Most property owners on Marco Island probably know by now that the much-discussed water and sewer Cost of Service Study has been underway since the Consultant, Burton & Associates, was hired in December of 2010 and actually started their work in January 2011.
Over the years City Council, city managers, and city finance directors have all been involved in varying degrees with the rate structure for water and sewer from Marco Island Utilities.
On behalf of ourselves personally, and Marco Island Homeowners, we have a problem with the tentative rates that the consultant has come up with (and are posted on the city website) in the respect that if the rates as recommended are adopted it would result in an increase of a minimum of 20 percent for virtually every single family home, 40 percent for commercial establishments, and 43 percent for North Marco Utilities (homes and condos north of Pier 81), with concurrent decreases in combined water and sewer rates for both master metered and individually metered condominiums; these rates do not include the already instituted 10.5 percent increase this past October for the current fiscal year as well as the already-scheduled six percent for the next fiscal year beginning in October of this year.
When the cost of services study was initiated, City Council made it clear that the consultant’s role was to ‘determine the cost of service and implications for the rate structure for Marco utilities’ and make recommendations for a ‘fair and equitable’ approach. Although I’ve sat in for virtually every meeting that the Cost of Service Study sub-committee has conducted, I would not profess to remotely be knowledgeable about setting rates for water and sewer, but I do think I’ve heard enough to comment from the perspective of what is “fair and equitable,” one of the objectives of the study.
As brief as possible some background: the City bought the water and sewer system from Florida Water knowing that the system was in serious need of repair, upgrade, and probable expansion; at the time of purchase a cost of service was not conducted, rates were simply kept the same, despite a purchase price of some $100 million, and further, it was decided that there would be no rate increases for the first five years (although COLA adjustments were added). Along the way, City Council, without referendum, adopted the STRP program; at the time, almost 70 percent of the city had sewer service, however the bulk of the non-sewered 30 percent was predominantly comprised of 6,000 single family homes.
With the exception of those who have a certain type of septic system (who have upwards of 10 years to defer connecting subject to certain regulations), when an STRP District is completed, homeowners have one year to hook-up to the system, and three options to pay the $20,000 or so to cover the various costs, including either removing the existing septic system or taking the option to convert it to a cistern.
In early 2010 Council appointed an Ad-Hoc Committee to address the rate issues, which subsequently became the Utilities Advisory Board (UAB); the UAB worked with the then-City Consultant, PRMG for several months and presented their recommendations to council in June of 2010; council chose to not accept their recommendations and agreed in August to hire a Consultant, however in September Council subsequently voted 4-3 in favor of a “flat rate” for all classes of customers for sewer service while the Study was to be conducted.
In November the Cost of Service Sub-Committee was formed (four councilors and the chair of the UAB) to screen candidates for the consulting position, Burton was chosen in December and started in January. The sub-committee made it a point to not be a “steering committee”, opting instead to allow the consultant to choose their own methodology with reports back to and interactive sessions with the sub-committee. The consultant’s conducted a lengthy fact-finding session with City Staff; some might argue that the Consultant did not necessarily get “all the facts”, although not through any fault of staff, but rather there was some background information staff was unaware of.
The study has analyzed usage by customer class (single family, multi-metered, individually metered, commercial, irrigation, etc.) and produced rate recommendations based on their analysis. We believe that if the rates recommended are adopted they will not be “fair and equitable” simply because of the methodology used to arrive at the rates. Common sense dictates that you cannot purchase an asset for $100 million, not conduct any kind of rate analysis, put a rate freeze on for 5 years, and expect profitable operating results (although apparently Marco Utilities did have a $380,000 or so operating profit for fiscal year 2010 after the finance director first announced a loss of some $1.8 Million!); 70 percent of the Island was sewered before STRP, yet the 30 percent added users are paying almost 70 percent of the cost of the new sewer plant! When the water/sewer plan was replaced the new plant was sized based on the same water and sewer requirements for each residential unit, without regard to whether they were a single-family home, individually metered condo, or master-metered condo; this is not the rate structure now, nor is it in the consultant’s “Water and Sewer Rate Design Module” that is available on the city website.
The UAB had recommended a rate based on a simple two-part formula: first, all customer classes would pay equally the debt service for the water and sewer plants (as was originally intended) and secondly, a universal rate per gallon would be applied based on usage, again, for all customer classes. The rate recommendation thus far is simply unfair and not equitable.
Marco Island Homeowners has created a “Citizen’s Position Regarding Cost of Service Study” that concerned property owners can complete on-line by simply filling-in their name and address and it will automatically be sent to City Council. The “Citizen’s Position” is available to everyone, regardless of whether they are members or not on our website: marcoislandhomeowners.com.
Larry Sacher, Chairman
Ray Seward, Treasurer