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Council directs staff to place 3% sewer rate increase on next agenda; discusses reducing LOST subsidy over time
Summary
City wastewater staff asked the council to authorize a 3% sewer rate increase to cover inflationary operating costs. Council members also discussed whether to reduce Local Option Sales Tax (LOST) contributions to the sewer fund over several years; staff will return with implementation options.
City wastewater staff told the City Council on March 3 that a modest sewer rate increase would cover rising operating costs at the new treatment plant and that reducing LOST transfers would have a direct effect on monthly customer bills.
Wastewater Superintendent Jared Kean recommended a 3% increase to cover inflation, higher equipment and chemical costs, and increased operational expenses tied to the new wastewater facility. Under the proposal, the current base sewer rate would rise by $0.75 per month.
Kean also presented scenarios tied to LOST contributions. The city currently uses a LOST contribution to help pay plant debt; staff showed that reducing that LOST allocation from $500,000 to lower levels would increase sewer bills for customers. Kean said removing the full LOST allocation would add roughly $12 per month to sewer customers’ bills; cutting it to $500,000 would add about $6 per month, using the city’s modeling.
Finance staff, consultants and councilmembers discussed debt coverage requirements for the municipal wastewater general-obligation bonds and whether a 3% increase would meet the bond covenant “coverage” targets. Staff said the 3% primarily covers operating inflation and would not, by itself, raise debt-coverage ratios to the 110% target required for some covenant calculations; the city must continue monthly set-asides for debt service.
Council members debated whether to gradually shift the LOST contribution away from the sewer fund so LOST dollars could be redeployed to streets, public safety facilities or other capital needs. Several councilmembers favored a phased approach over multiple years rather than an immediate transfer of debt service to ratepayers.
Vice mayor and council direction: staff was asked to place a 3% sewer-rate adjustment on the next council meeting agenda and to return with a multi-year plan that models stepped reductions of LOST contributions and corresponding rate impacts.
Ending
No final vote on rates occurred on March 3. Staff and council agreed to return with more detailed financial options, including multi-year LOST reduction plans and refined debt-coverage projections.
