_{Thumbnail photo by James Brooks}

Aging infrastructure, increased costs and expenditures outpacing revenues are prompting Crescent City staff to seek a rate increase for water and sewer customers.

Representatives from Rural Community Assistance Corporation and Willdan Financial Services presented study results that reached similar conclusions for both utilities. 

On the water side, sales won’t be enough to cover the system’s operating and maintenance costs, RCAC Assistant Field Manager Samantha Ryan told the City Council on Monday.

Meanwhile, a structural deficit within the city’s sewer fund is expected to increase over the next five years, Willdan Financial Services Vice President Chris Fisher said. His team’s analysis showed a list of nearly $5 million in cash-funded projects needed to keep the system serving its current customers. The city has an annual debt service payment of $1.6 million to the State Revolving Loan Fund and is obligated to keep $1.2 million in net income after subtracting its expenses from its revenues, Fisher said.

“The last rate increase was implemented in 2014, it went through that fiscal year,” he said. “As of 2015, there has been no increase in sewer rates. That’s over 10 years. The gap between the amount of rate revenue and expenses has grown each year as the costs continue to escalate.”

Water rates haven’t been adjusted since July 2017, City Manager Eric Wier told councilors. He noted that since they’re enterprise funds, the water and sewer utilities are meant to be self-sufficient and cannot be supplemented through any other city fund. Both serve customers inside and outside of the city limits, though sewer ratepayers within the county service area only pay the city for treatment. 

According to Wier, customers within the county pay for conveyance and sewer collection through their property taxes. There are about 4,000 accounts associated with the water system and roughly 3,800 connected to the sewer system, he said.

Customers will have an opportunity to contest the water and sewer rate increases through the Proposition 218 process and will also be able to speak during a public hearing.  Under Proposition 218, if valid protest letters are received from 50% plus 1 of the total number of parcels, the rate increase will not be allowed to proceed.

Proposition 218 also prohibits the city from implementing discounted rates for low-income families, Fisher said. 

“You can’t use revenue from one group of users to subsidize or give a reduced rate to another group of users,” he said.

Councilors accepted the results of both studies and directed staff to return with ordinances for water and sewer rate increases on April 6. If the Council adopts the first reading of the ordinance on April 16, the 45-day Prop 218 process would start and a public hearing would be set for June 1.

If approved, the new rates would go into effect after July 1.

Proposed water rate increases:

Currently, the pay structure associated with the water system establishes a base rate and a usage rate, Ryan said. The base rate accounts for the use of 500 cubic feet of water. This means a customer with a 3/4 inch water meter — “your typical residential customer,” she said — pays $22.49 per month.

A customer with a 6 inch water meter currently pays a base rate of $210.95 per month. According to Wier, water meter that size would typically be associated with an industrial property.

Customers whose water usage exceeds 500 cubic feet per month are currently charged an additional $2.62 per 100 cubic feet, Ryan said. 

Pelican Bay State Prison is also on the city’s water system and are contracted to pay Crescent City $3.11 per 1,000 gallons of water used.

“Currently you are covering your annual (operating and maintenance) expenses from your water sales, but it’s projected that in 2026 — this year — it will no longer be that way,” Ryan told the City Council, adding that even potential grant revenue won’t alleviate things. “It will continue to get worse if you don’t increase your rates because of things like inflation… at the end of five years, it’s assumed you’ll be $8.4 million short of where you need to be.”

RCAC’s proposed monthly rate increase starts at 99.7% in 2027, bringing the average water customer’s bill from $22.49 to $46.18, Ryan said. Rates increases between 2028 and 2031 would range from 4.8% to 5.5% for the average residential bill.

Meanwhile, the usage rate would decrease from $262 to $2.26 per 100 cubic feet, Ryan said. Proposition 218 recommends against base usage rate allocations because it’s not equitable to customers who use very little water, she said. However, smaller customers might see their bill go up as a result of discontinuing that base usage rate while larger customers may see relief, Ryan said.

Proposed sewer fees:

Similar to the water system, if the rate increases go through, sewer customers will see their bills jump by the largest percentage during the first year, Fisher said.

“Really that’s a reflection of not having had a rate increase since 2015,” he said.

A typical residential customer living within city limits will see their bill increase by about $25 starting in 2027, going from $72.21 to $98.06, Fisher said. Rates would then increase for single-family residential customers by $12.26 in 2028; $7.17 in 2029; $6.46 in 2030; and $6.20 in 2031, Fisher said.

Customers outside the city limits — who are billed for treating the wastewater only — will see their rates increase by $16.46, going from $63.14 to $79.60 in 2027. Their bills would then increase by $9.95 in 2028; $5.82 in 2029; $5.25 in 2030; and $5.03 in 2031. Their monthly rates would be $1.05 by 2031, Fisher said.

If the rate increases take effect, Crescent City would be able to maintain a capital reserve in its sewer fund of about $1 million, while revenues would stay above expenditures, Fisher told the City Council.

Following Fisher’s presentation, Wier spoke to the $228,000 fine Crescent City received last August because the sewer plant is unable to meet new regulations associated with the its National Pollutant Discharge Elimination System permit during wet weather.

“Our old secondary process that was put in 50 years ago in the 70s does not meet the new permit (requirements),” Wier said, referring to the plant’s rotating biological contactors.

The membrane biological reactor is enough for the city to meet requirements under its former NPDES permit, Wier said, though a second is needed to ensure redundancy. 

“The flows can run through the MBR during dry weather,” he said. “When it starts to rain and that ground water goes up (it) puts pressure on the pipes…. It makes our flows go up.”

Ensuring the city’s wastewater treatment plant meets standards associated with its most recent NPDES permit will cost an estimated $50 million. Crescent City staff are pursuing grant funding to pay for that project, Wier said.

The potential for increased rates drew mixed reaction from the smattering of public that stayed to hear the study results. Sam Schauerman, who’s building a 14-unit townhome development near 7th and J streets, was initially shocked. But, he said, the increased rates are needed to support efficient infrastructure.

Schaurman spoke to his experience trying to develop 76 homes in the Smith River area to find that the water district doesn’t have the funds to “bring their water district up to speed.”

“We want development,” he said. “We want it the right way. If this is the way it has to go, I know people are going to disagree, but it’s what needs to be done.”

Former city councilwoman Donna Westfall named several former city officials, a local engineer, a construction company and a judge, accusing them of fraud associated with the $44 million expansion of the sewer plant in 2007. She said the City Council should form an ad-hoc committee to investigate them for unlawful conduct and forward that information to the authorities for potential criminal prosecution.

“If some or all happened to be found guilty of fraud or corruption against the federal government, the state government and our city, perhaps some of their assets could be seized and restitution made which could cover the water and sewer rates for a number of years,” Westfall said. “Maybe pay off the loan and maybe have enough money to repair the sewer plant.”

Though Crescent City Councilor Jason Greenough was present during the water rate discussion, he was unable to take part in the vote associated with the sewer rate study, saying he had to go to work.