Friday, June 19, 2009

June 4, 2009 The "news"paper, the City, and Sewer Rates

I have held off on this blog post for nearly six months. Now that belated testing of the city sewer and multimillion dollars repairs are again before the Mayor and City Council, it is time to review the city's arbitrary policy of charging double sewer rates to outside customers.

When sewer rates were discussed by City Council on Tuesday, June 16, 2009, Bob Moore of the Citizen Tribune was present.  The next day, Moore wrote a front-page article on council's delay in making a sewer rate decision.  [Bob missed several budget meetings during the weeks leading up to the June 16 meeting. He did not attend the previous meeting on June 9 when sewer rates were discussed.]

Bob's June 17th report had some truth in it and several half-truths.

Bob's truths: 1) There was significant discontent from many individuals regarding sewer rate increases. 2) Outside customers pay twice as much for sewer service as inside customers.

Crumley's half-truth as reported by Bob: State law provides that municipalities can charge up to double the rate to sewer customers who live outside the city limits in situations where no rate study has been conducted.

TRUTH: State law provides that a municipality must submit its cost study to the state when it charges more than twice as much to outside customers.  The new law is solely about providing the city's cost study to the state when the proposed rate is more than double the inside rate.  The new law does not say that no rate study has to be performed if the city is charging is double or less. Whether a city provides its cost study to the state or not, a municipality can not just pull an outside rate "out of the air" even when that rate is double or less

Crumley's comment, quoted without any fact-checking by Moore, was a half-truth that implied that state law says the city does not have to have a cost study or cost justification if it wants to charge double rates to outside customers. Crumley's comment conveniently ignored case law and CTAS/MTAS opinions that say a cost study is a "practical necessity" in order to provide a cost justification for charging more to different classes of customers (e.g. inside v. outside customers).

CTAS/MTAS opinions on the "practical necessity" of a cost study apply in all situations.  MTAS is Municipal Technical Advisory Services, which is connected to U-T and provides advice, support, and legal research to cities across the state. CTAS is County Technical Advisory Services, which is connected to U-T and provides advice, support, and legal research to counties across the state.

Bob's truth: Moore notes that Lamar Dunn performed a rate/cost study for the City. Yes, he did and his rate study was an average of all customers--both inside and outside. What Moore left out: Dunn did not do a separate study for setting inside costs/rates and one for setting outside costs/rates. State law says you have to relate your water or sewer rates to your costs.   That means that if you are going to charge higher rates to one set of customers (outside customers), then you have to be able to justify those higher rates through a cost study. That's where the City conveniently drops the ball and just arbitrarily charges outside customers twice as much (by "policy") instead of doing a cost study to see if the cost of providing sewer service to outside customers is really twice the cost of providing sewer service to inside customers.

While one might expect that costs of outside sewer service would be higher than inside, that is not necessarily the case. The costs of outside sewer service are not "automatically" twice that of inside sewer service.  Why? According to documents I received from the city, there are approximately 140+ or - outside sewer customers. 1) There was no cost to the city for extending sewer lines to 50 or so of these "outside" customers because the sewer extension to these customers was paid for by the county with county money and CDBG grant money ("Russellville Sewer Project"). 2) Other outside customers were allowed to tap onto existing city lines with no additional cost to the city for new lines. 3) There are numerous "inside" sewer customers who are much farther from the treatment plant than many "outside" customers, so distance from the treatment plant is not a factor for all outside customers.

It's time for an honest, independent cost study--not one that is designed to come up with a pre-determined result to justify the existing double rates.  An independent cost study would determine if there are any additional costs to the city in providing sewer service to outside customers as a group (additional costs would be unusual or extraordinary costs beyond those standard costs that all customers must bear); if there are additional costs, the amount of those costs; and, finally, determine the proper and fair rate for outside customers.

Bob's half-truth: "Linda Noe...renewed her call for city government to charge a uniform rate to sewer customers living inside and outside the city limits."  Moore conveniently left off the last part of my request. The TRUTH: I asked the city to charge the same rate for inside and outside customers until and unless they conduct a cost study showing what, if any, additional costs are incurred to provide sewer service to outside customers.  When there is an independent cost study, then one can examine it and see if higher sewer rates for outside customers are justified and, if so, what the outside rates should be.

