The city of Española has a laundry list of water needs, millions of dollars in unspent tax funds in the bank, and no clear plan for how to move forward. And yet city officials seem certain of one thing — utility customers are going to have to pony up more money.
The City Council was presented last month with a proposal for a significant utility rate hike — one that could raise utility rates by 9 percent as early as February.
“It seems necessary,” City Councilor Danielle Duran said. “It’s unfortunate that we’ve waited until a time when the economy’s so bad.”
Duran said customers shouldn’t worry, because the Council needs to have a serious discussion about the initiative and that will take time. But scenarios for a rate increase have been on the table since last January, and acting City Manager Veronica Albin warned the councilors that if they delay, the proposal would have to be reworked and it could mean higher increases down the road.
Albin’s proposal calls for an immediate 9 percent water rate increase for both residential and commercial customers followed by an 8 percent increase in 2009, a 6 percent increase in 2010 and increases tied to inflation thereafter. Wastewater rates would go up by 9 percent annually now and each year through 2011.
According to the proposal, a $50 utility bill (for water and wastewater) at today’s rates would rise to $61.10 by 2010.
Mayor Joseph Maestas said he thinks the city is ready to make its case to the public. The Council called for a special meeting to discuss the proposal in depth, and Maestas said public feedback could come at that meeting in the form of silence.
“If we don’t have a lot of public opposition, or concern or questions at the end of that special meeting of the entire governing body, then I think we’re on the right track,” he said.
According to a December 2007 state Environment Department survey, Española’s residential water and sewer rates already ranked in the top 10 statewide. Commercial water rates were the second highest behind Albuquerque.
What About
The Water Tax?
The city has raised rates twice since 2002, the year that former mayor Richard Lucero’s administration campaigned for and won a permanent increase in the gross-receipts tax. At the time, administrators promised voters that such a tax would take the place of a rate hike.
The three-eighths percent tax passed, and all the revenues were earmarked for a list of 12 water and wastewater projects in the city. But the promise wasn’t kept. A 5 percent increase was implemented in 2003, and then in 2005 the city tacked a $13.43 monthly fee onto residential water bills and raised business rates by 50 percent.
As for the tax increase, some of that money was used illegally to fund a city salary and a legal settlement.
Albin said there may never be a full accounting of where the gross-receipts money went. She’s had contract employee Xavier Ortiz working on the ledger for the last several months, and he has only been able to track expenditures up to a certain point, Albin said.
In theory, Ortiz or other city staff could attempt to recreate every transaction and reconcile every transfer, but it would be an enormous task, she said.
“Is it worth doing?,” Albin said. “I don’t know. That would be painful.”
What about the infrastructure projects? On Monday, city Water Director Marvin Martinez looked at the original project list and said four of the 12 projects have been completed, and only two of them actually used the dedicated water-and-wastewater tax money.
Since Maestas’s administration came to power in 2006, more than $7 million has gone toward a sewer plant expansion completed last year, city documents state. The city is also using the tax to pay off an $800,000 loan for a water-meter upgrade.
The rest of the money has gone toward planning instead of building. From 2006 onward, nearly all of the discretionary expenditures went to one engineering firm, Molzen Corbin, which made approximately $480,000.
Martinez said they worked on line extensions to Lamb and Pacheco streets; pipe designs for a loop along state roads 106, 76 and 68; and transfer lines for two city wells.
Molzen Corbin has friends in high places at the city. Albin is married to Doug Albin, a project manager for the firm, and her father, Art Martinez works for the firm, though the city’s relationship with Molzen Corbin far predates her employment, her marriage or her father’s employment.
Souder Miller, a competing engineering firm, took in approximately $65,000 during 2008. One of their major projects was preparation of scenarios for the utility rate increase.
A large chunk of the tax money hasn’t been spent at all — hence the large reserve which has accumulated in city coffers. Albin said as of July, that cash reserve had grown to $2.7 million.
So if the city has all that money, why does it need to increase rates?
According to Albin’s proposal, the increase would bring in $XXX,XXX annnually and is designed to cover new operation and maintenance costs for systems that will come online in 2009 and beyond — such as an arsenic-treatment plant and a contaminant-dilution system on wells 4 and 7. The rate increase also funds additional employees and creates an extra revenue stream that will go into an emergency repair fund — something the state has long advised.
But the big question remains — if the water department can cover its own operations and maintenance, what will the city do with the water-and-wastewater tax it still imposes on local businesses?
“This is still a debate amongst the Council,” Albin said.
Maestas said the money should be used for capital improvements — and that doesn’t mean replacing old, broken water mains, he said. It means building new lines and expanding capacity, he said — dozens of residences in the city are not hooked up to city water or sewer lines. The city also has been unable to collect on about $X.X million in delinquent bills.
Duran said she doesn’t know how the money should best be spent, and that’s why the Council should take its time studying the issue.
“The problem is we really haven’t educated everyone as well as we should in terms of what kinds of projects need to be done in the next few years, and how much they’re going to cost,” Duran said. “I haven’t seen a good report from anybody on that.”
In the meantime, the Council continues to address the issue in piecemeal fashion. Last month it approved a $xxx,xxx check for a “brown bear,” a piece of equipment that processes sludge. The decision involved little discussion.
“Maybe that was the best expenditure using the balance of (gross-receipts tax) funds, maybe not,” Maestas said. “I agree that we need to make more strategic decisions on this funding.”
To do that, the Council will have to address its internal debate about the logistics of spending the money — for instance, whether to save up revenue or use it immediately, to back large construction loans.
Albin’s rate proposal already has some answers, if the Council accepts it. She proposes using $870,000 of the existing cash balance to completely pay off three outstanding loans, while another $400,000 would be used as start-up capital for the emergency-repair fund.
During Albin’s presentation Dec. 18, Councilor Alfred Herrera questioned the wisdom of paying off large debts. He equated it to someone paying off a $100,000 mortgage with the money in their bank account.
“That’s okay on one side,” Herrera said. “The other side is I’m not gonna be able to buy groceries for the next 10 years.”