January 10, 2011 - Bend Bulletin - Bend plans to raise fees for water and sewer services

Feb 23, 2011

January 10, 2011 - Bend Bulletin - Bend plans to raise fees for water and sewer services

Bend plans to raise fees for water and sewer services

City says rate hikes will help pay for $200M in infrastructure work

By Nick Grube / The Bulletin
Published: January 10. 2011 4:00AM PST

The city of Bend has a list of more than $200 million in transportation, water and sewer improvements it would like to undertake over the next five years to either upgrade its current network of infrastructure or simply repair and maintain it.

Of that $200 million, $175,695,600 will be paid by Bend utility customers through water and sewer rate increases. Some of those increases have already been implemented, and others are looming over the next several years.

To put that number in perspective, that means every single one of Bend’s 83,000 residents — and this figure includes children and non-ratepayers alike — would be responsible for about $2,100 of the $175 million in improvements, or about $420 a year from 2011 to 2015.

But considering there are only about 24,000 municipal water customers in Bend, and approximately 27,000 sewer customers, that burden is even greater. Of course, since water rates are tied to use, people who use more water will pay more.

While many capital improvements can be delayed when money is tight, city officials say the water and sewer systems are in desperate need of upgrades.

“We have infrastructure needs in this city that come from a lot of growth and aging infrastructure,” said City Manager Eric King. “We’re doing what we can to try to minimize rate increases to the best of our ability without sacrificing our need to make these infrastructure improvements.”

Perhaps the largest single project is the city’s reconstruction of its Bridge Creek water system, which includes replacing about 10 miles of deteriorating pipeline and building a state-of-the-art treatment plant to clean the water. The current estimated cost of that project is $58 million, though the city has been exploring whether to add a hydropower component to the system that would increase the price to $73 million.

The next most expensive individual projects deal with the city’s sewer system. One is a $20 million expansion of the wastewater treatment plant to increase the capacity. The other is a $30 million project that will intercept sewage from southeast Bend and route it around the downtown area and into the treatment facility in the northeast part of town.

There are a number of other sewer and water-related projects on the city’s improvement list that account for the remainder of the $175 million. Some of this cost, about $7.5 million, is simply for the repair and maintenance of current infrastructure that is expected over the next five years, while other portions are allocated to growth-related projects, like drilling new groundwater wells.

Fee hikes ongoing

Bend’s water and sewer rates have already increased over the past several years to help pay for some of these infrastructure improvements. Since fiscal year 2007-08, ratepayers have seen a 23.6 percent increase in their water bills and a 37.75 percent hike in their sewer bills.

Today, the typical monthly water charge in the summer is $66.95. Without the fee increases over the past several years, that summer charge would be around $53. The sewer rate, which is a flat fee, is now at $35.90 a month, about $11 more than it would be without the recent fee increases.

With the $58 million Bridge Creek project, water customers can expect to see an additional 42.5 percent increase in their bills over the next five years, according to the most recent city estimates prepared in August.

City officials don’t have up-to-date estimates on how much rates will increase for the sewer projects, but they are preparing that information for a Jan. 21 Bend City Council budget workshop. New water rate estimates will also be prepared for that meeting.

Public Works Director Paul Rheault said he understands that Bend utility customers are probably going through “rate shock” right now. But he added that the city can’t delay the projects any longer without exposing itself to some significant risks.

“We have these major infrastructure projects that we have to do, and I don’t know how to sugarcoat it,” Rheault said. “I think sometimes there’s a perception of public works people across the nation that we go out and think up some of these projects and that’s not the case. It pains me to work with the finance department to increase rates.”

One of the major driving forces behind the Bridge Creek overhaul is a U.S. Environmental Protection Agency mandate that is making the city treat its surface water for Cryptosporidium by 2012. The 10-mile-long pipelines that carry the water from Bridge Creek to a treatment facility just outside of Bend, are also decades old and in danger of collapse.

Rheault said the city has known about the EPA rule since 1996. It wasn’t until there was a changing of the guard in the department’s leadership over the past several years that he said the water system upgrade became a priority.

“For whatever reason, I don’t know why, it’s been punted over the years, and now it’s on our watch,” he said. “It would have been nice if we would have done this eight years ago. We wouldn’t be in this situation.”

Bend’s sewer system faced a similar fate, though the city’s exponential population growth also played a role. As people began flooding into Bend, they started putting pressure on the city’s aging wastewater treatment plant. Rheault said that today, the plant can barely handle the flows that come into the facility, and it’s nearing its capacity to actually treat the sewage.

The interceptor project that diverts sewage around Bend’s core, he said, is needed to reduce the pressure on old sewer lines downtown. It also will allow people in southeast Bend — a place Rheault said has a lot of development potential — to hook into the sewer system. Some energy efficiencies will be realized as well, as the project will increase the reliance on gravity to push the sewage to the treatment plant without the use of multiple pumping stations.

