LITTLE ROCK — If the Little Rock Board of Directors does not do all it can to support Little Rock Wastewater’s plans to finance repairs to the city’s aging sewer system mandated by a federal lawsuit, the city may be financially liable under that lawsuit, according to the city attorney.
The Sierra Club filed a federal lawsuit against the utility and the city in 2001, and while the settlement requires the utility to fix its leaky infrastructure on a strict timeline, the city did not agree to the settlement.
The city did not agree to the settlement because the sewer system is the responsibility of the utility, City Attorney Tom Carpenter said Tuesday, but if the city does not support the utility’s effort to take care of the cited issues, it could become liable for the remaining damages.
“The thrust of that [settlement] was that the city would not help fund the improvements and they would be done [by the utility] with revenue bonds based on rates,” Carpenter said. “If you do not assist the sewer utility, then this case can be reopened against the city.”
Carpenter couldn’t say whether the federal judge would reopen the case, but it is a possibility that he advised the board not to test.
The board agreed after a presentation at its agenda meeting Tuesday to put the rate increase request on the agenda for its April 3 or April 17 meeting.
Earlier this month, Chief Executive Officer Reggie Corbitt said that if City Hall doesn’t make a decision on a proposed rate increase by April 1, he’ll have to find ways to cut his budget and that layoffs are the only cuts left to make as the utility grapples with flat revenue. Corbitt did not say after the board’s decision Tuesday whether the schedule would lead to financial repercussions.
The agency already has cut 48 people through layoffs, attrition and frozen salaries, Corbitt said.
The utility has been calling for a rate increase since 2010. Last year, the measure was tabled at the mayor’s request as the city campaigned for a sales-tax increase that passed in September.
Corbitt had hoped to make a presentation to the board after the tax election, but he was never added to the agenda. He was cut from the agenda of the Feb. 28 board meeting before being rescheduled for Tuesday.
Several directors asked for reassurance Tuesday that the utility had used the funds from previous rate increases to address some of the fixes in a responsible way. They also asked for assurance that the rate increases will be the minimum necessary to take care of all the projects mandated by the lawsuit settlement.
“Is this the absolute minimum we have to do to address the settlement?” asked Ward 3 Director Stacy Hurst.
“This is as lean a budget as I can see,” Corbitt replied.
Corbitt reminded directors that the cost of several projects was more than had been anticipated, which ate up some of the funding. Ward 4 Director Brad Cazort said the board had increased the amount of the last rate increase to compensate for some of those expenses.
While a consent administrative order originally called for sewer improvements to be made by 2015, the utility was granted a three-year extension last year because of staff members’ concerns that the utility would miss the deadline. Through 2010, the utility had spent nearly $263 million on the improvements and needs to complete about $325 million more.
In December, the Little Rock Sanitary Sewer Committee approved a $60 million budget for 2012 for the semiautonomous agency. The budget’s revenue projection, however, is based on a rate increase for the utility’s approximately 66,000 customers. The budget anticipated an April 1 implementation date for the rate increase.
As a semiautonomous agency, the utility doesn’t need the board’s approval to pass a budget, but does need its approval for a rate increase.
The utility’s 2011 budget was $25 million. The budget report anticipated that a 20 percent rate increase would be needed this year if the utility was to remain in the black in the face of flat revenue attributed partly to the increasing use of water-efficient devices such as washing machines and low-flow toilets.
Currently, residential sewer bills are based on the amount of water used as recorded by Central Arkansas Water. In addition to a percubic-foot-of-water charge for sewer use, businesses are assessed a fee on the basis of what it costs the utility to treat their specialized waste.
For sewer service, residential and commercial users currently pay $3.09 per 100 cubic feet of water used. Under the most recent proposal, which has incremental increases, that rate would rise to $4.19 per 100 cubic feet for residential customers, as opposed to the previously considered $5.13, and to $6.46 for commercial users by 2018, compared with $6.25 as previously reported.
While rates would increase for residential customers, the lowest users would see a decrease because they now pay a flat fee.
For example, for a user of between zero and 199 cubic feet, the monthly bill is $15.37 (the lowest possible). Under the proposal, that bill would drop to $9.24 in 2012 but increase overall to $11.87 by 2018.
The average residential customer — a household that uses 600 cubic feet of water — would see bills increase from $27.73 to $29.09 a month next year and to $40.91 a month by 2018.
Arkansas, Pages 11 on 03/14/2012