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11/8/2012 6:00:00 AM
Despite discussion, alternatives to Kingman rate increase look scarce
Janet Watson
Janet Watson

Ahron Sherman
Miner Staff Reporter

The more they talked about it, the clearer it became that the majority of City Council sees raising the sewer rates one more time as the most realistic option for coming up with the remaining $1 million or so a year needed to meet the requirements for the $52 million to $55 million in loans taken out for the city's two wastewater plants.

Though Council won't actually vote until Nov. 20 on the city's fifth sewer-rate increase in as many years, members had a nearly two-hour discussion Tuesday focused on the pros and cons of potential rate-increase alternatives.

The majority of Council remained unconvinced that any of the alternatives were actually realistic ideas.

"It's a painful process," said Vice Mayor Janet Watson. But Council needs to bite the bullet and make the most reasonable decision, she said. "It doesn't mean we have to like it."

Two alternatives - a short term outside loan and a loan from the water company - were the focus of much discussion. But Councilman Richard Anderson's idea to charge the community an "environmental fee" for recharging the aquifer with A+ effluent and his notion that the city should defer the increase for several months or even a year received less attention.

Taking out short-term loans, whether from an outside source or the water fund, would allow the city to avoid raising the sewer rates for potentially the next three years, Loyd said. But doing so has its consequences.

"A loan is not revenue," said Coral Loyd, the city's finance director. So even though the city could theoretically use money financed from an outside source to meet the covenants of the Water Infrastructure Finance Authority loans, the city would still fall out of compliance because ratepayers weren't supporting the system.

Out of compliance with WIFA means derogatory audit findings and a downgrade to the city's credit, Loyd said.

Council made an agreement to be a responsible party with these loans, said Councilwoman Erin Cochran.

"Taking a loan on a loan is not going to work," Cochran said.

Another issue with taking out an outside loan is that it must be paid back, which would mean the city would need to come back once again to raise rates - or find some other revenue source - to pay the short-term loan back as well as meet WIFA's loan requirements, Loyd said.

Not much changed when the discussion shifted to taking out a loan from the city's water fund. The consequences remain and the loan would still need to be paid back.

But Loyd admitted that WIFA didn't outright say this method is impossible.

Anderson, who requested the Tuesday discussion more than a month ago, seemed to sour on the idea of taking out another loan from either the water fund or an outside source. But that doesn't mean he thinks the rate increase is the city's only option.

Anderson still wants to see the actual amount left in the sewer fund - the numbers haven't been finalized - from fiscal year 2012.

Also, the $55 million line is starting to look more like $52 million because of numerous cost-saving techniques. Anderson argues that the city should negotiate with WIFA for some type of deferment, with the idea that the savings should benefit customers now and not at the end of the loan.

Prior to the discussion, Loyd once again laid out the basics of the loan agreement with the WIFA for the city's two treatment plants.

The city needs to come up with $7 million a year for the plants, Loyd said.

About $4 million of that goes toward the $52 million-$55 million loans taken out in the last few years. For the first five years of the loans, approximately $775,000 must be set aside annually for debt reserve, she said. Then there are plant operations, which cost between $1.9 million and $2.1 a year. Lastly, the city sets aside about $125,000 for contingencies.

After the first five years of the loans, the city must continue setting aside $775,000 a year, but instead of it going to debt reserve, the money will go to a WIFA-mandated repair and replacement fund, Loyd said. This continues throughout the 20-year life of the loans.

On Nov. 20 Council will meet again to discuss the sewer rate, and a vote to approve the 25-percent increase, which translates to a $12 a month increase for the typical residential customer, is expected. The change would take effect Jan. 1 if that occurs.

Related Stories:
• Councilman demands answers about Kingman wastewater fee increase
• Kingman councilman not convinced wastewater rate hike is necessary
• Kingman's wastewater customers beg for 'breathing room'

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Reader Comments

Posted: Sunday, November 11, 2012
Article comment by: hmm just thinking

Mr. Anderson, you can't charge a fee for recharging the aquafer when you are already charging to take water it in to the sewer system. That is double dipping or double billing.

