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Santa Rosa council to reconsider water, sewage rate hikes

Nearly a month after refusing to approve two years worth of water and sewer rate increases, the Santa Rosa City Council may change course Tuesday.

The water and sewer rate debate is being revisited because City Councilman Jake Ours announced Jan. 14 that he wanted to change the vote he cast a week earlier.

City officials say rates need to go up an average of 3.3 percent in 2015 and 3.4 percent in 2016 to help keep pace with the rising costs of water and energy, to build reserves for the drought, and better balance usage and fixed charges.

Ours had expressed concern at the Jan. 7 meeting about raising rates without a plan in place to help low-income residents. At the time, he told Utilities Director David Guhin to “go back and sharpen your pencil.”

Water and sewer rates are typically approved every two years. Ours agreed only to approve one year of rate increases, not the two Guhin was requesting, effectively blocking the proposed 2016 rate increase.

The following week, Ours announced he had a change of heart because he better understood just how much money a new financing plan would save ratepayers.

He explained that the city's plan to begin funding wastewater upgrade projects with cash instead of bonds could save the city millions of dollars annually.

“If we do it with bonds, it'll cost us $1.90 (for every dollar spent on improvements to the wastewater system). If we do with it cash, it'll cost us $1,” Ours said. “It really will lead to lowering rates.”

Guhin said he provided council members additional information after the first vote that further explained the potential savings from switching from a bond-financing model to a “pay as you go” model of funding all but the largest wastewater system upgrade projects with cash.

The city is considering floating upwards of $16.5 million in bonds to pay for upgrades to the region's wastewater collection and treatment system this year. But when analyzing the department's sizable debt structure and future needs for the aging Llano Road treatment plant, city officials realized they couldn't keep up such a borrowing pattern long-term, Guhin said.

But by socking some cash away every year in a capital improvement fund, the city could begin funding more projects with cash and lower the amount it pays in bond interest, Guhin said.

Currently, the city pays about $28 million per year in interest on bonds, much of them related to construction of the $200 million Geysers pipeline 10 years ago. The switch to cash funding could help get those costs under $12 million annually, Guhin said.

“This is a more sustainable way to run our business,” Guhin said.

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