Newport Beach council again rejects wastewater rate increase

After months of back and forth between city staff and council members, Newport Beach leaders Tuesday again rejected a proposal to increase local wastewater rates.

The City Council voted 5-2 to deny staff’s proposal to increase rates over a five-year period for removal and treatment of wastewater, which includes sewage and water from sinks and showers, known as “gray water.” Mayor Diane Dixon and Councilman Keith Curry dissented.

Residential and commercial water users in Newport Beach are charged on their regular bills for wastewater service. A typical single-family household currently pays about $9.75 per month.

The proposed rate increase would have meant the same homeowner would pay $11.89 per month beginning in May and for the rest of 2016. The monthly rate for most customers would have increased to $13.16 in 2017, $14.64 in 2018, $16.21 in 2019 and $18.02 in 2020.

Municipal Operations Director George Murdoch said the increase was necessary to move forward with sewer line repairs and other projects to maintain the city’s 50-year-old sewer system. The fund for wastewater service, he said, is quickly running out of money.

“I’m shocked that the council didn’t approve this,” he said.

A need for an increase in sewer rates was cited when the city completed its Sewer Master Plan in 2010. The plan identified several capital improvement projects necessary to upgrade the sewer system. However, the council at the time did not increase the rates, partly because of the recession, officials have said.

Since the most recent rate increase in 2005, the city has outsourced various water services and reduced expenditures in the capital improvement program, but it wasn’t enough to stave off an increase forever, Murdoch said.

In 2013, the city contracted with HF&H, an Irvine-based consulting firm, to study rates for wastewater and recycled-water services. Based on the study, the City Council decided in June 2014 to halve the cost to ratepayers of recycled water.

However, the study concluded that the city needs to bulk up its wastewater fund if it wants to pay for system improvements that are expected to cost about $30 million over the next 30 years. HF&H projected the city would have to dip into reserves to fund the projects, which by 2017 could wipe out the $900,000 wastewater reserve.

But on Tuesday, Councilmen Scott Peotter and Kevin Muldoon indicated that instead of the city demanding more money from taxpayers, a portion of Newport’s $14.2 million operating-budget surplus should fund the sewer system.

“I’d rather have the general fund write the check,” Peotter said. “We need to apply the resources we have more wisely.”

Curry disagreed, saying the surplus money should go to fund one-time projects, not ongoing operational costs.

“If we don’t set our fees in such a way that they create adequate revenues to pay for the cost of the service and to pay for the reserves that we need for the program, then what’s going to happen is we will create a manufactured structural deficit to the sewer fund, which will have to be subsidized by the general fund,” Curry said. “It is simply financial mismanagement.”

The council’s action Tuesday is the latest turn in a months-long effort by city staff to increase wastewater rates to maintain funding for sewer projects.

In January, the council voted 4-3 to initially approve the rate plan. It also initially approved giving each residential customer a one-time rebate of about $55 to cover the cost of the rate increase for three years.

However, when the ordinance returned to the council for final approval in February, the vote was 4-3 to reject it.

Councilman Ed Selich, who had first voted for the rate increase, switched his vote in an effort to kill the rebate, he said.

Dixon had proposed that the rebate be funded with about $1.7 million in surplus from the general fund.

“It’s bad public policy to commingle those funds,” Selich said of the general fund and the sewer enterprise fund, which is used for capital improvement projects.

Selich said he voted against the rate increase again Tuesday after resident Jim Mosher commented about how the increase might unfairly burden residential customers who use a significant portion of their water on landscaping and are charged as if all the water is going into the sewer.

“There seems to be some inequity, and we need to look into it,” Selich said.