City is responsible for rate reduction delays | Lettesr | August 5
August 4, 2011 · 4:23 PM
Concern has been voiced that City Council’s pending vote on reducing water rates was purposely delayed to benefit Mr. Peters’ reelection bid. Responding, Mr. Peters blames the Bainbridge Ratepayers Alliance for delays in providing financial relief for city’s water customers. To paraphrase Shakespeare, methinks the council member doth protest too much.
In late 2007, council approved the construction contract for the Winslow sewer treatment plant upgrade with just 60 percent of the financing in place. Not until early 2009 did the city seek to complete funding with sewer revenue bonds, guaranteed by the water and storm water utilities. The Ratepayers Alliance filed suit claiming the guarantee was an illegal tax.
Since the lawsuit stopped the city from issuing bonds, the sewer fund borrowed $3 million from the water fund to keep the project going. In December 2010, the Appeals Court ruled the guarantee legal. One would have presumed at that point bonds would have been issued, the water fund loan paid back and water rates lowered given water utility cash far in excess of actual needs.
It didn’t happen. After spending 18 months and more than $250,000 to litigate the guarantee, the city walked away from that approach. Instead, issued city-guaranteed bonds paid for with sewer revenues. The question is, why wasn’t that done in 2009, thus avoiding spending $250,000 on the lawsuit, the need to borrow from the water fund, and the resulting delay in cutting water rates?
A logical explanation would be that the limited number of customers means some sort of guarantee is necessary to issue sewer bonds at reasonable interest rates. In 2009, the city’s financial condition took its guarantee off the table. So the city planned to have its water and storm water customers cosign the bonds.
As to the claimed Appeals Court victory, a close reading of the decision appears to bless the guarantee, but leave the courthouse door open to further litigation if the guarantee is actually used.
Bottom line, any delays in reducing water rates is but collateral damage from the city putting shovels in the ground before the corresponding dollars were in the bank, and failing to keep its financial house in order.