According to CTAS attorneys (see above) a cost study such as the one that I asked the city to perform is a "practical necessity to properly and fairly determine and support the rate structure."  All I have ever asked is that the city "properly and fairly" determine the outside sewer rate without resorting to an arbitrary policy of automatically charging outside customers twice what is charged to the inside customer. That is not only  reasonable and logical, but, according to MTAS/CTAS, Councilman Garrett, and my own research, it is the proper way to set a fair and equitable rate for outside customers. The CTAS attorney's letter was given to Bob Moore and I cited it in my comments to council, but Moore apparently forgot to mention this part of the CTAS opinion in his article.

The City by its own admission and by its consultant's admission has no cost study "to properly and fairly determine and support the outside rate structure." [Moore wasn't at the meeting with the consultant but IF he wants the information, I have it. I also have the city's admission that it has no cost study relative to any additional costs for providing outside sewer service IF Bob wants that.

Bob's truth: Noe characterized the city's two-tier rate structure as "arbitrary." Why? Because it is. Because there is NO cost-basis or justification for charging twice as much to outside customers. That's about as arbitrary as you can get. You live get charged twice as much. If you ask "why?" the response from the City is "no particular reason but we have this special 'policy' that says we are going to charge you twice as much." That's arbitrary!

Bob's slightly irrelevant half-truth: Noe provided information to council indicating that the burden is on the property owner challenging the (sewer) rate. MTAS says that this burden is a "difficult" burden because courts start with the presumption that the rate is valid. It is true that a sewer customer who challenges the fairness and setting of sewer rates in court bears the burden of proof in the matter, and I presented the various court cases to the Council---along with all the information that says you have to have some kind of cost justification for setting a double rate (or any rate). Bob again ignored the fact that the court cases and CTAS/MTAS opinions say you have to have a cost justification for setting a double rate (or any rate).  Bob jumped the gun in talking about the burden of proof in court. This should never end up in court. There should be a cost-study. The City should be fair to ALL its ratepayers. The Mayor and City Council should not say to outside customers "sue me" over the city's arbitrary sewer rates.  But, sadly, that is the typical political reaction when facts are put before the council.

Bob missed the meeting with the sewer consultant, but he knows that the City commissioned and paid for a sewer rate study. If Bob had been at the meeting with the consultant, he would have known that the consultant was specifically asked if he separated costs into inside and outside costs to set inside and outside rates. The consultant said that there was no separation of costs. He just lumped all residential customers together and came up with an average.

Why no separation of costs so rates could be fairly and properly set? My guess is that the City either does not have or chose NOT to provide the consultant with inside and outside costs so he could determine inside and outside rates. Bob also forgot to add that the sewer lines for a large number of outside customers were donated to the city by the county as a result of the Russellville sewer grant. Other outside customers tapped onto an existing line with little or no additional cost to the city.

It's easy to "report" what you are spoon-fed. It's much harder to think about the situation and ask the "why?" and follow-up questions. But that is what a reporter is supposed to do.

Sewer rates--both inside and outside--affect a huge number of people. I would love to see Bob do a probing "series" of articles on sewer rates. Compare the detail of the last (1998?) cost study to the current cost study. Detail the $40M of improvements that Bryan Fowler says is planned. Look in-depth into the legality of rate-setting. Don't just take everything you are spoon-fed as gospel.

The series doesn't need to serve as a press release for quoting half-truths from elected and appointed officials and the editing of comments by others. Bob is savvy when he wants to be. He could (if allowed to) search for and report the truth himself or at least discuss the situation more fully with those who have expressed concerns about the legality of the situation. It wouldn't kill Bob to talk to me. I'll tell him what I know and he is more than welcome to verify it. He can talk to Crumley and then he needs to verify that as well.

I have been concerned about the City's arbitrary sewer rates since I first became aware of them during the time I served on county commission. During the Russellville low-income sewer grant process, several individuals came to county commission and informed us that outside sewer customers were charged twice as much as inside sewer customers. That meant that the Russellville sewer grant recipients would get a "free" sewer hook-up but they would then be stuck with "arbitrary" DOUBLE monthly sewer rates from the City of Morristown. Sort of like being given a free Hummer and then being told that you have to provide the gas every month. But at least with the Hummer, you could sell it.

And there are other outside customers--though not all that many--scattered throughout the county. The extra that these outside customers pay in DOUBLE charges to the city is a drop in the bucket in relation to the millions spent through the sewer fund. But sewer increases and DOUBLE charges have a huge impact on each individual or family budget.

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