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Glendale intends to raise rates for water, sewer and trash

Posted 6/14/17

By Cecilia Chan

Independent Newsmedia

Residents could soon be paying more every time they turn on the tap, flush the toilet and throw out the trash.

Glendale City Council is scheduled June …

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Glendale intends to raise rates for water, sewer and trash


By Cecilia Chan
Independent Newsmedia

Residents could soon be paying more every time they turn on the tap, flush the toilet and throw out the trash.
Glendale City Council is scheduled June 27 to vote on an intent to raise monthly utility bills, following a rate study.
“We were elected to represented the citizens for these kinds of services,” Councilman Ray Malnar said at last week’s workshop. “We are not building a stadium here but taking care of day-to-day needs.”

This summer the public will have the chance to give input, which will then be presented to City Council at the Aug. 15 workshop. The Council is scheduled Sept. 26 to vote on whether to move forward with the hikes.

The last time Glendale increased water and sewer rates was in 2010 and for trash, 2008.

The Citizens Utility Advisory Commission recommended two options to Council, both increasing rates each year for five fiscal years with no change in service levels. One option called for lower increases and the other for higher increases that would shore up utility accounts’ financial stability faster.

Council is asked to act on the rate increases for the first two years with a wait-and-see for the remaining three years. The first rate increase would kick-in Nov. 1 and the second increase Jan. 1, 2019.

The Commission favored the option to increase water and sewer rates by 7.5 percent a month each year for the first two years and then slow it down with moderate increases in the last three years. For an average singe-family user, the 7.5 percent monthly increase is $5.02.

Based on a monthly average water use of 9,700 gallons, a monthly bill would increase from the current $66.69 to $71.71, according to the city. People who use less than 9,700 gallons a month would pay less and those who use more, would pay more.

The second-year increase of 7.5 percent would increase the monthly bill to $77.10.
For trash, residential customers would see a $2.75 a month increase to $19.05 the first year and another $2.75 increase the second year for a monthly bill of $21.80, under the option favored by the Commission. The city adjusted rates for commercial customers about a year and a half ago, according to staff.

If the Council goes along with the proposal, an average customer would see water, sewer and trash bills increase to $90.76 from $82.99 a month for the first year and $98.90 a month for the second year.

Finance and Budget Director Vicki Rios said Council has the options of following the proposed increases, changing the rates or doing nothing.

If the Council goes with the Commission preferred options, Glendale would still be in the middle of the pack among Valley communities for utility bills, behind Surprise, Phoenix, Mesa and Goodyear.

Ms. Rios said the city in December undertook a five-year forecast of its enterprise funds, where user fees for water, sewer and trash are deposited. Those accounts receive no money from the general fund.

If there is no rate hike, the funds would not meet the minimal fund balance set by the Council, and capital projects that were deferred during the economic downturn would not be addressed, she said.

At current utility rates, water, sewer and trash are spending more than they are taking in and dipping into dwindling reserve funds. During the lean years, the water and sewer and solid waste departments have had to do more with less, undertaking cost-saving measures such as cross-training employees.

Ms. Rios said during the years the city opted not to impose rate increases because of the recession, the respective funds absorbed the cost of living expenses for water and sewer, which increased by 12.4 percent and solid waste or trash by 13.5 percent.

The program’s decline 2008-14, corresponded to the downturn in the economy, she said, adding if no rate increase happens, all three funds would fail to meet its fiscal sustainability targets by 2019.

The city, however, did dip into those funds to the tune of $40 million, which went toward two pledges to the National Hockey League to keep the Arizona Coyotes playing at the city-owned arena until a buyer could be found for the hockey team.

Glendale borrowed $21 million from the landfill fund and $4 million from solid waste account in fiscal year 2010-11. And, it borrowed $15 million from its water and sewer fund in fiscal year 2011-12, according to the city. The city was to repay the money with interest.

The water and sewer fund has been reimbursed $1.3 million through the end of this year, according to Ms. Rios. The landfill fund has been reimbursed $3.2 million and the sanitation fund has been reimbursed $609,901, she said in an email.

Ms. Rios said there is no legal requirement for the funds to be paid back to those accounts over a specified time but following Council policy, money has been allocated each year to all three funds in the budget.

“Per the tentative budget, next year the water/sewer fund will receive $419,811, the landfill fund will receive $674,772, and the sanitation fund will receive $125,392,” Ms. Rios said, adding since then Glendale has not transferred any money from those funds for other uses.

City officials were asked if no money was taken from the enterprise funds, would it still be looking at rate hikes.

