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Rate debate: Prospect of utility bills doubling causes whirlwind of controversy

By Staff | Mar 28, 2009

A utility rate study released Wednesday showing that a 92.5 percent increase in utility rates over five years is needed to meet the bond requirements associated with the utility expansion project has some Cape Coral city council members crying foul.
Financial Services Director Mark Mason said earlier this week the rate increases are needed to prevent the city from defaulting on its water and sewer bonds, worth some $315 million, which would ruin the city’s bond rating and make it extremely difficult and expensive to borrow money in an already tight credit market.
Councilmember Bill Deile, however, sees the study as a “scare tactic” used to push council members into restarting the utilities expansion project.
“They (city staff) put you in a box where you can’t do anything but what they want,” Deile said.
“This is just another attempt to force council to go forward with the UEP,” he added.
A proposal to install water utilities in the area north of Pine Island Road, commonly referred to as North 1-8, that would have brought 57,000 more parcels and 16,000 more customers into the utility system was initially passed by the council in February but was later rescinded. A similar proposal to bring water, sewer and irrigation utilities to the SW 6/7 area that would have brought 3,200 homes into the system was also initially passed but eventually halted last year.
Councilmember Tim Day, who reversed his vote to go forward with the North 1-8 project, said he was surprised at the extent of the rate increase.
“I really was expecting a 50 percent increase,” Day said.
Under a study released by Burton & Associates in May 2008, utility rates were projected to rise to $122.21 by fiscal year 2013, assuming a stoppage in the UEP. According to the study released this week — also conducted by Burton & Associates — that projection was adjusted to $152.77, under the same assumption.
The UEP will continue at some point, Day said, so those numbers won’t come to fruition.
“Nobody believed we weren’t going to expand the UEP,” Day said.
One of Day’s colleagues on the dais says the proposed new rates should not be a surprise.
“Is it a frightening prospect? Sure, but it’s not something I didn’t expect,” Councilmember Dolores Bertolini said.
Deile and others question the numbers contained in the study.
Current rates are based on a 2006 study that projected an average of 5,250 new customers would tie into the utility system over the course of the project. Deile said the largest number of new hook-ups occurred in 2005 — in the midst of the construction boom — when 3,839 new customers joined the system.
“(City) staff was making decisions based on fantasy,” Deile said.
The unprecedented growth experienced by the city has come to a screeching halt as a result of the economic downturn, making the need to expand the capacity of the utility system less urgent.
For the studies conducted in 2008 and 2009, the number of average new water utility tie-ins was tempered to 2,214 and 640, respectively.
The dour economy was cited by Deile and other councilmembers as the main reason to halt the UEP, which would have brought hefty assessments and impact fees down on homeowners.
Some new facilities, such as the North RO plant, are nearly complete, and the lack of new utility customers means the costs will now fall upon current utility customers.
The actual cost of the facility expansion, however, is doubted by critics of the UEP.
“It’s a pattern that every year these estimates are going higher,” John Sullivan, an outspoken UEP critic said.
The expansion of the Everest Water Reclamation Facility, for example, was projected to cost $37 million in 2004. By 2007, that projection had risen to $89.4 million.
Councilmembers are poised to discuss the proposed rate increases Monday. Bertolini said she is looking for solutions, not rhetoric.
“I’m hoping everyone comes to the table with solutions. We have to address the reality of what we’re facing,” Bertolini said.
Day said he will push for a reorganization of the entire project, with the city replacing MWH, the current project manager.
“Let us have our own subcontractors,” Day said. “That was my thought at the beginning of this whole thing four years ago,” he added.
Taking over the UEP, however, might require an increase in city staff at a time when council members are already trying to cut the budget by at least $10 million.
“We might have to hire some engineering staff,” Day said, adding that he would require all UEP-related workers to live in Cape Coral.
The earliest council members could vote on a rate hike would be May 4, to allow time for a 30-day notification period for homeowners.