By Doug Emerson
None of us need look far to realize the impact the moratorium
has on the quality of life in Hollister. Schools with declining
enrollments face elimination of programs and reduction in services.
Businesses, unable to expand, ponder leaving the community. Housing
shortages result in unprecedented purchase prices and rent
escalations. City services must be reduced due to revenue
decreases. Some renovations and remodels for homeowners are
impossible. Hospitals cannot expand. Community service centers
cannot be built. We all suffer.
None of us need look far to realize the impact the moratorium has on the quality of life in Hollister. Schools with declining enrollments face elimination of programs and reduction in services. Businesses, unable to expand, ponder leaving the community. Housing shortages result in unprecedented purchase prices and rent escalations. City services must be reduced due to revenue decreases. Some renovations and remodels for homeowners are impossible. Hospitals cannot expand. Community service centers cannot be built. We all suffer.
It is easy to find blame, point the finger and talk about what we believe to be wrong. None of this will bring results. The fact remains that we, the citizens of Hollister, have a serious problem and we must arrive at an efficient, well-planned and all-inclusive solution: one that is the result of examining all alternatives and which takes into account the needs of citizens, homeowners, renters, businesspeople and our environment. The solution must also consider the needs of future generations. The city completed such study and research before adopting the proposed wastewater plan and project. No, it is not cheap, but it must be done and it must be done right!
There has been much discussion recently regarding the proposed sewer rate increases. Many believe new development should pay for the sewer project, assuming that without growth we would not need a new plant. Actually, we face two problems with our wastewater treatment plant. Yes, expansion is needed to provide service for growth. However, another problem is that, even without expansion, the current system must be upgraded to meet changing federal and state requirements. Additionally, we have been allowed to divert some wastewater from the domestic plant into the industrial plant, but only on a temporary basis.
Yes, the project will be expensive. It has three cost components, the first of which is the plant itself. Since our major problem is disposal and since we are under a “zero discharge” requirement, our ability to percolate effluent into the ground is limited. The preferred solution, after examining alternatives, is to utilize sprayfields, and this becomes the second component of the project. Third, since the use of sprayfields is limited in the winter, we must provide for seasonal storage ponds. Preliminary estimates put the total cost at $120 million.
This cost must be shared between current and future users. MuniFinancial was commissioned to undertake an independent study and recommend a fair balance of cost between current and new users. We currently have slightly less than 10,000 users. Using the City’s General Plan as a guide, we will add about 5,800 units by 2023. Factoring that data, plus the costs that we would occur by doing the upgrades, results in a recommendation whereby current users pay 54 percent of the cost through rate increases and new users pay 46 percent of the cost through impact fees on new development.
Since we don’t have $120 million in cash, we must sell bonds to finance the plant. To do so, the city is required to maintain four months’ operating expenses and a separate reserve account.
In addition, we are planning on refinancing some existing sewer bonds to take advantage of lower interest rates. However, the most important requirement for bond financing is that bonding companies require a guaranteed source of revenue. Impact fees cannot be guaranteed. This means that the city must have the ability to set rates at a level sufficient to fund the entire project. However if the city grows in accordance with General Plan projections (2.6 percent/year), only 54 percent of the authorized rate increase will be implemented. In simple terms, while the authorized monthly rate for a single family home would be $124 in fiscal year 2009-10, if growth occurs at the projected rate, the actual monthly rate would be $71.50. Some may say that if the higher rate is authorized, the city will implement it regardless of impact fees collected. A solution to address this valid concern is to enact an ordinance requiring that all future impact fee revenues go towards reducing the rate increases.
MuniFinancial also modeled a scenario which provided for no growth and no expansion of the plant. In other words, they determined the rate increase would be required to do the upgrade portion of the project only. Interestingly enough, doing just the upgrades and with no impact fees contributing to the cost, the monthly rate would have to be roughly $84 – significantly higher than providing for upgrades and expansion at the same time! So, by doing expansion and upgrades at the same time, both current and new users benefit through reduced cost and receive a new, state-of-the-art system.
Doug Emerson is a Hollister City Councilman. He can be reached at [email protected]
