The Clinton Herald, Clinton, Iowa

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July 9, 2013

Council work session takes look at options to pay for mandated sewer work

CLINTON — CLINTON — Clinton City Council members are investigating new fees, tax levies and the future of the city’s street repairs as they look to pay for mandated sewer improvements.  

Council members met Monday during a Committee of the Whole work session to discuss funding $23 million in sewer projects that are part of the long-term control plan in fiscal years 2018 to 2025 that the city hasn’t yet determined how to fund.  

During the work session, council members decided to further research a stormwater utility fee, capital improvement tax and redesignating a portion of local option sales tax that is used for property tax abatement to sewer and street work. The former being the only method that would not have to be approved by the voters.

Council members also discussed a franchise fee on Alliant Energy bills, but that option was nixed.  

“We just started fiscal year ‘14, so we’re really addressing this in a proactive way where we’re looking out and saying we know we’re going to have an issue hanging out there and I will say we’re talking about this right now because this is something you as the council wanted to talk about now and not leave it hanging out there,” City Administrator Jessica Kinser said.

The council made the decision to discuss funding methods other than repeated rate increases after approving a 9.5 percent sewer rate hike in May.

Before council members learned what their options were for funding the $23 million, they were given a brief history of how the city landed itself in its current position. Dave Dechant of HDR Engineering explained that Clinton, as well as other cities, is in its current predicament of reoccurring rate increases for a number of reasons, such as raising rates as an absolute last resort, rarely forecasting needs or generating reserve funds and spending reserve funds even when needs are forecasted.  

He also noted intermittent reaction to large capital needs with significant borrowing and large rate increases.  

Water Quality Superintendent Dan Riney supplied the council with historical rate information that showed the city waited for more than a decade before seriously addressing the impending EPA and DNR mandates, causing large one-time increases in the past eight years rather than gradual increases from the time the first issues surfaced.  

Riney cited court documents that showed the city was first informed by the DNR of items it needed to correct in 1992. The city was given one year to submit a plan to address the DNR’s concerns about combined sewer overflow events. In 2001, the DNR issued an administrative order because nothing had been done to address the 1992 concerns. Riney went on to highlight other orders that were ignored, up to 2009 when it entered the consent decree with the EPA and DNR to address the combined sewer overflow events.   

After the initial notice from the DNR, the city increased rates by 47 percent in 1993 from an average $8.80 a month to $13 a month. In 1995, rates went up another 1.8 percent. The next increase didn’t come until 2005 at 5.8 percent. The following year, rates increased by 81 percent, the highest jump in the city’s rate history dating back to 1962.  

“We didn’t land in 2013 with high sewer rates because we didn’t do it last month,” Riney said. “If in 1993 rates had been looked at and that plan had been put together and implemented or scheduled for implementation...It’s kind of the cost of complacency. We’re not the only city. As Dave said, this isn’t Clinton, every community is this way. It’s not broke, so why fix it? The trouble is, it does break and then you don’t have any money to pay it.”  

With the latest sewer increase of 9.5 percent, the city will pay for a $6.55 million state revolving fund loan to complete the 25th Avenue North pump station that is the major project in the city’s long-term control plan in the next few fiscal years. The city will also use local option sales tax to bond for other items. However, beginning in fiscal year 2018, the city will need options to fund the projects that need to completed under the long-term control plan.

City Engineer Jason Craft explained what those projects will be, such as the First Avenue pump station, the Margaret Street pump station, various drainage projects and others. He went on to state the mandates from the EPA and DNR are meant not to harm the city, but to correct infrastructure problems that should have been corrected.  

“This program, I think a lot of people take it as stuff that we’re just being forced into. And really the only reason we’re being forced into it is because we should have done it already,” Craft said. “We should have had our sewer separated long before this. The consent decree is just the way the EPA allows the state to make us do things that we need to do.”

In order to fund these projects, residents will likely be asked at the polls in November to take the half of the 1 percent local option sales tax (LOST) that is used for property tax abatement and re-apportionate it to streets and sewers, therefore designating all LOST revenue to streets and sewers. This would need to be approved by voters so that the city could use $1.5 million of LOST revenue for sewer work while maintaining the city’s pavement management program, which is funded through $1.5 million of LOST revenue and $1.2 million in general obligation bonds.  

If voters did not approve losing their tax abatement, the city would use half of the local option sales tax for sewer work alone, leaving the pavement management program $1.5 million shorter than anticipated and adding another two years to the street work the city would like to complete. If the city wanted to continue funding the pavement management program at the $2.7 million level, it would need to find the funds elsewhere.  

“The pavement management program is something that is desperately needed in this city,” Kinser said. “We get a number of complaints and many of the complaints that have come forward to the council are ones that we can say are being addressed in the pavement management program. And so, my personal feeling is yes we need to continue the pavement management program. If it is your sense that you want to continue that, then yes I think we need to ask the voters to reallocate local options sales tax.”

To get the item on the ballot for November, the city would need to have the language to the Clinton County Auditor’s Office in early August.

Among the other items council members discussed was the stormwater utility, which would provide a stable funding stream for stormwater management activities and projects by charging a fee based on an individual property’s impact on the stormwater management system. The impact individual properties would have on the stormwater management system would be evaluated based on the amount of impervious areas on the parcel of property.

The stormwater utility, or “rain tax” as Ward 4 Councilman Paul Gassman referred to it, could be used to cover $1 million a year in operational costs currently in the sewer budget, including flood control, collection system maintenance, street cleaning and other items; $300,000 in drainage/green infrastructure costs; $200,000 in miscellaneous sewer projects, maintenance, rehab and repair; and multi-million dollar capital projects in the long-term control plan.  

To establish a stormwater utility, the city would need to hire an engineering firm to complete a study of properties and investigate what it wanted to fund with the utility, followed by developing an ordinance creating the utility.  

At-large Councilwoman Jennifer Graf suggested the city investigate the stormwater utility fee for commercial and industrial properties in Clinton, but not residential.  

“My hesitancy is on putting it to residents at all. They’re the ones that have seen the biggest increases, the most often increases,” Graf said.

A franchise fee for Alliant gas and electric was also proposed as a revenue generator. The city can enact a franchise fee from 1 percent to 5 percent of customers’ bills, but it is a lengthy process that would likely require voter approval. Council members decided not to move forward with the franchise fee.

Finally, council members discussed a capital improvements levy, which could be up to 67.5 cents per $1,000 in taxable valuation. Using fiscal year 2014 values, Kinser estimated with the loss of ADM valuation, the levy would generate under $650,000 annually. The levy would need to go before the voters on the next regular election or the city could set a special election.  

Ward 1 Councilwoman Maggie Klaes was in in favor of putting the issue to the voters.

Kinser explained the idea for funding the projects would be to pursue a 20-year bond with annual payments of $1.5 million generated by the options discussed.The items will be further discussed by council members during committee of the whole and council meetings.

“As I said, funding is first needed in fiscal year ‘18 so we’ve got time to think about things. But I don’t want to let this sit out there and drag out for a few more years,” Kinser said.

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