By postponing these projects, Rheault said, the city faces everything from possible enforcement action from the federal government to losing out on economic development opportunities because it doesn’t have the infrastructure capacity to handle an influx of new people or businesses. With the improvements, he said, the city will once again be poised for the future.

“We’ve gone from a city of 30,000 or 35,000 people to 85,000 people,” he said. “Now, here come the infrastructure needs, and it’s just unfortunate that they’re all coming at the same time.”

Bend isn’t the only city in need of updating its aging infrastructure. Nationwide, municipalities are struggling with updating their water and sewer systems while also trying to keep up with state or federal mandates like the EPA’s requirements to treat for Cryptosporidium, which is something Portland is fighting right now.

For instance, in a 2009 EPA report to Congress, the agency found that over the next 20 years, $335 billion would be needed to update, maintain or expand public water infrastructure throughout the country. For wastewater, that figure is $390 billion.

Other improvements

Bend also has other improvements it wants to make outside of its water and sewer systems. These include $13.9 million for the municipal airport, $9.1 million for major street projects and $2.6 million for improvements to handle stormwater. With the exception of a $4 monthly fee for stormwater, money for these projects comes through grants, franchise fees and charges levied against builders for their developments.

When compared with other cities in Oregon, Bend’s water and sewer rates fall somewhere in the middle. The rates aren’t the highest in the state and also not the lowest. With the impending increases, city officials believe that will still be true, as other municipalities will likely have increases to keep up with operations and maintenance costs or to fund other projects.

Finance Director Sonia Andrews said the city is currently in the middle of updating its rate models for both water and sewer. She said these models are based on conservative revenue and expenditure projections, and are being spread out over 10 years instead of a five-year stretch that was used for previous forecasts.

“The hope is that we’ve been conservative enough that the real picture is better than our model,” Andrews said. “It’s unavoidable that rates will have to go up to pay for these projects, but the city is doing everything it can to spread the rate increases to lessen the impact on citizens today.”

She called this “generational equity” and said it’s a way to make sure people who live in Bend now aren’t paying for something that future residents will benefit from. She said the city is also probably going to defer the $13 million hydropower component of its Bridge Creek upgrade as another means to reduce the “sticker shock” for ratepayers.

These rate increases will also be updated every year to make sure the city isn’t overcharging its customers if projects are delayed, if revenues spike upward or costs come in under what was initially projected.

Andrews said Bend utility customers should also consider that the city typically increases its rates every year just to deal with the rising costs of operating its water and sewer systems.

“Every year, rates are increasing, so it’s not out of the ordinary,” Andrews said. “It’s just over the next five years you’re going to see a larger increase than what you’d normally see. It’s just a question of when those increases are going to get back to the normal increases.”

Without the major water and sewer projects, she estimated the annual increase in monthly bills would probably be in the 3 to 4 percent range.

Trimming the list

From a policy standpoint, recently appointed Mayor Jeff Eager said the City Council will have to make sure it does everything it can to rein in costs while also balancing Bend’s infrastructure needs.

Part of this could be trimming and reprioritizing the list of improvements the city currently has planned, which is something that is done every year. He said the city can also look for ways to make its infrastructure, particularly the sewer and water systems, operate more efficiently so that future impacts on rates are limited.

“I don’t think the city can afford all of these projects,” Eager said. “I think that realistically we’re not going to be able to do all of them in the next five years, so there’s going to be a prioritization process and determination of what we need to do, and those things will go to the top of the list.”

With the city facing large budget shortfalls over the next several years, including an estimated five-year, $20 million deficit in its general fund, he said the choices the council makes on what projects to pursue or put off will be all the more important.

As for the major sewer and water upgrades that are under way, Eager echoed the public works director in saying that the city is facing an “urgent situation,” where it could face possible action from the state or federal government if it doesn’t make the improvements, and risk losing out on economic development opportunities if it can’t handle new growth.

For those reasons, he said, the upcoming rate increases are a necessary evil.

“What I would say to people, and to myself since I’m a ratepayer, is that it is a very unfortunate situation which has occurred. And that situation is that the city has backlogged a number of important improvements to the water and sewer system, which are necessary for various reasons,” Eager said.

“It is extremely unfortunate that the pressures are coming to bear right now during these difficult economic times. I think the solution in the long run is to have the city plan a little better and try to make sure that there’s not as much concentrated pressure on the ratepayer at any one time, especially during a severe economic recession.”

Nick Grube can be reached at 541-633-2160 or at ngrube@bendbulletin.com.

Published Daily in Bend Oregon by Western Communications, Inc. © 2010



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