The cost of water and sewer service in Petersburg could be going up next year, in part to help pay off water main and sewer pump replacement work that passed on the local ballot this week.
Borough staffers are recommending annual three percent rate hikes over five years. A consultant completed a study of rates this summer and says more rate hikes are needed to keep pace with inflation.
Petersburg’s municipal government is looking at increased rates and fees for many of its services. For the water and waste water departments the borough hired the FCS group, a financial consulting firm based in Redmond, Washington. Matt Hobson is that company’s project manager for the study. He summed up the findings during a night time public presentation in late September that saw no one attending other than borough staff.
“We don’t anticipate any new revenue coming into the utility simply through customer account growth,” Hobson said. “So any new revenue will have to be generated from rate increases. The reason that’s important is because we’re forecasting cost increase three percent a year. So any new revenue will have to be generated from rate increases. So there’s a structural challenge if your revenue’s not going to change but your expenses are going up three percent per year.”
Petersburg’s water utility brings in about one million dollars a year in revenue, the waste water utility around 900,000 dollars. Besides paying off the cost of salaries, benefits and other costs, the consultants looked at existing debt the two borough departments are paying off, along with new debt that depends on voter approval.
“So big picture in 2021 next year the utility is projected to have revenues that exceed expenses but every year thereafter, expenses tied to inflation of operating costs as well as the cost of new debt service will make it so the utility is running, expenses are exceeding revenues,” he explained.
That new debt was on the local ballot this month for up to eight million dollars of water line and tank and sewer pump station projects.
The consultants only looked at the next five years and only considered across-the-board increases, instead of different rate hikes for large or small customers. In the water department, the firm studied possible rate increases of two or three percent. That larger increase is recommended by borough staff.
“What that means a three percent annual rate increase would equate to about $1.34 for a typical residential household, using about 4,000 gallons of water a month,” Hobson said.
That’s at the beginning of the five years and it would be slightly larger each year. In the fifth year the rate hike would be $1.50 a month for those customers.
The options in the waste water department are rate increases of three percent or four point six percent. Again, borough staff are recommending three percent. And again the impact to a typical residential bill would start at $1.33 and grow to $1.50 a month.
The cost of water before and after the increases would be higher than Juneau, Wrangell and Haines but lower than Anchorage, Ketchikan and Fairbanks. The cost of water in Petersburg is already about 20 dollars a month higher on a residential bill than it is in Juneau, and more than $13.50 a month more than in Wrangell.
For sewer service, Petersburg is also more expensive than Wrangell by about 12 dollars a month on a residential bill. But it’s less than Anchorage, Haines, Ketchikan, Fairbanks and Juneau. However, after five years of rate hikes, Petersburg’s sewer service could surpass Anchorage and Haines.
The consulting firm specializes in utility rate studies for public utilities. This company also did another rate study for Petersburg in 2013. That study lead to annual increases for six years. The cost of water went up nearly 15 percent during that time and sewer rates saw a 36 percent bump.
The rate increases won’t take effect without three readings of an ordinance by the borough assembly. The municipality is also studying rates for garbage and electricity this year and could be boosting the cost of those services as well.