GUSTINE - City Council members recently signaled a willingness to consider the largest of three rate increase scenarios under consideration in order to fund repairs to Gustine’s aging water and sewer infrastructure.
After hearing a workshop presentation from consultant Terry Madsen, the council gave direction to prepare more refined scenarios based on a five-year series of 9 percent annual increases.
The public will have the final say, as any proposed increases are subject to a protest election under the terms of Prop. 218.
If enacted, the series of 9 percent annual rate hikes would take the monthly combined water/sewer bill for a typical customer from its current $52.63 to $80.98 in fiscal year 2023-24, a 54 percent cumulative increase. The first-year increase would be in the amount of $4.74 for a typical customer, the council was told.
Madsen also presented scenarios based on annual increases of 5 percent and 7 percent.
Capital improvement needs are a driving factor in the equation, Madsen said.
The city’s last go-around with rate hikes some five years ago focused on bringing water and sewer budgets into a point of fiscal stability, Madsen said. Those increases were not sufficient to begin addressing the needed high-dollar improvements to the city’s aging water and sewer systems.
He identified more than $6 million in improvement needs to each system - amounts which Madsen said even the 9 percent increases would not fully cover.
“There is nothing that we will propose that will actually get you there,” said Madsen, adding that the council will be faced with strategic decisions on prioritizing projects. “Under every scenario there is the concept of give and take.”
He suggested that annual increases of either 7 or 9 percent in sewer rates would allow the city to begin making significant improvements, but said he believes the 9 percent option will be necessary on the water side.
Another choice facing the council is whether to save money as it goes, or borrow money to accomplish improvements more quickly and use added rate revenues to pay off the debt.
“Our recommendation would be to fund as significant an amount of that as possible from debt,” Madsen stated.
City Manager Doug Dunford recommended moving forward with the 9 percent scenarios, and council members appeared to concur.
“Rather than trying to ease our way in, I think we’re better off biting the bullet right off the bat and be done with it,” said council member Rich Ford, who advocated borrowing money against rate increases to speed improvements. “We are going to need lot of improvements in a short amount of time. I don’t think we can wait to save up the money and then do the projects. I know there is a lot of need out there.”
“I agree,” said Mayor Pat Nagy. “We are very reactionary in our utilities. We wait for something to break before we address it. That costs a lot more money than if we planned ahead of time to get things done.”
Council member Craig Turner proposed a cautious approach to financing the improvements, saying he was not comfortable taking on additional debt until the city was seeing some growth.
Turner voiced concern about rate impacts - particularly on seniors - but at the same time acknowledged the need to be more pro-active in addressing the city’s infrastructure needs.
With residential growth on Gustine’s horizons, council members questioned whether some of the improvements built in to the rate scenarios should instead be funded through impact fees.
Dunford, however, emphasized that the necessary improvements are for the benefit of existing residents - not to accommodate future development.
That must clearly be the case, Turner insisted.
“We can’t have existing residents pay for new development,” he stated.
“That goes without saying,” agreed council member Joe Oliveira.
Dunford said that, based on the direction of the council, Madsen will return with refined scenarios.
The council also requested a comparison of how Gustine’s rates stack up against those of surrounding cities.
Dunford said the water and sewer system improvements are long overdue....as evidenced by regular water leaks and the unexpected repairs that recently took the water tower out of service for the better part of a year.
“We’re kind of rolling the dice,” he said. “We could wait (on the repairs). We’ve already been waiting....and one of these years it is going to come to be too late.”