“If the transfers had not occurred, both funds could conceivably have more cash reserves,” Assistant City Manager Tom Duensing said. “However, both water and sanitation or solid waste have fundamental budget imbalances where their revenues are not sufficient to cover their expenses over the long term. This is what is driving the need for rate adjustments.”

Water Services Director Craig Johnson said although the city spent $50 million over the past six years for projects, involving sewer pipes, the water distribution system and water treatment plants, some projects were deferred.

He said in order not to risk reliability and redundancy of the city’s water system, it was now time to take advantage of the economic upturn and do a bit of catch up and bring the program back to where it should be.

Council was given a list of 38 projects totaling $257 million ranked important to critical for fiscal year 2016-17 to fiscal year 2021-22. Projects included upgrades to Arrowhead Water Reclamation Facility, replacement of sewer pipes in Arrowhead Ranch area and fire hydrant replacements.

Councilwoman Joyce Clark raised concerns with the process.

“Here is the problem that I’ve had from the very beginning of this undertaking,” she said. “When the Citizens Commission was presented material, I don’t believe they were presented material in this format — these are the projects we would like to do. These are the reasons why we think these projects are critical. Which of these projects would you approve and this is the cost involved in implementing these projects. I think they got pretty well what the Council got, that projects were underway, ongoing and that there were only eight future projects on the list.”

She said the Commission did not start with a clean slate but started with a packet of projects either underway, ongoing or planned for the future.

“Basically the Commission was asked to ratify recommendations of staff,” she said. “The only thing the Commission had any discretion was choosing which mode of rate increase was palatable to them. I understand we need to look at rate increase. I am not opposed to rate increases. I am opposed to the process that was implemented to arrive at the rate increase. Because I think there was very little independent judgment required of the Commission to come up with these recommended rate increases.”

She added she felt personally, the projects presented to the Commission and Council were pretty much a done deal and that “we are being asked basically to ratify what has been started, undergoing, whatever you call it and it would be pretty dumb to stop a lot of these projects in the middle by saying, ‘no we are not going to grant a rate increase.’”

Ms. Rios said if Council opts to forgo a rate increase, staff will re-prioritize the projects and for the first year use its cash reserves of $60 million to address the most critical projects. She cautioned any deferral comes with a risk.

Councilman Jamie Aldama joined in with his concerns.

“I’m displeased with how we got here today,” he said.

He said the public should have been brought in earlier in the process and helped formulate the options when it was at the Citizens Commission, instead of hearing it for the first time at last week’s workshop.

“I think it’s kind of putting the carriage in front of the horse by allowing the Commission to formulate Option one and two with staff and then go to the community,” he said.

He asked if the public can come back with another option.

Ms. Rios said the options could change during the process.

Councilwoman Lauren Tolmachoff said the future projects on the list totaled just $9.8 million, which is .04 percent of the $257 million.

“Basically everything else is already happening,” she said, adding it puts the city in a difficult position of pulling the plug on money already spent.

She asked if it was a matter of policy to start projects without knowing if there is money for them and if bond funding was considered first to pay for the projects and then go to a rate increase to repay the bond debt.

She also asked if some larger ratepayers, due to come online, were considered because if the city raised rates more than needed it is unlikely to lower them later.

Ms. Rios said the rate study looked at everything and the proposed options include bond funding of $55 million to be issued over the course of the next five years. The city would first spend down the $60 million in reserves before going out to bond, she said

“While the total is $257 million, we don’t have contracts actively underway for funds we don’t have,” she said.

If there is no approved rate increase, staff would need to look at what stage those projects are at and what available funding is on hand, she added.

“The risk of doing that is high but not impossible to do,” she said. “We can stop a project in the design phase ...if needed.”

Council members also voiced concern about the public not getting enough notice about the issue and suggested ways to get the word out, including putting the information in residents’ bills for at least two billing cycles and printing the information on the back of utility envelopes.

If you go
Glendale will hold four public meetings for input on rate increases
• 6-8 p.m., Tuesday, July 18 at Glendale Regional Public Safety Training Center, 11550 W. Glendale Ave.
• 6-8 p.m., Thursday, July 27,
Foothills Recreation and Aquatics Center, 5600 W. Union Hills Drive
• 6-8 p.m., Wednesday, Aug. 2, Glendale Adult Center, 5970 W. Brown St.
• 10 a.m.-noon, Saturday, Aug. 5, Council Chambers, 5800 W. Glenn Drive
A survey will be posted on the city website for those unable to attend.