Officials raise a stink over sewer rates

Officials say flawed study forces city toward 10 percent rate hike

By Jennifer Eisenbart

Editor

As the City of Burlington Plan Commission wrapped up Tuesday night, aldermen slowly filtered their way to their desks for the final of the three city budget meetings.

But a larger problem loomed – a problem with a proposed flat-rate increase with the wastewater utility, and a loss of revenue over the past two years.

The problem with the wastewater rates has to do with losing revenue from the city’s largest users – Echo Lake Foods and Nestles, as contracts expired, and standard billing rates went into effect. The result is revenue about $1 million below than expected.

At Tuesday night’s meeting, the City Council gave direction to go with the higher of two proposed sewer rate increases – 10 percent – which would, in theory, put revenue numbers back on track. Those numbers do not assume Echo Lake Foods would be back at full capacity in 2014, and also assume rate increases for sanitary districts that the city works with – Bohners Lake and Browns Lake.

That rate increase would be split equally between a fixed rate and metered rate (usage) increase. The sewer rate increase would be coupled with the planned 3 percent water rate increase.

“We’ve got a problem,” Craig Workman, the Director of Public Works, said. “We need to do something.”

The proposed rate increase drew ire from aldermen in attendance, including blunt comments by Alderman Tom Vos.

“Whether you stick my head in a noose, or put a gun to my head, we’ve got to go along with a rate increase,” Vos said.

Workman showed a graph to the council that displayed the wastewater revenue well below its expenditures, much less projected revenues.

He added that revenues would be increased when Echo Lake Foods and Nestles industrial rates were increased. The special contracted rates for both users – which covered capital improvements in the wastewater treatment system – have expired.

However, a rate study by Donohue and Associates was done because the contracts were expiring, and it appeared that the lag time between those contracts expiring and the study being completed had cost the city significant money.

That frustration – and lack of a good explanation of how the city lagged behind in getting the rates worked out so the city didn’t lose revenue – boiled over.

“There should have been a way we could have done that,” said Alderman Bob Prailes.

Workman, who joined the city a year ago, conceded that the rate study was “fundamentally flawed,” and that things needed to change.

Aldermen Jon Schultz and Vos questioned how the rate study came out so wrong, and items were missed. And Alderman Tom Preusker wondered what legal avenues the city had.

“That’s another conversation we need to have,” City Administrator Kevin Lahner.

Aldermen also wanted to know just how much revenue the city missed out on in the two years Echo Lake and Nestles were not billed up to par. Workman couldn’t give an exact number, but estimated it was about $400,000 a year if Nestles had been charged the going industrial rate.

“What I want to know is why they weren’t billed up,” said Schultz.

The problems went beyond billing issues, however.

Echo Lake Foods was devastated by an eight-alarm fire in January. While most of the employees are back to work – either at Echo Foods or in other jobs – the facility in Burlington has not fully reopened. There are plans to rebuild in Burlington, but city staff said they have yet to receive a plan from the company.

The rate increases assume Echo Lake Foods coming back online with its flow use of 2012 – before the fire.

“I’ll be honest: I think you should assume they’re staying offline,” Schultz said. Lahner said he felt confident that Echo Lake Foods would move forward with plans to build, and revenue would come in.

“I guess I would err on the side of conservative,” Vos said.

Tom Foht, a consulting engineer with Kapur and Associates admitted the rate study had not accurately predicted the flows coming from those users.

Workman said after the meeting that the city had come up with its own solution to the rate increase issues, dismissing the ideas suggested by Donahue as impractical, as it suggested dropping the fixed rate lower and ratcheting up the metered rate.

Other budget items

The rest of the meeting outlined various scenarios of what the city would be looking at for 2014 – like the proposed loss of an employee for streets and parks work, and the breakdown of hours for work next year.

Among the details there included 870 hours put aside for removal of 104 ash trees and 50 trees to be planted in replacement – due to the presence of the tree-destroying emerald ash borer.

There is also a proposal to cut the police department staff by one.

“There will be some loss of services to cover it,” said Mayor Bob Miller.

Lahner said employees needed to be trimmed to keep the tax levy from growing too much. He said the eliminations would come from attrition, not through layoffs.

Vos said that eliminating a position to save money now – but pushing repairs and work down the line – might be a case of pennywise, pound-foolish.

“Eventually, it comes around and bites us in the butt,” said Vos.

Miller said that could be a possibility. Preusker said that part-time help could help alleviate the crunch on hours, but that would increase the city’s reliance on the fund balance. Lahner also stressed that they don’t know for sure that services will decrease.

Earlier in the week, Miller said that the city was still waiting for final numbers from the state, and didn’t have an idea on what the tax levy or the tax rate would be yet.