The Eureka City Council will, as always, tackle some exciting and important issues during tonight’s meeting, including a few items concerning the City’s water and sewer systems.
Homeowners have been freaking out on social media in recent weeks in response to proposed water and sewer tax hikes from the City of Eureka. The council will discuss the proposed rate increase during tonight’s meeting, but is not expected to make a decision on the matter as of yet.
Let’s take a look at that agenda!
Water and Wastewater Revenue Refunding Bonds
The council will start off tonight’s meeting with a request from staff to refinance a series of bonds related to the City’s Water and Wastewater funds.
In case you’re not aware (this reporter surely wasn’t), the City currently has four bonds, or debt obligations, related to the Water Fund and two bonds related to the Wastewater Fund. Each fiscal year, the City makes six separate principal and interest payments related to each bond. Since interest rates are lower than in years past, staff thought now would be a good time to refinance the City’s debt.
“This transaction is akin to a homeowner refinancing their mortgage for a lower rate/payment and it has no effect on the total debt owed by the City’s utilities,” Lane Millar, the City’s finance director, explained in an email to the Outpost. “The result of the two transactions is that the City will pay less in interest over the remaining life of the bonds. This will lower expenses in both the water and sewer funds.”
The City issued a Request for Proposals (RFP) earlier this year to find a bank willing to refinance the City’s debt at a lower rate. Last month, the City selected Signature Bank as the best option for the Water Fund and California Bank and Trust for the Wastewater Fund.
If approved, the proposed transactions will save the City more than $814,000 in interest expenses over the next 20 years.
“When combined, the current debt service payments, less receipts, will result in net cash flows of $18,589,570 [for the Water Fund] during the period of 04/01/2023 to 06/30/2043,” according to the staff report. “The total savings of the proposed transaction is approximately $142,619 with present value of savings of $184,269. …The total savings of the proposed transaction is approximately $671,820 [for the Wastewater Fund] with present value of savings of $545,959.”
In the past, the City has issued bonds to fund major capital improvements for its water and wastewater systems. Millar noted that the staff is “not proposing to issue new debt in this case” but is instead “looking to lower the cost of the debt already incurred.”
The council will also receive a report on a recent water and sewer rate study during tonight’s meeting. The item is somewhat related to the aforementioned bond discussion, but the items will not directly impact one another, according to Millar.
“I hesitate to directly relate the refinancing to the rate study because I think they should be understood apart from one another,” he said. “What I mean [is], the interest savings are good, but they will occur between now and 2042. Since the rate study looks out five years, the refinancing will have no effect on the proposed rate changes.”
However, any effort to reduce costs to the water and sewer systems can reduce rate increases over the long run, he added.
Private Sewer Lateral Ordinance
The council will also consider a revision to the City’s Private Sewer Lateral Ordinance. The ordinance, adopted by the city council in 2019, shifted the responsibility of maintenance and repairs of the lower lateral – which is the sewer pipe connecting a property’s plumbing system to the public sewer main under the street – solely to the property owner.
Since the city adopted the ordinance, staff have reported ongoing issues with laterals not being replaced by property owners when they should be, largely due to the cost.
“The main hurdle has been the fact that replacement of the lower lateral requires a Class A contractor due to the insurance requirements of working in the City right-of-way,” the staff report states. “The number of Class A licensed contractors in our area is limited and owners were often having to hire two separate contractors to replace the upper and lower lateral. This increased the cost, complexity and duration of the process significantly.”
To alleviate this issue, staff proposed the implementation of a set fee and a point-of-sale trigger to “significantly accelerate the rate at which aging sewer laterals are replaced.”
“The sale trigger will increase the number of laterals replaced annually, helping to satisfy the City’s obligation to reduce wet weather flows,” the staff report continues. “The set fee, payable prior to closing, will allow sales to progress unimpeded, as timing is often critical in the sale of the property. The City would then aggregate the projects and bid them together as a single public works project.”
The fee amount would be based on the average City bid cost of lateral repair/replacement over the previous two years. Currently, the anticipated fee would fall under $10,000, the staff report says. Property owners who feel they can get a better deal through a private contractor will still have the ability to do so.
You can view the revised ordinance at this link.
The council will also review another segment of the City’s proposed Coastal Land Use Plan during tonight’s meeting. Rather than bringing the entire proposal to the council for consideration in one go, staff decided to break the plan into several digestible chapters to present to the council through January.
This week’s installment will focus on land and aquatic resources. You can read more at this link.
The Eureka City Council will meet on Tuesday, Nov. 15 at 6 p.m. at Eureka City Hall — 531 K Street. The agenda can be found here.