Council committee advances multi‑year sewer rate plan after lengthy debate over consent decree, rebates and bond financing

The Honolulu City Council Committee on Budget on Wednesday reported out an amended version of Bill 60 (CD2), a multi‑year package of sewer fee changes the administration says are needed to fund operation, maintenance and a $6.5 billion capital improvement program for wastewater infrastructure.

The committee advanced an amended draft of the bill after hearing a multi‑hour presentation from Department of Environmental Services Director Roger Babcock and extensive questioning from council members and public testifiers. The committee debated how quickly to phase in increases, how to allocate revenue between a fixed base charge and a volumetric charge, the size and targeting of a proposed customer rebate, and whether integrated planning could reduce the overall capital need.

Why it matters: The sewer fund must be self‑sustaining, department staff told the committee; bond covenants evaluated by rating agencies require predictable revenue to support debt service. The bill would shift the single‑family allocation of charges from approximately a 70/30 split (base/volumetric) to roughly a 40/60 split over the plan period and would raise revenue through annual percentage increases the administration modeled over a 10‑year period. Council members sought shorter periods (five to seven years) and a larger role for targeted rebates and resilience funding to limit impacts on low‑volume or low‑income households.

Key details from the presentation and discussion

- Structure: Director Babcock described the department’s package as a 10‑year proposal meant to cover operation and maintenance, existing and new debt service tied to a $6.5 billion capital program, and the rate covenant required by bond documents.

- Billing mechanics: The department said the base charge is currently about $77.55 and the volumetric charge is $4.63 per 1,000 gallons; a median single‑family household that uses 6,000 gallons per month is billed for 80% of that (4,800 gallons) and currently pays $99.77 per month under the existing structure presented at the hearing.

- Rate shift and examples: The CD2 presented by the administration phases the bill from a roughly 70/30 base/volumetric ratio to roughly 40/60 so that customers can reduce bills by lowering water use. Babcock’s slides set out example annual dollar impacts for four usage profiles (2,000; 4,000; 6,000; 15,000 gallons per month), showing that low‑use households could see modest short‑term declines under the proposed shift while very large users would see larger increases as the volumetric component rises.

- Proposed schedule: The administration’s modeling included a multi‑year schedule with increases in early years (for example, Babcock described year‑one increases around 6%, year‑two around 7.5% and subsequent annual steps through a 10‑year envelope in the presentation). Chair Waters and Budget Chair Dos Santos Tam offered alternative schedules: Chair Waters proposed a five‑year, 6.75%‑per‑year path; Dos Santos Tam presented a multi‑year CD2 that the administration said would meet bond covenants but noted council members could shorten the term to five to seven years.

- Customer assistance and rebates: Committee members discussed a proposed $20–$25 rebate for eligible low‑income customers. Department staff said one contractor‑administered program could reach roughly 40,000 households, and that the City would need rulemaking authority to implement credits and customer assistance programs.

- Integrated planning and EPA discussions: Several council members and public speakers urged the administration to fast‑track an integrated planning study and to pursue negotiations with EPA on consent‑decree requirements. Testifier Frank Doyle argued the city should press EPA about secondary treatment at Sand Island, and Councilmember Tupelo urged detailed, project‑level CIP lists to evaluate pay‑go vs. bond financing. Director Babcock said integrated planning work was funded in FY 2026 and that a full integrated plan would take time to complete and require coordination with stormwater programs and regulators.

- Financing trade‑offs: Council members highlighted the costs of borrowing. Chair Waters emphasized that long‑term bonding increases total program cost via interest and said using cash where possible lowers interest expense but also reduces liquidity for operations; department staff described a mix of cash and debt financing in the modeled CIP and warned that excessive reliance on general‑fund transfers or one‑time sources would not be counted by bond analysts.

Committee action and next steps

After extended discussion and amendments, the committee accepted a version of the council‑sponsored CD2 with two principal changes: (1) explicit rulemaking authority for the Department of Environmental Services to implement a customer assistance program, and (2) trimming the out‑year tables in the bill so the explicit rate tables stop earlier (a change the committee described as effectively shortening the commitment horizon to align better with the City’s 6‑year CIP cycle). The committee then voted to report Bill 60 (as amended) out for third reading.

Formal record: During the roll call for reporting out the bill for third reading the committee noted an objection and recorded votes as: Councilmember Cordero — no; Councilmember Kiana — yes; Councilmember Weier — yes; Committee Vice Chair Nishimoto — reservations noted; Chair Dos Santos Tam — yes. Reservations from two members were recorded in the committee report.

What the committee did not adopt: The committee did not adopt any final rule language for the rebate program on the floor; it also did not change any bond authorizations or CIP project prioritizations at the hearing. The administration will continue to refine revenue estimates and present final ordinance language to the full council.

Looking ahead: The bill was reported out for third reading and will go to full council. Committee members and public testifiers urged the administration to accelerate an integrated planning process and pursue grants and low‑interest loans where feasible to reduce the rate burden on residents.