The Little Rock Sanitary Sewer Committee sent a proposal for an impact fee on new development to the Little Rock Board of Directors on Wednesday and approved a 3 percent raise for all employees except the utility’s chief executive officer.
The committee, the governing body of Little Rock Wastewater Utility, had stalled on the approval of an impact fee for several months amidst debate over whether it was necessary. The committee also voted Wednesday to undo a previous vote that approved the 2013 budget without any raises for employees - a vote taken after an investigation into bonuses awarded to utility staff members in December.
The committee tabled the discussion on the impact last month to allow for more questions and to gauge the opinion of the Little Rock Board of Directors before moving forward. Several committee members said in March that they were struggling to find a reason to approve the impact fee, which is meant to offset the cost of running system lines to new developments.
Before any impact fees are imposed, the Little Rock Board of Directors must approve them. The citywide utility is semi-autonomous, but any increase in rates or fees for customers must go through the Board of Directors.
The action Wednesday came with little debate on the impact-fee structure itself. Chairman Ken Griffey said the committee’s attorney, along with at least one member of the committee’s rate advisory subcommittee, pointed out after the March meeting that the committee had passed a resolution approving the impact fee in 2009.
The 2009 resolution approved six recommendations from the rate advisory subcommittee, one of which was an impact fee that would impose a charge for new development based on the size of the water meter.
“We wanted to make sure we did not set a precedent for not following resolutions this committee has passed,” Griffey said after the meeting. “It was brought to our attention that the rate advisory committee’s recommendations approved by this committee in a resolution did include the asking the Board of Directors to consider an impact fee.”
Griffey said the committee had passed the full, multifaceted resolution onto the board in 2009 but was told to present it in individual proposals.
The committee voted to strike two recommendations from the original resolution Wednesday because they have been acted on, but not in the way recommended by the subcommittee. The committee also made note that a revised plan for an impact fee may be coming in the future as an addendum to the resolution.
The conversation Wednesday switched from asking whether the fee was a good idea to asking how to revise the resolution.
If approved, the impact fee would be charged to homebuilders or business developers who connect to the city’s sewer system at the time a sewer permit is issued. The fee would increase with the size of the water meter and range from $275 to $2,200.
Standard residential meters would be on the lower end of the cost range.
The revenue would be earmarked to pay for debt service on projects that added to the utility’s ability to serve more residents and businesses, and would bring in an estimated $110,000 per year.
The utility staff is still reviewing an alternative proposal from an outside rate consultant that would charge an impact fee based on how much water the business or residential development is anticipated to use. That plan would create different fee schedules based on whether the development was residential or a business.
Utility Chief Executive Officer Reggie Corbitt said the average would be $1.10 per gallon per day, but all of the numbers from the study were still being compiled. He said he anticipated bringing a full proposal before the committee, likely next month.
If approved, the impact fee would be the third increase in fees and rates in less than a year. The Little Rock Board of Directors approved a series of rate increases as well as a $1-per-month fee for sewer line replacement at two different meetings in June.
The $1-a-month fee is only charged to residential customers and pays for the utility’s sewer line replacement reimbursement program. The program offers a chance for homeowners who have to replace their aging or irreparable sewer lines to be reimbursed for up to $2,500.
The rate increases were approved mostly to pay for needed repairs and expansions under the settlement of a 2001 lawsuit by the Sierra Club, an environmental advocacy group, after the group found that waste was flowing from the sewer system into groundwater throughout the city.
The increases averaged 12.75 percent in 2012 and 8 percent for 2013 and will average 7 percent for 2014 and 4.75 percent for 2016.
At Wednesday’s meeting, the committee also reversed a January decision to not award raises to utility employees in its 2013 budget.
Griffey said he wanted to wait until after the first quarter of the year to make sure revenue was trending in the right direction before revisiting the raises. His first proposal Wednesday included giving raises to the utility’s roughly 180 employees but withholding an increase from the eight employees labeled as the executive staff.
“As a result of our concerns about the bonuses and financial stability, the committee approved the budget without pay increases,” he said. “Now that the first quarter is behind us, it seems like a good idea to consider the 3 percent merit raises … not to include executive staff.”
Vice Chairman Marilyn Perryman said the move might make the raises easier to support when talking with the Little Rock Board of Directors.
The board does not have the power to approve or deny pay raises for the utility. That decision is in the purview of the Sanitary Sewer Committee.
The committee faced a backlash from the Board of Directors, however, after an anonymous letter let the individual city directors and members of the city staff know that most of the utility’s employees - including the executive staff - were given a one-time longevity bonus in December.
Board members called the bonuses into question because of the rate increases approved in June. Several directors said they were under the impression that the rate increases were solely to help the cash strapped utility pay for necessary fixes to the system.
The committee launched an investigation into the bonuses at the board’s request, finding that each employee who had stayed at the utility for three years of fiscal austerity received a check worth $1,250. The checks, which added up to more than $236,000, were sent to the executive staff, including Corbitt, as well as to laborers.
Corbitt defended his decision to give out the monetary awards, noting he had been before the committee on two occasions discussing some details of the award plan and noting that the utility had met its goal in terms of building up a financial reserve before the checks were mailed out.
The committee found that Corbitt had not done anything to violate utility policy, but chastised him for not being more communicative and transparent. They also asked at the end of the investigation that he come up with a plan to retire and to train his replacement.
Wednesday, Corbitt said he felt that the proposal to exclude the executive staff from the raises was meant as punishment, despite the committee’s finding of no wrongdoing in regards to the bonuses.
“I’m taking this as punishment, and I’ll accept that even though your report said nothing was done without the proper authority. I can live with it,” he said. “But I made that decision. What I’m saying is that you should not punish eight people when you could punish one. If I’m reading this right, then I recommend you only withhold my salary [increase].”
Several board members agreed, noting that the executive staff had gone as long without raises as other utility staff members and had also been made responsible for more tasks because of hiring freezes.
Board of Directors liaison Ward 4 City Director Lance Hines noted that the city considers raises for its executive staff members like the city manager separately from the other staff.
“When the city reviews raises, our executive staff, the city attorney and the city manager, are reviewed separately from the rank-and-file employees,” he said. “I would think that the city would look at the executive staff in a way different light than the regular folks.”
The committee ended up voting unanimously to approve 3 percent merit raises for everyone except Corbitt, who will undergo a performance review in December.
The raises will be given retroactively to January 1 on the basis of an employee’s hiring date. Employees are eligible for merit-raise reviews on the anniversary of their hiring date, according to utility policy.
Front Section, Pages 1 on 04/18/2013