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Council adopts sewer-rate plan after contentious debate over bonds, cash and consent-decree options
Summary
The council approved a multi-year sewer rate plan that shifts charges toward volumetric pricing and phases scheduled increases; debate focused on whether to fund Sand Island secondary treatment with bonds or general-fund cash, possible EPA negotiations, and customer assistance options.
The Honolulu City Council adopted a multi-year sewer-rate plan after several hours of debate over length of the rate program, bond versus cash financing for sewer improvements and potential negotiation with federal regulators.
Council approved a committee-origin measure (Bill 60 CD2) that restructures sewer charges to a 40% fixed / 60% volumetric split and phases a series of rate increases over the next several years. The adopted path (the CD2 passed on a 5–4 recorded division) will lower many ratepayers’ bills in the near term if they conserve water but increases revenue from higher water users. The CD2 also includes a customer-assistance provision to provide credits or rebates for low-income households; the program’s eligibility and structure were not finalized and will be developed by the administration.
The public and council debate focused on two linked choices: whether to finance Sand Island Treatment Facility upgrades and other CIP work with additional bonds (incurring interest costs) or to use general-fund cash to avoid interest costs in the near term. Chair Waters’s FD1 had proposed a substantial cash infusion to the sewer fund from general-fund savings; several councilmembers and public testifiers raised concerns that using general-fund cash for sewer work could violate or weaken bond covenants and jeopardize the city’s bond ratings, thereby increasing long-term borrowing costs.
Director Andy Kawano (Budget and Fiscal Services) and Roger Babcock (Department of Environmental Services) explained options. Babcock said the department has some flexibility in sequencing CIP projects and the cash-versus-bond mix, but some projects carry statutory or contractual deadlines that limit sequencing. Kawano cautioned that using general-fund subsidies could be treated by rating agencies as a recurring subsidy and factor into credit reviews.
Public commenters urged caution and alternatives. Natalie Wasa urged adoption of the CD2 package from the budget committee and warned that setting aside large general-fund provisions for sewer activities risked bond-rating consequences. Frank Doyle, representing a water stewardship group, urged the council to require an integrated planning process and to open formal discussions with the EPA before committing large cash injections; he argued that the consent decree can be renegotiated if the city provides a structured plan. Other testifiers asked the council to prioritize minimizing short-term household impacts.
Councilmembers proposed competing timetables. Councilmember Tupelo introduced a five-year rate schedule intended to reduce multi-year spikes and to allow the administration time to negotiate with federal partners and finalize an integrated plan; Budget Chair Del Santos Tam and other members supported a longer schedule. After sequential votes, the committee-origin CD2 (with a structure to 07/01/2031 and a subsequent 3% annual escalation thereafter) was adopted by the council on a 5–4 division. The council directed Environmental Services and Budget & Fiscal Services to continue discussions with the EPA and to finalize a customer-assistance plan to reduce impacts on low- and moderate-income households.
The outcome shifts greater emphasis to volumetric charges to encourage conservation and contains explicit direction to shape a low-income assistance program, while leaving financing choices and integrated planning as administration responsibilities with council oversight.
