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Stop the zombie idea of offshoring the city's water utility | LETTER TO THE EDITOR
To the editor:
The idea to transfer ownership of the city of Bainbridge Island's Winslow water utility, which came up in 2010, initially had a salutary effect. It caused the council and the Utility Advisory Committee to ask the right questions about the utility:
1) Is the rate for water service in Winslow competitive with peer agencies?
2) If not, why not?
3) If not, can competitiveness be restored by reduction in staff?
4) What is the right amount of capital reserve?
It took us several years to come up with answers to these questions. But, as a result of an analysis of these questions by a utility business advisor, by the UAC, and by city staff, we have finally arrived at conclusive answers:
1) The rates charged by the city for water service in the Winslow system in 2010 were excessively high in comparison to peer agencies.
2) A primary reason for the high rate was an excessive allocation of staff time to the water utility.
3) The city has proven that the water utility can operate at a very competitive rate to peer agencies, including the Kitsap Public Utility District (KPUD), after having reduced staff from the level of approximately 10 full-time equivalents in 2010 to the level of 4.5 FTEs today. This has permitted the utility to implement a 45 percent reduction in the rate without sacrificing service quality or withdrawing funds from the capital reserve to subsidize operation. This rate reduction makes the typical water rate for a small quantity water user in Winslow lower than the rate charged by the KPUD.
4) The utility business advisor consultants suggested that the right amount of capital reserve is probably in the neighborhood of about $1 million beyond immediate capital needs.
So our questions were answered by this analysis by the utility business advisor, the UAC and city staff. Part of that analysis was informed by proposals solicited by the council in 2010 to take over water utility ownership.
Three different proposers spent significant effort to provide these proposals. The end result of that process was a decision by the Council in 2011 to keep ownership of the utility for a period of at least 18 months to ensure that the utility could be operated efficiently without using any capital reserve. Analysis by the city's finance department, shared with the UAC over the last year, has proven that the city now has a competitive utility.
So why has the council solicited a further set of proposals for water utility operations?
We have heard a number of reasons for off-shoring the water utility either by direct transfer of ownership or by an operations or “management” interlocal agreement with the KPUD:
1) There should be one “professional” agency responsible for water management on Bainbridge Island.
2) The KPUD has a professional hydrogeologist.
3) The KPUD is doing a ground water study to properly manage the ground water resources of the entire near-shore Kitsap peninsula.
4) The KPUD does their own water system plans, while the city relies on consultants.
5) Since the KPUD has more water system customers than the city, they have an “economy of scale” that means that they can more efficiently service Winslow customers than the city.
6) A management contract can be executed with essentially no requirement for staff FTE by the city.
These reasons don’t hold water.
There already is one professional agency responsible for water management on Bainbridge Island. That agency is the city. The city manager, in his presentation to the council in March, showed the combined 71 years of professional utility operations experience of current city staff assigned to the water utility. KPUD offers no better.
The KPUD has a hydrogeologist on staff, but likewise the city has a professional water resources geologist who has worked on projects for both the water and stormwater utilities.
The KPUD is currently doing a groundwater study, but the city has already done one. The city’s water resources geologist worked with the U.S. Geological Survey to deliver a groundwater model and study for the Island. When results of the KPUD study are in, they can be used with the Bainbridge model to improve water management, but that does not require off-shoring of operation of the utility.
The KPUD uses consultants to do their water system plans, just like the city. It is not economical for water utilities to employ engineers as full-time staff expert in water system modeling and capital improvement cost estimating when these studies are only performed once every five years.
The fact that the Winslow system now operates at a lower rate than the KPUD for low water use customers is ample refutation of the idea that KPUD has an “economy of scale” that is not provided by city. Where is the “beef” in this claim?
It is unrealistic to think that the city can retain ownership and ultimate responsibility to customers of the Winslow system without a significant expenditure of staff time. This time is directly the result of water utility ownership and not appropriately shifted to the general fund. The city manager has estimated this at around two FTEs. A figure dramatically lower than this is simply not realistic.
In spite of the paucity of need for such a contract, the idea of water utility off-shoring is still with us in the form of a proposed interlocal agreement for operations by the KPUD. But this off-shoring idea has not fully considered negative impacts to the COBI of the idea.
I have outlined some of these in a previous note to council. They include increases in costs for the stormwater and sewer utility because of loss of cross-trained support for water system operation, loss of valuable staff knowledge and hampering the city’s ability to attract competent staff.
There are several important utility issues that currently demand the council’s attention:
1) What should be done with an excess of approximately $4 million currently in the capital reserve over the necessary amount.
2) The water utility master plan is overdue. Important capital projects including high school reservoir improvements, a possible intertie with the KPUD North Bainbridge system, and downtown pressure problems need to be evaluated.
3) There has been question as to whether the current water utility rate structure is consistent with community values. Analysis of this by the UAC has been delayed by other tasks.
4) A similar analysis needs to be done for the stormwater utility.
5) There has been question as to the reasonableness of a sewer rate based on water consumption, since impacts on the sewer system are caused not by water consumption by sewage production. Should the rate for the sewer system be changed to one based on equivalent residential units and the water consumption basis abandoned?
There are unquestionably other important utility issues that need to be addressed by this council. But it is hard to see how these questions will be addressed by off-shoring water utility operations.
It is time to drive a stake in the heart of this zombie idea to off-shore the water utility. Let’s get back to work making the city operate efficiently for its utility customers and citizens and stop trying to avoid our responsibility for serving their needs.
RANDAL W. SAMSTAG
Agate Pass Neighborhood
Former UAC member