Little Rock Wastewater is re-evaluating the sewer-rate increase that it plans to seek approval for in November. The utility is reconsidering how much money it needs for court-ordered improvements that can lower the proposed rate increases.
Since 2000, 12 sewer-rate increases have been approved by the Little Rock Board of Directors - including one set to go into effect in 2016 - to meet requirements of a 2001 Sierra Club lawsuit settlement. That settlement requires that the utility correct by 2018 several problems tied to citywide sewer overflows.
An average customer’s monthly sewer charge has risen 207 percent from about $13.05 in 2000 to about $40.02 this year.
The amounts of four more rate increases proposed to go into effect from 2015-19 were announced last year by the utility’s then-Chief Executive Officer Reggie Corbitt. Corbitt was fired in January after an investigation into his business practices, and the utility’s director of administration and community outreach, John Jarratt, took over as interim CEO until a new agency head is hired.
Wastewater administrators didn’t “feel comfortable” with the previously proposed rates, which were the outcome of a 2008 rate study, Jarratt said. So the engineering department is taking another look at the costs of required capital improvements, which play a part in dictating the rate increases, and the finance department is looking into whether the utility can fund some of the projects with current revenue rather than paying interest on loans.
After both departments’ evaluations are completed, the utility will hire a consultant to review the new data and come up with “more accurate” figures that will “most likely modify or change” what Corbitt announced last year, Jarratt said.
“They may be the same, but I doubt it,” he said.
The previous proposals were a 10 percent increase in 2015 to pay for expansion of storage facilities, a 5 percent increase in 2016 to pay for a storage facility and pump-station upgrades, a 4 percent increase in 2018 and a 6 percent increase in 2019, both to pay for sewer-main rehabilitation. Those were in addition to the already approved 4.75 percent increase in 2016.
REQUIRED CAPITAL PROJECTS
Currently, the utility must complete more than $272 million in capital improvement and sewer main rehabilitation projects in the next five years, though wastewater officials are hoping that a recent court victory in Iowa will eliminate some of that cost.
The court ruling involved a fairly new Environmental Protection Agency rule that dictated how cities treat wastewater during heavy rains. By restricting the use of the sidestream treatment method, often used when stormwater overwhelms a sewer system, the rule ultimately required cities to spend millions of dollars to build extra storage.
To comply with the guideline - and the Sierra Club lawsuit settlement - a 2010 report concluded that Little Rock Wastewater needed to build alternate storage facilities or add on to existing ones at four locations at an estimated cost of $83.6 million.
In March, a federal appeals court struck down the EPA’s rule against side-streaming after a lawsuit filed by the Iowa League of Cities. The EPA had previously allowed the process during heavy rainfall but had recently restricted its use and pushed the process that requires more storage. The new requirement would have cost cities across the nation $150 billion total in new equipment and storage systems, according to EPA estimates.
The 8th U.S. Circuit Court of Appeals concluded that the EPA had effectively created a new legislative rule without following procedures for adopting a new rule, exceeding its legal authority granted in the Clean Water Act.
The 8th Circuit hears cases from Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.
Little Rock Wastewater is researching what opportunities the Iowa ruling affords in relation to storage requirements. The EPA rule affects two of the coming projects. If granted permission from the Arkansas Department of Environmental Quality, the utility could replace or significantly reduce the cost of those projects - the Adams Field Storage Facility and the Mabelvale Pike Peak Flow Attenuation Facility - which together total $40.1 million.
That could lower the overall cost of projects the utility must complete by 2018, which then could lower the rate-increase amounts.
“Prior to the Iowa decision, the idea of side-stream treatment to replace/reduce storage was not possible within the guidelines,” interim Director of Utility Operations Howell Anderson said in an email.
He said the engineering department plans to present a report to the utility’s governing body in May outlining what opportunities the Iowa ruling creates.
At the same time, newly appointed interim Finance Director Debbie Williams is reviewing what projects can be completed without bonds. If projects can be paid for with current revenue and without having to pay added interest costs, that, too, could result in lowering the rate-increase proposals.
TIMELINE
Updated figures won’t be announced until the fall and may not be voted on by city directors until next year, according to a schedule given to the Sanitary Sewer Committee, which oversees certain finances and operations of Little Rock Wastewater.
The utility plans to hire a financial consultant and appoint bond underwriters by mid-June, then present rate-increase amounts to the sewer committee by Oct. 15, the schedule states.
The sewer committee would vote on the rate increases at its Nov. 19 meeting, sending the proposal to the Board of Directors at a Nov. 25 agenda-setting meeting. The city board must approve any rate increase.
The board’s first chance to vote on the proposal would be at its Dec. 2 meeting, but the utility doesn’t plan to seek approval on that date, according to its schedule.
Instead, it plans to have the increase appear on the agenda several times and for the board at its Dec. 16 meeting to set a public hearing for Jan. 20. At a board meeting Jan. 20, the utility hopes city directors will approve the proposed schedule of rate increases.
The first increase would go into effect Feb. 20, according to the utility’s schedule.
Wastewater officials had planned to give a presentation to the board today refreshing directors on the Sierra Club settlement requirements and what past rate increases have funded. However, the city asked to postpone that presentation, and it has not been rescheduled.
Jarratt hadn’t planned to discuss the amounts of the to-be-proposed rate increases during that presentation, he told sewer committee members at their meeting last week. He added that the utility has engaged in regular communication with people at City Hall to remind them that the rate-increase request is coming.
“We have been overly communicating. They don’t want to hear it,” he told the sewer committee.
CITY BOARD RESISTANCE
City directors have been critical of the utility over the years. Some have said they are skeptical of approving more rate increases and wonder whether revenue from previous increases was spent properly.
After the board approved a series of increases in 2012, Corbitt authorized one-time bonuses for about 190 employees totaling more than $236,000. That drew criticism from several city directors, one of whom said he felt like the board was lied to.
A 7 percent rate increase that took effect at the start of this year is expected to generate close to $3 million - about the same amount of the utility’s operations budget increase to accommodate employee raises, added equipment and office supplies and more training, among other things. The revenue from the rate increase could be spent on those operations, go toward capital improvements or be divided between the two.
When that was reported, some directors said they were under the impression that all of the rate increase was needed for infrastructure improvements, and they questioned it being spent on operations.
Ward 5 City Director Lance Hines said that because he’s been a liaison between the sewer committee and the city board, he’s gained more understanding of the need for rate increases and the Sierra Club lawsuit requirements. He added that some of his fellow directors just need to be reminded of what they approved before and why they approved it.
“I think the Sierra Club settlement has taken on mythic proportions. It’s a whipping post for most,” he said at last week’s sewer committee meeting. “Memories fade for some board members. We need to go back to the base of what we agreed to, when and why.”
Arkansas, Pages 9 on 04/29/2014