Sewer rates will not be increasing in Clearwater in 2017 despite a lack of money in the sewer enterprise fund.

 

Monday, after a one-hour workshop and another 45 minutes of discussion at their regular meeting, members of the Clearwater City Council decided to keep rates the same in 2017 - and possibly for the next few years.

 

Discussions about the need to increase rates started early last year when it was revealed the sewer fund wasn’t bringing in enough money to cover operational costs, debt service and future capital projects. 

 

Last April, Mayor Pete Edmonson proposed refinancing a 2008 PFA loan for the sewer expansion project that has an outstanding balance of about $5.3 million.

 

Extending the loan another 10 years with the same interest rate could cut annual debt service payments from about $600,000 to under $300,000.

 

In numerous discussions last year, members of the council didn’t agree the refinancing option was the best fit for Clearwater because it would add almost $800,000 in interest over the life of the loan. And it might not guarantee the rates wouldn’t increase.

 

Monday, Vicki Holthaus of Abdo Eick & Meyers (AEM) the city’s financial planner, gave a rate study presentation showing the sewer fund would fall well short of its $600,000 target by 2021 with just the refinance.

It would reach the target if the city went through with the refinance and increased sewer base and usage rates 3% through 2012.

 

The third scenario was a refinance, no rate increase but adding a one-time transfer of $500,000 from the general fund. That scenario reached the goal by 2020.

 

With two new council members at the table, the consensus was still not to follow through with the refinancing option.

 

Councilman Kris Crandall said there still wouldn’t be a reduction in water and sewer rates, even with the refinancing.

 

What followed was a lengthy debate over whether the city should continue to use non-sewer money to subsidize the sewer fund each year, or raise rates.

 

The city currently has an extremely strong reserve balance.

 

One thought was to use money from reserves each year to make the sewer fund break even. That doesn’t solve the problem of building up the fund for future improvements, but it eliminates the need to raise rates.

 

Councilman Rollie Lange said Clearwater’s biggest issue is lack of growth. He said if more people and businesses located in Clearwater, it would increase sewer usage and bring in more revenues. He said rates were already high, and  any rate increase would keep businesses and people away.

 

He was in favor of the $500,000 infusion immediately to build the fund.

 

Councilman Richard Petty was concerned removing such a large amount from reserves might negatively affect the city’s bond rating.

 

Holthaus said even with transferring the $500,000, the reserve fund would still be between 85% and 100% of the annual operating budget, which was still stronger than required.

 

Council member Andrea Lawrence agreed with the option of the $500,000 infusion, and suggested a 3% increase in 2017 to begin building up the fund even more.

 

Petty felt there wasn’t a need to immediately transfer $500,000 if there weren’t any sewer capital projects for a few years. He said the city might need the money for other things.

 

But a motion was made to transfer the $500,000 into the sewer fund, which would help cover annual costs at least for a few years.

 

Edmonson, Crandall, Lange and Lawrence voted in favor. Petty voted against.

 

The council will continue to monitor the sewer fund to see if there will be a need to increase rates. They also agreed refinancing is still an option if necessary.