(Sage Smiley / KSTK)
Utility users in Wrangell are looking at increased rates and fees for … pretty much everything in the coming months. Wrangell’s government is trying to keep up with skyrocketing inflation and prepare for major projects in the coming years.
Last year, Wrangell began the shift to a comprehensive fee and rate schedule, slowly pulling utility rates out of borough code and putting them into a 20-page-long document with the borough’s rates for everything from the cost to open a graveyard plot to the water bill for a bakery.
Now once a year, the borough assembly reconsiders all the rates and fees at once. Since it’s the borough’s first year with the comprehensive fee and rate schedule, there are some changes coming – water, sewer, garbage and electrical rates will all be increased. At a work session earlier this month (March 14), Finance Director Mason Villarma explained the borough is proposing an increase of about 10% every month on an average Wrangell utility bill.
“Monthly, for your average Wrangell citizen, this would be a $34 increase monthly, a $410 increase annually, which truly is about a 10% increase overall,” Villarma explained.
Assembly member Dave Powell said it’s not ideal, but if Wrangell sets a pattern now, there won’t be huge utility rate hikes in the future. It’ll be steady and predictable.
“I would rather they see this once every year than us do what we have done like we just did with our water [rates] – you went up 27% in three years,” Powell said. “I mean, I don’t want that on my utilities four years from now you guys come up when I’m off the assembly and you go: ‘Guess what, we let you off for four years, but here’s a 35% raise,’ and now I’m retired.”
Finance Director Villarma explained that the borough’s proposed rate and fee increases are mostly to help combat aging infrastructure and prepare for the future: “‘Do we need the same stuff that we did 30 years ago? We need the same amount of trucks, we need the same buildings? Can we do it more efficiently? And if so, are we generating enough income to sustain our operations currently?’” he asked.
The borough hasn’t been keeping up with the slow deterioration of buildings. So instead of putting away money a little at a time over decades as the buildings depreciate, many of the community’s public facilities are at the end of their useful lives, with no money to repair or replace them.
“Obviously, sales tax and property tax are the largest revenue drivers,” Villarma said, “But barring those two, our enterprise funds are the biggest revenue driver for the borough.”
Enterprise funds are accounts that are supposed to be self-sustaining. In theory, Wrangell’s utility funds should take in enough through electricity, water and sewer bills to pay for the cost of services without dipping into tax revenue or other outside funding. But that hasn’t been the case.
“As you guys know for the last 50 years, really since the 1970s, we’ve been heavily reliant on the state and the feds and the community,” Villarma pointed out. “Wrangell has never paid the true cost of services. We know that to be true.”
Thus the rate hikes.
How the increases break down for specific utilities varies a bit.
A proposed electricity rate increase would bump up the cost of power by 7.5% – one cent per kilowatt hour (kWh), or around $18 per month for the average Wrangell home with electric heating.
Borough officials are also considering a new fuel surcharge. Though Wrangell runs most of the time on hydroelectricity, during maintenance or power outages it burns costly diesel fuel. Villarma says last year alone, the borough lost over $41,000 by not increasing electrical rates when burning diesel.
Villarma says the 7.5% increase would lay the groundwork to take on powerhouse needs in the future.
The rate proposal would also increase water rates by about 10% across the board, or $6.13 for a residential user each month. That’s on top of a 30% increase to water rates last year.
The borough’s water fund is its worst-performing enterprise fund, meaning it requires significant tax revenue to fill the gap left by low rates. Villarma said there’s lots of new infrastructure in the works, like a new water plant, and that means there isn’t much money to spare.
“The water fund worries me because we can’t just jack up water rates 100%,” Villarma said, adding that there does need to be some sort of increase: “We have to make up some ground, and I think a 10% increase is justifiable for now.”
Sewer rates would rise even more sharply, by a 15% increase, or about $7.40 per month. Villarma said he’s concerned about expenses coming down the pike – the community’s wastewater permit is being updated and a new treatment process could cost upwards of $5 million.
Garbage rates are proposed to increase 5.5% next year, or $2.73 per month for an average-size (64-gallon) can.
While the goal with utilities is to take in money to maintain the system, Villarma says Wrangell’s ports and harbors won’t ever meet that standard.
