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City reaches partial settlement with Bainbridge Ratepayers Alliance

The City Council has approved a partial settlement agreement in the ongoing lawsuit filed by the Bainbridge Ratepayers Alliance, which will allow the city to secure bond funding to pay for the remaining upgrades for the Waste Water Treatment Plant and repeal the sewer rate surcharge.

The agreement says the alliance will not sue Cashmere Valley Bank for financing a bond anticipation note for $1.9 million to fund the final upgrades to the treatment plant and create a reserve of $300,000 for the city’s sewer utility fund.

“Both sides really want to get this resolved, and we have that common ground,” interim City Manager Lee Walton said.

Representatives of the city, alliance and Cashmere Valley Bank approved the language of the settlement.

Members of the council declined to comment on the situation.

Sally Adams, secretary for the alliance, said the partial settlement is a positive development in the lawsuit, and for the ratepayers, who were set to bear the brunt of consequences of the case in the form of the sewer surcharge.

“The alliance is very pleased that settlement decisions are finally being made that both serve the interests of the ratepayers and the city,” she said in an email. “We have every reason to hope that the settlement process will continue until the remaining issues in our lawsuit are addressed.”

As a result of the partial settlement, the council will repeal as soon as possible the 111 percent sewer rate surcharge it passed in December.

The surcharge was set to begin on bills sent out last week, but the day before bills were sent, Walton authorized a temporary hold on the rate hike.

As previously reported, Walton met with alliance President Richard Allen several times recently as the first bills with the surcharge loomed.

City Finance Director Elray Konkel said coming to a partial settlement before the surcharge went into effect was in everyone’s best interests.

Following an executive session to discuss the suit, the council began the process of repealing the surcharge. After Wednesday’s first reading, the ordinance will go to a second reading on Jan. 27, at which point it could be passed by the council.

“It would be wonderful to avoid the surcharge and the impact it would have on the ratepayers,” Konkel said.

In the settlement, the city agreed to pay legal costs for the alliance in an amount not to exceed $35,000.

Adams said the alliance has spent between $30,000 and $35,000 on legal fees.

As of this point, the city has already spent more than $200,000 in legal fees on this case, Konkel said. The cost of those fees, along with the obligation to repay Cashmere Valley Bank, will be charged to the sewer utility, he said.

Konkel said the bond note has a two-year repayment window, with an interest rate of 90 percent of the prime rate, or a little less than 3 percent.

The ability to obtain this note is a positive step, but Konkel said the city still has more work to do.

“We originally planned to issue $6 million in bonds and we got $1.9 million,” he said. “We still have a long way to go.”

Not included in the bond is money to repay the $3 million interfund loan from the water utility to the sewer fund. The settlement includes language saying the city will not use revenue from the water or storm water utility to pay sewer expenses.

The lawsuit, filed in April and appealed by the alliance after a Kitsap County Superior Court judge ruled for the city in September, has been a burden on the city in its attempts to complete the treatment plant upgrades and undergo a Winslow Way reconstruction project. The latter, scheduled to begin construction in 2010, had to be delayed for at least one year while the city figures out its legal issues.

The city and alliance are continuing to work on a full settlement concerning the other claims of the lawsuit.

“The issues remaining address both past mischarging of the utility ratepayers and the need to put procedures in place that assure that such overcharging, or mischarging, of the utilities does not occur in the future,” Adams said. “We’re hoping for an early resolution of these remaining issues.”

Several claims in the lawsuit have already been answered. In the lawsuit, the alliance alleged that the $6 million bond was far in excess of what the city actually needed. As a result of the lawsuit, the city obtained a smaller bond. The alliance also demanded that the city form a Utility Advisory Committee to oversee and advise city officials and councilors on utility issues. The city filled out its UAC in August, and the group has worked with the council on rate changes and the sewer surcharge, among other issues.

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