CBJ rate study explained

Juneau has approximately $275 million invested in its water and sewer system, and some of the pipes and plants are very old.

Every ten years, the city conducts a detailed study of the system; one is now underway.

As Rosemarie Alexander reports, this year’s study is different, because it reaches out to the public.

10th Street-Egan

The state Transportation Department will repave Juneau’s Egan Drive from 10th Street to Main Street next year, a good time to replace city utility lines. Photo by Rosemarie Alexander/KTOO.

CBJ Public Works Director Kirk Duncan says cities all over the nation have a similar problem:

 EPA estimates there’s about 4 trillion dollars’ worth of improvements needed for the water and wastewater systems.

Juneau has two major water sources and about 180 miles of water mains.

 In a town our size, we would have about one reservoir for 31,00 people.  We have eight.

Juneau also has three wastewater treatment plants.

 A town our size would normally have one treatment plant, but because of our long linear nature, we have three treatment plants.  We have 46 lift stations that support those treatment plants.

Last year the Twin Lakes lift station needed a rebuild, “and that cost a  million dollars to update that system,” Duncan said.

In the next year, Duncan expects $4.5 million in water and wastewater projects, “and we generate 13 and a half million dollars a year.”

A lot of upgrades to Juneau’s water and sewer are coming due, but  Duncan said the city doesn’t have a good plan.  Asset management is part of the utility study.

Public meetings

Duncan and consultant Karyn Johnson explained the rate study Thursday to three different audiences – the Chamber of Commerce, Juneau’s top 50 water and sewer users, and the rest of the public.

He said the study will result in a new rate model to take the system to 2024.

“The rate model is intended to make sure that we generate enough money to cover our operating expenses as well as make needed changes to the system,” he said.

The last study was done in 2003.  As the main consultant then and now,  Johnson, of FCS Group, is intimately familiar with Juneau’s water and sewer system.

Johnson said a successful rate study first defines the revenue needed to operate and maintain each utility.  The second phase is a cost of service analysis.

“How you would take those costs of each utility and allocate them to the different types of customers you have on your system, whether they be residential, commercial, industrial and so forth,” she said.

Then different types of customers are grouped together based on how they use water and sewer.  Finally, the rate design will answer these questions: How much revenue is required from each customer class?  How will it be collected?

Johnson said the study will be done about May.  Then it will go to CBJ leaders and finally to the Assembly.

Sticking with a plan

The last utility study resulted in a series of rate increases stretched out over a number of years.  But Johnson said there wasn’t the political will to implement the entire recommended rate hike.

“So it represents about a 32 percent difference in what was proposed versus what was implemented for water,” she said.

Mendenhall treatment plant

The Mendenhall Wastewater Treatment plant is the second-largest user of electricity in the city and borough. Like all parts of the water and sewer system, it needs constant maintenance. Photo by Rosemarie Alexander/KTOO.

Sewer rate increases went the same way, so the city collected about 30 percent less revenue than the study proposed.

Johnson said an annual rate adjustment would avoid that problem.

But generating enough revenue to operate, maintain and update the utility system  won’t all fall on customers.

“Your rate revenues typically pay for your operating type expenditures, whereas capital can be paid for with grants as they’re available, with debt financing , with other outside sources, general fund supplements as needed,” she explained.

The utility study also will look at how Juneau’s rate policies compare to those in similar cities around the nation and some in Alaska.

In December, Duncan and Johnson will hold more meetings to explain the amount of revenue the water and sewer systems will need for the next ten years.  In February, they expect to be able to tell residents how that will impact their rates.

(Disclosure: CBJ Public Works Director Kirk Duncan is also a member of the KTOO Board of Directors)

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