Higher Rates Approved for FY26 Utility Bills

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Category: News

Created on Wednesday, 05 February 2025 15:06

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By SHANNON HAUGLAND
Sentinel Staff Writer
    The Assembly reviewed proposed increases in monthly utility bills during a special meeting Tuesday on the 2025 budget.
    The meeting was on city “enterprise” funds for departments with budgets that are based on revenue from the services they provide – such as electric, water, wastewater, solid waste and harbor moorage.
    Assembly members asked questions but in general agreed with the city administration’s proposed 2% increase for electricity; 6% for each water and wastewater; 2% for solid waste, and 4% for harbors.
    It was noted that some of the proposed increases were below the rate of inflation, although the electric department is in the middle of raising customer fees to better reflect the cost of operation.
    In the second half of the meeting the Assembly granted preliminary approval to some “resource proposals” made by individual Assembly members.
    Those would add a heat pump specialist to the building maintenance staff, proposed by Scott Saline; fund a consultant study on the economic impact of tourism, proposed by JJ Carlson; fund a community survey after the visitor season on impacts to quality of life, proposed by Carlson; and a proposal by Chris Ystad to lay the groundwork for setting up a Port District to manage port-related services such as the harbors, the industrial park, the new seaplane base, the haulout and the expanded airport terminal.
    Assembly members are in the middle of their budget process for fiscal year 2026, which runs July 1, 2025, through June 30, 2026. They start with the general fund budget review, followed by enterprise funds, internal service funds and special revenue funds.
    There were no formal votes at the meeting, but members could make changes or object to recommendations by staff or fellow Assembly members. Decisions on the budget aren’t final until the Assembly approves the budget ordinance, which must be approved by mid-June. If the Assembly takes no action, City Administrator John Leach’s budget goes into effect as presented.
    Finance Director Melissa Haley said today she received the information she needed from the Assembly to put together the revenue side of the budget for the enterprise funds. She commented that inflation is starting to come down, but construction inflation remains high, and continues to drive up costs for projects.
   
Utilities
    The average annual increase for utility customers, assuming they use electric heat, was $228.24. The monthly increase, which varies depending on the season, was estimated at $19.39 per month in winter months, and $18.65 in summer. Electric rates are lower in the winter.
    Most of the enterprise fund discussion was spent on the electric fund, which expects to see growth in working capital, and a decrease in debt over the next 10 years as the city pays off major capital projects. Thor Christianson questioned whether the city should be setting rate increases lower than the rate of inflation, but city staff also reminded the Assembly of the new phased-in customer fee increases.
    The customer fee increase will reflect more closely the cost of providing services. For example, the base rate for on a remote island is $27.60 this year; $34.70 next year; and $41.60 in FY27. Lower rate increases are expected after that.
    The Assembly also discussed the purchase of a $365,000 piece of equipment needed to replace poles and perform other high voltage work in-house, instead of hiring contractors.
    On the wastewater fund, one major project on the horizon is the “unfunded mandate” to add effluent disinfection to the wastewater treatment system, by 2030, at an estimated cost of $11 million.
    On the solid waste fund, the city has seen savings from using the new compactor, which is reducing off-island shipping costs. Solid waste rate increases for residential customers are proposed at 2%, with a 4% increase proposed for scrapyard and transfer station charges.

Assembly Resource Proposals
    The Port District department proposed by Ystad would supervise harbors, the new seaplane base, boat haulout and multiuse dock at Gary Paxton Industrial Park, marine service center, and the expanded Rocky Gutierrez Airport terminal.
    The budget proposed for the first year, including the cost to set up a new city department, is $220,000 for a director and $50,000 for a consultant to figure out how it will be organized. There were some assumptions by Assembly members that this new organizational structure could result in cost savings, but it remained to be seen how the Port District would be organized, and how various divisions would interact.
    The initial funds will potentially come from various enterprise funds, including harbors, the airport terminal, GPIP and the marine service center.
    Saline’s resource proposal was for a new employee with refrigeration skills to service city-owned heat pumps, HVAC systems and similar equipment. He said this would have the advantage of not only saving equipment, but would put the city in a good position to meet federal requirements for recycled refrigerants. In “2029 another refrigerant transition begins, and the city needs its own inventory of refrigerant to be fiscally responsible for the 2036 refrigerant transition,” Saline wrote.
    He said the city position should result in cost savings since this new employee could put time into preventative maintenance, and prevent destruction of assets. Saline estimated costs at $35 per hour, which he said might not be enough to attract an ideal candidate. But he added candidates may be drawn to the job by quality of life improvements.
    Assembly members said they hoped the employee could work on other building maintenance projects when not needed to maintain or fix heat pumps.
    Carlson’s proposal for data collection related to the visitor industry is in line with Assembly direction at a September meeting, and a recommendation by the 2024 Tourism Task Force.
    She proposed using the visitor enhancement fund (bed tax) and the commercial passenger vessel fund (cruise head tax) to cover the cost of a post-season phone survey on the impacts of tourism on Sitkans’ quality of life. The estimated cost is $30,000 to $40,000.
    The proposed economic impact study would be conducted by a third party, at a cost of $70,000 to $100,000. Carlson said the last major study was the Alaska Visitor Statistics program study conducted by the Department of Commerce in 2016. At the meeting it was agreed that this new study could not take place until the 2026 season.
    “To achieve evidence-based decision making, there needs to be timely research to capture the current situation,” Carlson and Ystad said in arguing for data collection in a September memo.
    Christianson asked about the purpose of the studies, if the Assembly were unable to change anything as a result of the findings.
    “Do we have the ability to change that, to make those changes depending on what we learn? And the answer is, no, what’s the point?” he said. “ ... Not that I don’t think this would be valuable and really interesting, but can we make changes to what we’re doing based on it?”
    “I would say yes,” Carlson said. “Because that was one thing that was really challenging for the Tourism Task Force.” She noted the information could be useful for the Tourism Best Management Practices program, and also fo the new Tourism Commission and the contractor for Visit Sitka.
    “We can target the use groups that we want when we know who’s here, and maybe how to grow those conventions and shoulder season visitors, as we say we want to do,” she said. “And through the community survey we have these questions on quality of life, and we can really pinpoint the needs and stress factors and update that in our TBMP program.”  She said the information will be valuable to the regional port communities group, as well as the cruise industry.
    Assembly members said they were fine leaving the resource proposals in the budget at this time, but Kevin Mosher said he was hesitant to be spending money at this time, given the current global economic climate, and changes at the federal level that are putting federal grants and funding into question.
    “We have a large portion of our budget based on grants,” he said. “I believe we’ll get most of them but we don’t know what we’re going to get, and that is very concerning to me. ... And then the ballot proposition, those are three things that are getting me very concerned about this budget season which is wanting me to lean more on the fiscally (conservative) side.”