Posted: Sunday, November 11, 2012
Article comment by: Ticked Off

People,what we need to do is show up at the meeting on the 20th, and make the council aware of our displeasure regarding this rate hike, and that this will be a issue at the next election. The last time this was brought up at a council meeting I was the only one to address the issue. For my effort all I got was a arrogant response from Robin Gorden " how do you propose to pay for it". I believe that is she sitting in the council chair and not me. Anyway we know where she is now OUT OF OFFICE, where she belongs. Our vote is the only thing these poeple seem to understand. I can bet you if this was and issue in Rancho Santa Fe there would be a whole differnt solution put forward by the council. I do have one idea and that is to put a SMALL surcharge on the water rates for everone. If you don't like my idea, show up at the meeting and put forth your own. It seems that we have to do the thinking for the council because thier not able to.

Posted: Saturday, November 10, 2012
Article comment by: Can't Help But Wonder

"But Loyd admitted that WIFA didn't outright say this method is impossible."


"Anderson still wants to see the actual amount left in the sewer fund - the numbers haven't been finalized - from fiscal year 2012."


KDM - Please find out the answers. Once you share those answers with us, we'll apply the pressure if needed.

Posted: Friday, November 9, 2012
Article comment by: nnp nnp

I moved out of kingman, halfway across the country, to a very large city. And my water bill is cheaper here than it was in Kingman. While Kingman is in a desert, and water is scarce in the desert regions, the water company charges way too much. Keep raising your rates...low income and elderly (who is the majority of kingman, by the way) wont be able to pay their bills, and youll disconnect them...which still means you are not getting any revenue. Big companies seem to think that they can just take out a loan to do whatever they want, when they want, and theyll just make the customers pay it back. I say the water company should of figured out how to to do what they needed to do, without making the customers pay more. Kingman is a very poor area....they cant afford another increase in their bills!

Posted: Friday, November 9, 2012
Article comment by: Just Kidding

Simple solution to problem--- Default on the loan--- then have Obama fly to Kingman for a photo op and presto the loan will be forgiven.

Posted: Thursday, November 8, 2012
Article comment by: Is my math Correct?

20 year loan

9000 customers

52 million dollars

Equates to about $290.00 per customer, per year for 20 years.

Do they really need a rate increase?

Posted: Thursday, November 8, 2012
Article comment by: Rick Sherwood

To the concerned people of Kingman regarding your water bills.

Let me tell you what many of you are quick to tell the rural folks, when they have these issues.
You chose to live in the city now deal with it.
Seems harsh, but we in the rural areas hear this all the time. Like when they want to bus the kids and close the school (Mt. Tipton)or when they need to shut down fire stations(Chloride).
I empathize with you, but elections have consequences.

Posted: Thursday, November 8, 2012
Article comment by: jist me agin

Dan, maybe, if yer not one of dese loculs, you wuldint minde lookin in ta this fer us.

Posted: Thursday, November 8, 2012
Article comment by: Fred Beverage

Are all the City Council Members hooked up to the system? There are many people on fixed incomes and when just the sewer portion of the bill is over $50 per month, that is ridiculous! Last month my gas bill was $17, my electric $50 and my internet, $25. My water bill was $111. Yes, there is the water portion, $30 and the trash collection $19, but the remainder was all sewer related. Then you throw in rent, gasoline for the car, car payment, food and clothes and that pretty much takes all your income. I honestly do not know how Seniors and others on their fixed incomes will make it. So what will likely happen is the city will be DISCONNECTING a lot of people for failure to pay. Hmmmm, that seems pretty counter productive to me. As a new resident, I would like to know if the citizens had a vote in this or did the Council just do this on their own, without understanding the long term consequence?

I am already doing everything I can to conserve water and my bill will go up anyway. Thanks City of Kingman for making this an unattractive place to settle down.

Posted: Thursday, November 8, 2012
Article comment by: Erin Cochran

Mr. Geruss,

Each year we go over all of the monies collected and where it has or will be spent. Tuesday night we went over much of that information in detail. You are welcome to go down to the city complex and ask request a copy of the information. We welcome any ideas you or anyone else may have to help the situation.

Thank you,

Erin Cochran

Posted: Thursday, November 8, 2012
Article comment by: Dan Geruss

I'm sorry but as I said before, something is just not right here, maybe we need some smarter people to look into this than these locals that have been elected. The customers deserve full disclosure on monies collected and where exactly the rate payers money have gone too.

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