Hollister residents could soon see an average increase of nearly
$7 a month on their sewer bills, due to the City of Hollister’s
plans to increase sewer rates almost 30 percent this year to
satisfy the conditions of bonds sold in the 1990s totaling more
than $16 million.
Hollister – Hollister residents could soon see an average increase of nearly $7 a month on their sewer bills, due to the City of Hollister’s plans to increase sewer rates almost 30 percent this year to satisfy the conditions of bonds sold in the 1990s totaling more than $16 million.
In 1993, the city issued $16.14 million in revenue bonds, using the proceeds to fund upgrades to the sewer system. The bonds were issued on the condition that the city would provide investors with at least one and a half times their initial investment. At the time, the sewer system had enough money in a reserve fund to agree to those conditions.
“We’ve made significant improvements to the system, and that’s depleted our reserves,” said City Manager Clint Quilter.
As a result of the depleted reserves, the city’s 1993 bonds were rated “BBB-,” the lowest investment grade rating from investment research company Standard and Poor’s.
To combat the poor state of its bonds, the city is proposing a rate hike which would take place over the next five years, with a 29 percent increase this year and an additional 2 percent increase every year from now until 2010. City Council members discussed the increase at their meeting Monday, and scheduled a public hearing on March 6 to garner input from community members.
“Right now the average household gets a sewer bill of about $49 every two months,” said Quilter. “The increase will add an additional $6.55 every month, so the average resident can expect to see his bill go to about $62.”
So far, the city has been unable to determine when the last sewer rate increase took place, but expect to learn within the next few days.
“The record keeping in this city in past years is unbelievable,” said Mayor Robert Scattini. “If this had been kept track of, we could have increased the rates a little bit at a time, and not have to come down so hard on people now.”
The city believes the new rates will generate more than $1 million in extra revenue each fiscal year, allowing them to satisfy the conditions of the bond and re-establish a good investment ranking.
Reserve funds are slated to one day help build a new sewer plant, which Hollister has been looking toward since the Regional Water Quality Control Board penalized the city for a 15-million gallon sewer spill in May 2002. The state board’s sanctions included a ban on new construction permits – a moratorium – along with the suspended fines.
The building moratorium’s effects on Hollister have ranged from reduced tax revenues to the city’s coffers and parks fund, to a severely damaged local construction industry.
“Our first concern right now is our enterprise,” said Administrative Services Director Robert Galvan. “But being able to gradually increase a reserve is important to the system.”
Galvan added that in the future, the rates will be reviewed on an annual basis. If everything goes according to plan, residents will see the increase take effect on their next water bill, in late March or early April.
While residents may not be happy about the increase, Hollister sewer rates will still be less expensive than those in neighboring communities such as San Jose, according to Quilter.
“We’re still very comparable to other communities,” he said. “It’s actually cheaper than most.”
According to Scattini, once the bonds have re-established a good rating, the City Council hopes to refinance, assuming interest rates stay low.
“I felt that we should have refinanced a long time ago,” he said. “But that’s something we definitely want to do in the future.”
The public hearing will be held March 6 at City Hall to discuss the rate increase. While city officials are braced for at least a few complaints, they do not expect heavy opposition to the increase.
Danielle Smith covers education for the Free Lance. Reach her at 637-5566, ext. 336 or [email protected]
