January 29, 2010 And the Sewer Rates Are Going Up AGAIN

Another bad budget bites the dust.

In June 2009, the Morristown City Council adopted a deficit Fiscal Year 2010 sewer fund budget against the advice of its paid consultant Lamar Dunn.  [Dunn presented a rate study to council in June 2009 and told council that the FY 10 sewer rate increase should be 14% to cover sewer fund expenses. Council ignored the recommendation and instead raised rates by 8% in FY 10, adopting a deficit sewer budget] For more on adoption of the current deficit sewer budget, click here and here.

Now just seven months later, the Mayor and Council called Dunn to come to the Finance Committee meeting yesterday and give them a sewer "update."  Without saying "I told you so," Dunn's update reminded  the Mayor and councilmembers that they adopted a deficit budget (which they already knew) and that the city's sewer fund is in the hole as result (exactly what he told them would happen).

Solution. Pay Dunn for another rate study--since you ignored the last one you paid for.

Industries and residences better start socking away money--if they have any--for yet another big sewer rate increase.

Sewer costs are a major factor in the budgets of many existing Morristown industries and of industries that might consider locating here. With large sewer rate increases year after year, the City and Industrial Development Board (IDB)/Jack Fishman may at some point realize that spiraling sewer rates are one reason that it so hard to get new industry to locate in Morristown (without tax incentives) and that spiraling sewer rates have a negative impact on existing industries (that get no tax breaks).

And it goes without saying that skyrocketing sewer rates have a major impact on hard-pressed family budgets as well.

The new increase could be adopted right after Dunn's study is complete or it may be included as part of the adoption of the FY 2010-2011 sewer fund budget in May or June 2010.

[Dunn also told the Mayor and Council that the "unknown" regulatory cost that he mentioned in his June 2009 rate review is now a huge "known" regulatory sewer cost. Morristown is under a Commissioner's regulatory ORDER to fix sewer problems that were ignored for years and years, to develop and actually implement a maintenance plan, and to provide reports to the state for the next several years of compliance with the Commissioner's ORDER.  This known regulatory cost will be a factor in Dunn's new study.]

July 8, 2009 City Council Avoids Discussion about Its "Policy" of Automatically Doubling Sewer Rates for Outside Customers

City Council met yesterday at 4:00. It was a short agenda that was dispensed with quickly.

During the public comments portion, I asked the council about the double rates charged to outside sewer customers. I asked if they have any cost study or any report by anyone showing that it costs twice as much to provide sewer service to customers who live outside the city limits. They do not.

[The sewer consultant who came up with the new increased sewer rates lumped ALL sewer customers (inside and outside) together to come up with a single new rate structure. Then the council, pursuant to "policy," automatically doubled the consultant's new rate structure for outside customers.] See my previous post.

With no cost study for outside customers, the next question was why do you arbitrarily and capriciously charge outside customers twice as much? City attorney Dick Jessee advised the Mayor and council not to respond to that question, so I rephrased it "why do you charge outside customers twice as much?" Jessee did not object to that question, but there was still no answer from the Mayor or council.

In the end, it really didn't matter how the question was phrased, the Mayor and council will not engage in open discussion about the double outside sewer rates and for good reason. They don't have any justification for charging outside customers twice as much. Someone just decided to slap on a punitive double charge years ago, no one ever questioned it, and now they don't want to listen to any questions about the double charge policy.

The Mayor and council don't like the question in any form, but let's get real about this and look at state law and case law. When you just hit someone with a double sewer charge as a matter of policy without a cost basis, that is just about as "arbitrary and capricious" as you can get. Policies can be erroneous, without basis, and illegal. [Remember Jim Crumley's ill-fated "moratorium" on garbage service to new city businesses that was later determined to be indefensible by attorney Dick Jessee?]

One of the newest members of the current council, Bob Garrett, has already told the council and city staff in an open meeting that the policy of charging double sewer rates is "illegal." Bob knows the law in this area. He worked for the water system for decades and knows that rates have to be lined up with costs---not just set up to punish one set of customers and favor another set. Bob spoke the truth, and I would imagine that there were several conversations afterward about such openness and honesty in a public meeting.

The Mayor and council can sit quietly and ignore the "arbitrary and capricious" double sewer rates, but the issue isn't going away. There can be different rates---but only if there is a cost basis for the different rates. A "policy" of charging twice as much--pulled out of thin air--is not a cost basis. There is no justification for the city continuing to treat some of its sewer customers unfairly.

It may be painful, but it's time for the city to stop avoiding the situation and take care of this matter. It's a matter of fairness because that is what the law requires. Rates must be fair and equitable. Bob Garrett knows that and has told the council as much. I have repeatedly asked the city to charge the same rate to inside and outside customers until and unless the city performs an outside study and finds that its costs for service to outside customers justify a higher rate and the amount, if any, of that higher rate.

The city's recent rate study by Lamar Dunn lumped the costs for all customers (inside and outside) together and came up with a single fair rate for all customers (inside and outside) based on those costs.

