In a major twist to an ongoing saga, Bainbridge Island City Manager Doug Schulze said this week that it will be more costly to outsource management of the city’s water utility than to operate it in-house.

Schulze was charged with looking into a proposal from the Kitsap Public Utility District to manage the city’s water utility.

He returned to the city council at its meeting on Wednesday night and said that the cheaper option is to keep the water utility under the city’s purview.

“It would cost the city about $100,000 more to contract with KPUD,” Schulze said.

While the announcement did not create much debate on the dais, it drew an immediate reaction from those in the audience.

Former Councilman Bill Knobloch was present and ready to comment on the matter. Knobloch has been a vocal proponent of divesting the water utility.

“While I have the upmost confidence and respect of our city manager, much of his information has been provided to him by city staff,” Knobloch said. “I’m hearing a lot about the impact on city staff, city organization and city administration…council, this is about the ratepayers, not the impact to the city.”

“The economy of scale that KPUD offers cannot be matched by the city of Bainbridge Island,” Knobloch said. “What I heard tonight from our city manager and our staff were reasons not to transfer the utility because they can do a better job and mainly be more economical. History shows that was not preformed previously.”

But Knobloch wasn’t the only citizen in the audience inspired to respond to the city managers report. Former Utility Advisory Committee member Randall Samstag also spoke.

Samstag said that the city manager came in as an objective party on the water utility issue.

“The objective reality you just heard is that, in spite of the supposed economy of scale, it will cost more to transfer the utility to KPUD,” Samstag said.

“You need to be very clear if you make this decision that what you are doing is increasing the costs to the system,” he said.

KPUD was the preferred manager out of three management proposals submitted to the city in November. The city’s Utility Advisory Committee reviewed each proposal and chose KPUD as the best option.

Schulze’s presentation to the council not only covered the cost, but also the policy issues the council would have to consider such as emergency response the notion that the public utility’s expectations for capital improvements may exceed the city’s funding availability.

Ever since the city was caught overcharging customers by nearly double what surrounding utilities were charging in 2010, a debate has lingered throughout the island community. Some have argued that the utility should be divested and handed over to the Kitsap Public Utility District. Others say that the city should correct its mistakes and move on.

The council reduced water utility rates by 45 percent in late 2011.

The move to explore outside management options, spearheaded by Councilman Steve Bonkowski, is the most recent effort to answer the question of what the best option for the city is: to keep the water utility or get rid of it.

Schulze answered that question Wednesday night.

“I would say the impact on other services and potential impact on the cost of those other services is greater,” Schulze said.

“A good example would be operation and maintenance of the other utilities,” he said. “There will be an impact if we loose two or three operation and maintenance employees. Those three employees aren’t just dedicated to the water utility, they are shared across water and sewer and to some extent the storm water utility. It’s three less bodies.”

Schulze also briefed the council on the staff employed by the city who works on the water utility. Staff such as Public Works Manager Chuck Krumheuer who has 35 years of utility operations experience and holds multiple certificates relating to water distribution, wastewater collection, and water pollution.

Schulze also mentioned Randal Williamson, a maintenance technical with 17 years of experience with utility operations. Williamson is certified as a water distribution manger and specialist among other skills.

Richard D. Oxley can be reached at 206-842-6613 or roxley@bainbridgereview.com.