After a work session and some discussion during the March 12 City Council meeting, a proposed 1.5% utility rate increase was unanimously denied .
Mayor Ken Jackola and councilors David McClain and Dave Workman agreed that this is not the right time to increase utility rates.
Councilor Jeremy Salvage asked for more information about the needed upgrades at the wastewater treatment plant, which are primarily the reason to consider rate increases, to which City Manager Ron Whitlatch responded with information about regulatory requirements that the current 50-year-old wastewater treatment plant is struggling to meet.
“Regulatory (requirements) is only getting tighter and tighter and tighter and tighter,” he said. “There are so many unfunded mandates that come out of regulatory agencies. This isn’t a pipe dream that we have… This is all driven by need and by regulatory.”
He added that the city has cut staff and looked for other ways to function with less.
“I get that it’s a big ask. It’s something that we ask internally all the time, and we are looking for other ways to do it, hence the lobbying, the grants,” Whitlatch said. “We’re turning over every rock that we can find.”
Councilor Michelle Steinhebel noted that past councils have “kicked that can down the road,” which led to a high water rate today because the city finally reached that point where a new water treatment plant was needed.
“I don’t want to be the council that kicks the wastewater treatment (can) down the road and then we have to come to our constituents for a double-digit increase,” she said.
Yet since the current proposed rate increase is so small, she’s okay with agreeing with the other council members.
“I just want the cautionary tale of the past remembered for this council,” she said.
Whitlatch clarified that the city anticipates it will have approximately half of the needed funds for wastewater treatment upgrades. The city might be able to secure grants or state and federal money, but that is not a guarantee. The rate increase, though not much, would “move the needle closer” to fulfilling the need.
McClain gave credit to Finance Director Brandon Neish for providing a five-year projection, which wasn’t presented to past councils.
“We are looking forward, we’re planning, we’re budgeting better,” McClain said. “Back in the early 2000s, when we needed money we just said ‘Okay, let’s raise the rates.’ We didn’t think about it; we just raised the rates. Now with a five-year plan and the budgeting and a more informed public, I think we’re doing a lot better job today than we were back then.”
Salvage said he understands both sides. He doesn’t want to kick the can down the road, but he also hates raising rates and he doesn’t like the unknown of the project cost.
“If there is a right time to hold off on a rate raise, probably right now, for me, is a right time,” Salvage said.
The city received 11 emails opposing the rate increase. Ultimately, all council members approved a motion to disapprove the rate increase.
During a work session on the subject held prior to the regular council meeting, Public Works Director Jason Williams reviewed projects his department is working on.
For water treatment, the city is focusing on water main replacements in the 88.7 miles of mains they maintain, with priorities on undersized and leaking main lines. Current funding for these projects allows for the replacement of approximately 2,500 to 3,000 lineal feet per year, which equates to the lines being replaced every 160 years, he said.
Additionally, Williams noted, the Green Peter deep drawdown has increased the need for more staffing hours, and the city plans to install mixers in the water reservoirs for improved water quality.
For wastewater treatment, Williams reported that the city had to replace failing gear boxes on the aeration basin boxes. Staff are managing increased failings in sewer lines and laterals. Of the 69.03 miles of sanitary sewer main within the city, he said current funding allows for the replacement of approximately 2,000 to 2,500 lineal feet per year, which equates to the lines being replaced every 170 years.
“Our aging pipes allow for a substantial infiltration and inflow that ends up in our system, which is driving the priority projects at our wastewater treatment plant,” he said. “In one recent heavy rain event, we had a 200% increase in flows coming into the plant just with groundwater, picking them up from leaking laterals, leaking mainlines, leaking manholes.”
For storm drainage, the city manages approximately 63 miles of storm drainage mains and 52 miles of open channel drainage. Williams said staff replace about 1,500 lineal feet of mainlines every two to three years, and staff spent “a large amount of time” mowing the drainage ways every summer.
Finance Director Brandon Neish continued the meeting with a review of the projected water fund budget for the next five years, assuming the council does not increase the utility rates. Neish projected approximately $6.7 million in revenue, $4.7-$5.3 million in operating expenses, and $2.8 million for capital projects next year (and $1.2 million for the following four years). By FY 2030, the fund balance is projected to sit at about $1.5 million, a $4 million decrease from the current fiscal year budget.
Workman noted during the work session that the proposed 1.5% utility rate increase, an average of $1.89 per household, doesn’t amount to much additional revenue for the city.
“We’re gonna have people in here today and people are going to be frustrated,” Workman said. “It’s not a lot of money and we, sitting up here, feel okay with $1.89, it’s only $1.89. But I feel like we’re really wearing on some of these people with our ‘oh it’s not that much money’ thing, especially timing-wise right now. Let’s face it. We’re not gonna get people who are gonna be in here talking to us later to separate that $18 (new city service fee) from this $1.89.”
Whitlatch agreed, clarifying that the city’s stance is it’s okay to forgo the increase for now.
However, Neish began talking about the wastewater fund, saying that staff recommends a two-percent increase “to help stave off some long-term need.”
Assuming no rate increase, Neish projected approximately $22.4 million in revenue next year in the wastewater fund, $4.7 million in operating expenses, and $8 million for capital projects. By FY 2030, the fund balance is projected to sit at a $1.3 million deficit. That’s because in a couple of years, the city intends to upgrade the wastewater treatment plant with a projected $30 million cost. With the requested rate increase, the FY 2030 balance is projected at a $674,431 deficit.
Whitlach pointed out that last year Lebanon was around the third-highest in utility rates, but this year the city sits at about sixth-highest and about $12 over the average. It came as no surprise to Whitlatch, though, because he anticipated that other cities would begin upgrading their own water systems and raising their rates appropriately.
After a couple of years meeting representatives in Salem, Whitlatch and Jackola noted that the state is starting to hear from more and more cities with water and wastewater problems, and they are starting to better understand the need for infrastructure support in line with improved housing options.
Neish took the time to clarify that the city is not asking for an increase on the new city service fee seen on utility bills. As expected, the projected general fund budgets for the next five years will have just enough to cover requirements, thanks to the city services fee.
“By the time we get to FY 2030, we’re looking at about $12,000 (fund balance). We’re basically flat as far as our reserve fund is concerned, making sure that we have enough to meet our 17% required minimum,” he said. “But that city services fee is working the way it was intended.”