“We know in our harbors we’re never going to be able to operate without state and federal assistance. That’s just a fact,” Villarma said. Harbors are expensive, too expensive for a tiny community like Wrangell: “We’ll never be able to purchase a brand new $27 million harbor by ourselves. We just don’t have the [tax] base for it.”
But Villarma added the borough will still have to take out loans or bond to get harbor projects done, and pay back those debts.
“The goal is to be somewhat independent,” Villarma continued, “And if a travel lifts goes down, one or two of them over the next five years, when something happens, what do we do? We’ve got to have sufficient reserves to go by, we can’t just shut down. That’s like the bread and butter of the whole operation. So we’ve got to be prepared for unforeseen circumstances.”
Wrangell’s Port & Harbor commission approved an 11.1% increase to harbor fees earlier this year. That would have, for example, a 58-foot seiner pay $270 more per year for annual moorage.
The proposed increase doesn’t include fees targeting cruise ships and passengers, though. Wrangell’s Assembly is considering setting those rates separately to coincide with the calendar year rather than the fiscal year, right in the middle of cruise season.
The big picture is 5-50% raises on all sorts of rates and fees around town. Mayor Patty Gilbert told borough staff she wants to be able to show concerned citizens what the borough is doing to lower its own expenses. She also wondered about ways to help utility users save money – maybe an additional tax-free day in town, or a new, smaller trash can size with less frequent pickups?
“One thing that strikes me looking at it as the public will,” Gilbert stated at the work session, “[Is] the only thing that the public has control over is their electrical usage. The other rates are flat rates.”
But even ordering trash cans comes at a steep price nowadays. Public Works Director Wetor said 50 new, small-size trash cans could cost upwards of $10,000.
Assembly member Jim DeBord also floated the idea of implementing a summer-winter system like the one used in Sitka, where rates are higher in the summer to catch the seasonal tourists and lower in the winter. Ketchikan also recently implemented a seasonal sales tax system.
Ultimately, Gilbert said raising rates is a hard move to have to make in the broader financial climate.
“Mathematically, I understand all of this and I know what needs to be done,” she said, “But emotionally it’s tearing at my heartstrings because we’ve all experienced this massive inflation. I don’t see it getting any better anytime soon.”
Dave Powell agreed. He says he didn’t get on the assembly to make people pay more.
“I mean, do I want to pay more?” Powell asked. “No, I don’t want any more, I would rather we kick it down the road for about 30 years, I’d be really happy. I mean, I’d be tickled, I could live here and make more money and buy more stuff and not have to pay the city more money. But that’s not feasible. That’s not good business.”
Villarma told assembly members that context is key.
“The community of Wrangell, and Alaska, is heavily subsidized,” Villarma pointed out. “Everybody got a Permanent Fund [Dividend], I mean, I would wager to guess that the Permanent Fund was far more than their property tax bill. If they’re a senior, then they really didn’t pay anything in property taxes [because of the senior property tax exemption]. And then you look at the utility bills: the majority of residents in Wrangell didn’t pay their utility bills for the last two years because WCA picked them up. So we’ve been subsidized and you can’t feel too bad. But you don’t want to overburden people either. So it’s kind of this fine line you’ve got to walk.”
Even with proposed rate increases, Wrangell’s utilities are by and large below national rates and urban Alaska rates, Villarma says.
Looking beyond next year, Villarma’s model proposes a 5.5% increase to most utilities each year. He says that’ll keep up with inflation while rebuilding borough reserves to allow for longer-term planning.
“If we don’t at least match inflation with this, we’re kicking the can down the road,” Villarma said. “The next assembly, the next manager, the next finance director that’s trying to fix whatever, they’re going to inherit a bigger mess. And we’ve kind of been forced to do that. It’s just not advisable to not at least match inflation.”
Wrangell cannot continue down the path it’s been walking when it comes to utility rates and maintenance, Villarma said.
“Projects have to get done that we slate and budget for,” he said. “Otherwise the liability just continues to grow to the point where it might just not – we can’t do it. And what does that mean, what does ‘you can’t do it’ mean? Does that mean catastrophic failure? Does that mean our water lines just crumble?”
At some point, those projects have to be funded, he says. It’s better to prepare for the future than deal with disaster.
Wrangell’s Borough Assembly will hold a public hearing on the comprehensive fee and rate schedule at its regular meeting on March 28.
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