City Tables Utility Rate Increases For Now
Monday, December 03 2012
For months, Unalaska’s city council has been debating the best way to pay off more than $40 million in upgrades to its utilities. Sales tax hikes and rate increases have both been floated as solutions.
But now, the city’s consultant says the 65 percent rate increase that he described as inevitable as recently as October might not be necessary after all.
That’s what Mike Hubbard, of the Financial Engineering Company, told city council at a special meeting last Wednesday. Hubbard says he knows that the announcement was unexpected.
"Yeah, I apologize for that," he says. "Originally, when I started the analyses several months ago, I was using some older data in making projections of both revenues and expenses. At that time, it looked like with just the ongoing operations, we were going to need some pretty significant rate increases."
Hubbard had been using data from the last two fiscal years to make his recommendations.
In the first few months of fiscal year 2013, the city’s been earning more revenue and spending less. Hubbard says that if Unalaska continues down this track, the city could make a big dent in its debt service by raising the sales tax half a percent.
That research surprised city council. But Hubbard says he was equally surprised to learn that the city was ready to start increasing utility rates as soon as January 1.
He didn’t find out about that plan until city manager Chris Hladick mentioned it during the meeting. Hladick says the city didn’t want to waste time raising rates, if that was what was required.
"If we needed to increase the rates now, based on information he had created in June -- he didn’t have this year’s first three months of data," says Hladick. "You would want to do that sooner than later, do some incremental increases is what’s that called. You would want to do that over time instead of all at once."
Hladick says that even though Hubbard recommended the rate hikes, he hasn’t been a big part of the implementation.
"We’ve been talking about it internally here," Hladick says. "Mike’s a consultant and lives in Maine, so he’s not always in on all the conversations that happen here."
In light of the new information from Hubbard, the city is taking rate increases off the table until June. The soonest they would go into effect is July 1. This spring, the final construction contracts will go out to bid, and the city will know the final cost of the utility upgrades. Unalaska will also know if it can count on additional state funding, which might come through during the legislative session.
In the meantime, city council will continue discussing tax increases. Most councilors said they could support raising the sales tax by a half a percent. That issue would have to go to a special election in May.