Belmont is considering increasing sewer rates to fund overdue sewer-related capital improvement projects and set aside enough reserves to cover operating expenses if residents improve water conservation habits.
The City Council is considering increasing sewer rates up to 14.5 percent over the next two years to cover operations and help begin paying for nearly $45 million in deferred utility system maintenance, City Engineer Leticia Alvarez said.
The council will hold a protest hearing Tuesday and unless more than 50 percent of the property owners who would be affected oppose the rate increase, the council may adopt increases that would take effect in November.
Currently, the average single family home pays about $638 for sewer rates each year and that could increase to $692, Alvarez said. These increases would help fund bonds and set aside reserves to cover expenses if revenue decreases due to conservation efforts, Alvarez said.
Until 2012, sewer rates only covered operating expenses, so the council voted then to increase rates by about 19.5 percent through this year, Alvarez said.
“We’d been deferring it for many, many years. The city never did an adequate job of planning for the future. … Previous rates were just maintaining the system, but the city hadn’t put away any money to do actual replacement of aging infrastructure,” Alvarez said. “Back in 2012, the idea was ‘let’s raise rates to at least have enough money to take care of what (infrastructure) we have and stabilize that’. Now we’re here, two years later and … that backlog is still there. So these rates would be able to address that backlog.”
If the council approves staff’s recommended 15-year maintenance plan, the city will use the revenue from increased rates to take out $9 million in bonds every year for five years, Alvarez said.
Like several other cities including San Mateo and Foster City, Belmont must contribute toward a $500 million Waste Water Treatment Plant upgrade. The costs associated with those repairs are already priced separately from sewer service charges and each household pays about $250.83 annually, Alvarez said.
The council will also consider changing how sewer rates are explained to residents in their bills. A portion of the rates goes to the city’s internal costs and the other toward costs associated with the treatment plant managed by Silicon Valley Clean Water, Alvarez said.
“What we are doing this year is separating that out because the charges from [SVCW] treatment facility are different from ours. So those will be shown now separate because we really don’t have control of those costs. Previously, when those costs went up it made it look like our costs went up. So this will give people a better idea of where that money is going,” Alvarez said.
Although the residential base rate could appear to go down from $324.68 to $242.29, a $108.36 treatment base charge will be added, according to a Public Works Department staff report.
The council will only be voting on a two-year rate adjustment. However staff has looked at options for rate increases over the next five years and could choose to spread out costs over 15 years, 20 years or more, Alvarez said.
Another reason it’s important for the council to consider raising rates in the long term is because revenue could decrease due to enhanced conservation efforts in response to the drought, Alvarez said.
The city was projected to take in about $7.9 million in rate revenue from 2013-2014 fiscal year but based on customer billing data, the projection for the 2014-2015 fiscal year may decrease to $7.6 million, according to a staff report.
“Other things in these rates is provisions to start coming up with reserves so if we do have a drought year … we have some money set aside,” Alvarez said. “If we do have an unusual year (because of conservation) we would be able to use reserves to cover our operating costs as opposed to automatically raising rates.”
The Belmont City Council public hearing on sewer rates is 7 p.m. Tuesday, July 8 at City Hall, One Twin Pines Lane, Belmont.
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