Lamar Dunn's report did not say that it costs twice as much to serve outside customers. The city simply took Dunn's single rate structure (inside and outside) and then applied its "policy" of automatically doubling Dunn's cost study rate and charging outside customers twice as much. Arbitrary and capricious? In my opinion, yes. Unfair? Yes. Needs to stop? Yes.

A rezoning ordinance for a Weigel's Store (2750 N. Davy Crockett Parkway and a portion of Cherokee Park) passed 5-0-1. Kay Senter abstained without comment and Gene Brooks was absent.

A change order for the airport renovation was approved.

Several fire department promotions were approved.

The council then convened as the Beer Board and approved four beer permits:

Maria Isabel Flores, Don Pancho Mexican Restaurant, 1134 South Cumberland.
Misael Martinez, Locanda Italian Restaurant & Pizza, 1590B Buffalo Trail.
Jaymin, Inc., Shell Gas Station, 2564 Buffalo Trail.
Kenneth E. McMullen, Weigel Stores, Inc, 2750 N. Davy Crockett Parkway.

The work session that followed was lengthy. Two companies gave health/wellness presentations, seeking city business to set up a local clinic for city employees. The presentations ran so long that three councilmen and the local "news"paper reporter left during the presentations.

When Councilman Frank McGuffin left, reporter Bob Moore followed him and called for Frank by name. Bob was gone for quite a while and missed a lot of the first presentation.

Bob finally came back. Councilmen Claude Jinks and Doc Rooney left separately. Then Bob Moore left again (permanently) and missed a lot of the second presentation as well.

At the end of the second presentation, there were a few city employees still around, a few members of the public, and only these elected officials: Mayor Barile, Kay Senter, and Bob Garrett.

June 24, 2009 City Council Changes 3-year Sewer Increase To 8%, 8%, and another 8%

At yesterday's 11:00 am city council meeting, it was apparently decided to change the original proposal for an approximate 14%, 6%, and 2% rate increase over the next three years to an 8%, 8%, and then another 8% increase. See the original proposal by clicking here.

The city council met at 12:30 pm today for finalization of various budget ordinances and other business.

Just as an aside: Scheduling "public" meetings at 11:00 am, 12:30 pm, or other traditional work hours shows contempt for the public and is apparently designed to restrict public attendance and public comments. That is an issue to which the new council should give serious consideration. The question is, for whose convenience are meetings scheduled?

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 outside...you 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.

June 10, 2009 Morristown Sewer Rate Increases

The City of Morristown continues the pattern of large increases in sewer fees.

Yesterday, the Mayor and City Council heard a presentation by Lamar Dunn and Associates regarding sewer costs and rate increases for the next three years for sewer customers.

Dunn is recommending that the city increase its sewer rates by just slightly more than 14% in the upcoming fiscal year (7/1/09-6/30/10) and then increase rates by 6.2% the next year (7/1/10-6/30/11) and 2.0% in the 3rd year (7/1/11-6/30/12).

NOTE: Sewer customers who live outside the city limits are "automatically" charged twice as much as customers who live inside the city limits so the dollar amount of these rate increases is automatically twice as much for outside customers. At yesterday's meeting, recently elected Councilman Bob Garrett stated that automatically charging outside customers double the inside rate---without a specific cost basis---is illegal. I will have more on this in a future post as I stated the same thing to the former Mayor and Council in 2005 (no action) and again to Mayor Barile and the previous council in early 2009 (no action). According to Bryan Fowler, the City has a "policy" of automatically charging outside customers twice as much. Well, as I have said before, you just might have an illegal "policy."

Dunn indicated that it would be difficult to accurately project what the rates should be beyond that. He suggested that the City start looking again at its rates in year two (7/1/10-6/30/11) of the increase--with the hope that the economy is on the rebound at that point.

Jim Crumley added that sewer rates had increased 57% in the previous 10 years and that he expects a similar increase in the next 10 years. [With a hefty 22% increase in the next three years alone, it is certainly possible that the next 10-year increase could easily exceed Crumley's 57% prediction.]

Bryan Fowler, who is over the city sewer, stated that he has a $40 Million capital improvements plan for the next 10 years.

Purchase and operation of the Lowland treatment plant is included in the projected sewer rate increases.

June 4, 2009 City Budget: What about the Sewer Rates?

Something that has been mentioned once or twice but never actually discussed at Morristown City Council meetings is the city sewer fund and upcoming changes in city sewer rates.

There was supposed to be a presentation and discussion of the results of a sewer study last Thursday. That didn't happen. Yesterday, when City Administrator Jim Crumley was asked when the sewer study would be presented and new rates set, Crumley didn't give a date.

From what I can gather--and part of this is second-hand information-- it appears that sewer rates are scheduled to go up about 12% in the upcoming budget year and about 8% in the next year. That would be about a 20% increase over a two-year period. And that is on top of previous sewer rate increases!

No wonder Crumley wants to keep this fund--and this study--under wraps as long as possible.