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EDITORIAL: Council must make unpopular call on water rates

News that rates are going up, especially rates for bare essentials, such as water, is rarely well received.

Such is the situation the Scappoose City Council finds itself in after nominally raising consumption rates in 2009 and using reserve funds to postpone fixed water rate increases as the result of capital improvement debt and maintenance demands.

Two years ago, a vocal handful of residents appeared en masse to convince the council not to raise water rates during one of the worst economic periods since the Great Depression. The council absorbed those concerns and delayed — for as long as possible — the inevitable. The intention was earnest and sincere, and it could be argued the council was hoping to save its constituents from the reality of additional expenses at a time of economic hardship.

Today, however, there is every appearance the option of not raising rates has expired. The city is confronting a potential $690,000 shortfall in water department-related funds for the next fiscal year starting July 1. A lack of new construction has stagnated the inflow of systems development charges, a fee land developers pay to the city on a one-time basis to tap into city services and which is the priority revenue source to pay down debt.

There is only a sprinkling of revenue anticipated to arrive anytime soon on that front. To illustrate this problem, consider that the city has budgeted a very modest $22,000 in SDC revenue. For context, the city gains about $5,000 in SDC funds annually per residential meter hook-up. But annual debt payments due to construction loans for the Miller Road Water Plant and storage reservoirs — both projects initiated as the city underwent a housing boom in the lead up to the economic meltdown — is $307,000.

To close the gap on that figure, the city has been in the unsavory position of using consumption rates, which the City Council had raised by a nickel in 2009, and dipping into its contingency fund.

With the contingency fund now largely depleted and barely sufficient revenue in the general fund to maintain base-level city operations through to November, when it would receive its next payment of property tax revenue, the council is left with no choice but to raise the fixed rate for water expenses.

This will not be an easy burden to bear for both residents and businesses. A minimum $15 per month increase in the fixed water rate is up for consideration, a figure Scappoose City Manager Jon Hanken says is necessary just to “stop the bleeding.”

That means each house and small business can anticipate a minimal water rate increase of $180 per year, just to keep the taps open. Unfortunately, however, there are few options available beyond a fixed rate increase. As some councilors have previously suggested, options such as the possible further reduction in city staffing need to be explored. At this time, it is unlikely those measures would make the water fund solvent for next year.

At a November 2009 workshop on the water rate issues, Scappoose Water Treatment Plant Supervisor Joe Lewis clearly outlined for the council the risks should it opt to not act to stave off a looming budget shortfall regarding payment for water service debt. As he explained, and as the minutes from that meeting reflect, the city’s real and projected expenses were $2.4 million with incoming revenue pegged at $1.2 million. Even at that point, and considering using contingency funds until it hit “dangerously low” levels, the city was staring down the barrel of a gun. As Lewis concluded at that time, the city officials had to do something “sooner rather than later.”

As the result of those discussions, a Public Works Advisory Committee recommended raising the fixed rate $15 per month and the consumption rate 5 cents. To squeak by, a compromise was struck and the final recommendation was to raise the fixed rate $5. Instead, the council deferred to the vocal residents in the meeting and decided not to raise the fixed-rate increases.

If there is any solace, consider that Scappoose residents are not alone. Across the nation municipalities are struggling to satisfy loan conditions for capital improvements initiated before the housing bust. Growth — especially in the areas of larger industrial development — is one path forward to generate more revenue to meet outstanding debt. There is an opportunity at Scappoose Industrial Airpark for just such development, though opponents to an expanded urban growth boundary have tied up the land-use process, potentially delaying such growth for years or, in a worst case scenario, turning potential business developers away from Scappoose indefinitely.

The water infrastructure was constructed in anticipation of new growth, as the state requires. Without that growth, current residents and businesses will have to foot the bill. And, unfortunately, the Scappoose City Council is going to have to deliver the bad news.