Utilities report spurs question

For the average citizen, trying to decipher the overload of water utility information presented at last week’s council meeting was overwhelming, if not impossible, to digest in one sitting.

For Utility Advisory Committee member Arlene Buetow, it was an outrage.

“I think it was an intentional attempt to skew the facts to support the status quo and mislead public opinion,” said Buetow. “I think their

report lacked an apparent objectivity.”

Among a plethora of information Thomas Keown of GHD laid out in the preliminary report to the community, Keown estimated a rate comparison for each of the potential water utility operators – including the Washington Water Services Company (WWSC), Kitsap Public Utility District (KPUD) and the status quo, the City of Bainbridge Island.

Buetow, whose experience with water utilities includes 12 years of operating the North Bainbridge Water System, said the consultants did not clearly label how they calculated the rates and tacked on a KPUD surcharge prematurely.

The consultants’ report is spurring questions about the city’s intentions involving the water utility’s future.Does it have the ratepayers’ or the city’s best interests in mind as it decides to either retain, transfer or sell the water utility?

A spin-off of the water utility would clearly have a major impact on city staff and finances, and some people are accusing the city of focusing on the impact to the city instead of the ratepayer.

At last week’s council meeting, Keown provided utility rates for the four potential utility ownership and operation scenarios.

• The existing city rate, which includes the 5 percent Washington state utility tax and the 6 percent city utility tax is $64.98. The consultants said they found an immediate savings that could be implemented to drop the rate down to $43.15, and a further savings if the city were to optimize its utility through operational changes to achieve a rate of $35.94.

• The WWSC rate, which also includes both taxes, was listed at $47.54.

• The KPUD rate was listed at $42.39, which included a $7.60 surcharge, according to Butow. The rate without the surcharge, Buetow said, was actually $32.47 – including the state utility tax.

“The rates the consultants presented were not clear cut,” said Buetow, who is speaking as an individual and not representing the UAC.

Keown said the numbers are preliminary and he would agree with Buetow that they need further investigation.

“By no means are those numbers finals,” said Keown. “ There is still plenty of debate to be had. We still need to go back and talk with KPUD about what was included in their proposal and finalize rates.”

The figure presented by the consultants differed from the rates described in the fall 2010 KPUD proposal of $35 to $40 if it were to take over the utility at the city’s request.

At that time, KPUD estimated that it would ask for about $2.1 million in capital costs to pay for necessary infrastructure projects through 2014. KPUD would pay for about $1 million of those upgrades and would assume responsibility for any improvements in the water system after 2014.

The report said that it would prefer the city pay outright for those improvements instead of adding a surcharge to ratepayers. (Projections show the  fund will end with a cash balance of $4.86 million minus accrued payables, assuming repayment of the $3 million sewer loan, according to Interim City Manager Brenda Bauer).

Bob Hunter, KPUD’s assistant general manager, said the surcharge should not be used to determine a base rate for KPUD services, and was never discussed in the three-hour meeting KPUD officials had with the consultants. But, he said, he wasn’t too surprised when it was included in the presentation last week.

“It’s pretty evident that the city wants to retain the water utility infrastructure even though they requested us to give them a proposal,” said Hunter. “It’s rather apparent the city would choose to retain ownership. Really we are indifferent. We are just here to provide a service that we would to any utility in the county.”

Councilor Bill Knobloch said he too was disappointed in the report.

“The consultants are making assumptions about the actual transaction that has no basis in fact until council sits there, under legal advice, and decides how that spin-off would occur if and when the council decides to do that,” said Knobloch.

He added: “I am disappointed with the consultants emphasis placed on impact to the city. The real emphasis should be the impact to the ratepayers because a utility by law is an enterprise fund in place for the benefit of the ratepayers. We have all seen the KPUD proposal; it’s simple, direct and the emphasis is how they can benefit the ratepayer by reducing rates by more than half. We did not see this kind of trend in the consultants’ report.”

Buetow said she doesn’t think anyone should look to spite the city, but focusing on how spinning off the water utility will effect city infrastructure will continue to abuse the ratepayers, who are already paying water rates that exceed most in the state.

She hopes the consultants will directly address this issue and correct the rates in their final report due at the end of July.

Since the beginning of the consultant process, several members of the UAC have expressed their frustration for their lack of input in the process.

“I think it’s a widely held frustration in this community that we have not been involved in this process at all,” said UAC Chairman Dave Ward.

When the consultants initially met with the UAC they invited an open dialogue of communication. The UAC, with its own set of utility expertise, had already studied the water utility history and background and offered to get the consultants up to speed.

“For whatever reason, we have been excluded from this process completely,” said UAC member Dan Mallove. “Early in the process we expected to meet and that never happened. I think it’s unacceptable without a conversation before they put together their final report.”

The UAC decided to hold a special meeting next Tuesday dedicated solely to generating questions about the consultants’ preliminary report.

Public Works Director Lance Newkirk, said he is working on setting up a meeting to occur in the next several weeks with the UAC and the consultants to discuss questions and get answers before the formal report and recommendation from the consultants at the end of July.

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