KPUD proposal passed to Utility Advisory Committee

The much-anticipated proposal from the Kitsap Public Utility District to assume ownership of the city’s water utility went through its first public dress-down in front of the City Council Wednesday and will now be sent to the city’s Utility Advisory Committee for review.

The council was more concerned about how quickly the UAC could review the proposal, which would reduce water rates for the city’s 2,300 ratepayers by nearly 50 percent, than the actual substance of the document.

The transfer of utilities has been on the UAC’s radar since the idea was first broached by the council in January, said Vice-chair David Ward, and the group has thought about the changeover already.

“We’ve been aware for some time that this event was going to happen,” he said. “We’ve already begun outlining the process of evaluating the KPUD proposal,” he said.

The UAC was scheduled to meet at 5:30 p.m. Thursday, after the Review’s weekly press deadline, to discuss the proposal.

Coming into Wednesday’s study session about the proposal, Councilor Barry Peters had prepared a number of what he called top-level questions. Peters’ questions focused on the timeline, impacts of acting quickly and possible alternatives that need more analysis. The council agreed that it would be best to hand the proposal to the UAC and let the body of experts find its own issues and form its own conclusions.

“I’m hopeful we won’t start trying to tell the UAC how to handle this,” said Councilor Bill Knobloch. “Let them do their job.”

The council wondered primarily about the timeline because the group wanted to complete the transfer as quickly as possible to start saving money for the ratepayers.

“When I see a 50 percent reduction of rates, it’s compelling to move forward,” said Councilor Kim Brackett.

The council didn’t leave the meeting with a clearly prescribed timeline, but Ward said the UAC could have its questions ready quickly.

“If you say you’d like an answer in a month, then we’ll get back to you in a month,” he said.

That doesn’t mean that the UAC will send the proposal through, no questions asked.

“You can count on the fact that we will come back to the council if there’s any issue we’re uncertain about,” he said.

Bob Hunter, assistant general manager of KPUD and author of the proposal, said the timeline for the transition depends on the city. KPUD has sent in its proposal, and it still has some more research to do, but Hunter said it could move at as quick of a pace as the city dictates.

“I would anticipate it taking at least six months, but as far as the water portion of it goes, KPUD could move as rapidly as the city wanted,” he said.

Once the change is completed, customers should see instant savings.

According to the proposal, a typical monthly bill (800 cubic feet of usage on a 5/8-inch meter) would cost a resident $31.47 under KPUD and $62.89 under the city’s water systems with 2011 rates.

With the transition, KPUD will assume responsibility for capital improvements needed after 2014, according to the proposal. The city identifies $5.4 million in improvements between 2011 and 2014, much of which is for a $2.6 million improvement to the High School Reservoir scheduled for next year. Those improvements will need to be paid for by the city, either through money in its water fund or through a surcharge to water customers.

The plan also includes potentially assuming control of the sewer utility, but KPUD has never operated a sewer system, so it would embark on a one-year trial period, where sewer rates remain at current levels and are reassessed at the end. The time period would be used to set optimal rates for sewer, which the proposal predicts will be lower.

Under state law, KPUD is not currently authorized to operate wastewater facilities, but it can acquire that authority through legal means or seek special legislation to do so. While KPUD works to gain that authorization, the city could continue to operate the sewer or it could bring in a third party to manage it in the interim. Once KPUD obtains authority to control wastewater treatment facilities it can begin the trial period.

In a letter attached to the proposal, Walton expressed worry about the possibility of giving up the water utility to KPUD without quickly moving the sewer.

“If the city is only able to transfer the water system, I am concerned the result may be higher sewer rates for our 1,857 sewer customers,” Walton wrote.

The sewer and water utilities share some overhead costs, and if the sewer was unable to be taken over, those costs would be transferred exclusively to the sewer fund.

Last week, Walton indicated that the change in utilities could lead to staffing changes, as well. Approximately 20 employees manage and operate the sewer and water utilities. Walton said staffing reductions may need to be made as a result of the changeover.

Public Works Director Lance Newkirk said that any number up to the full 20 was within the “range of possibility” for amount of reductions. Should KPUD only operate the utilities, not own them, that number would change, he said.

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