End Developer Subsidies by Portland Sewer Ratepayers

Aeration tank at Columbia Boulevard Wastewater Treatment Plant, photo from BES website

City of Portland budget development is rolling along this spring. CUB gave testimony at a mid-March meeting focused just on budgets for the two utility bureaus. Next, CUB gave invited testimony at City Council budget work sessions.

CUB’s immediate goal is to get the City Council to amend the proposed budget for the Bureau of Environmental Services to end two types of subsidies that are being paid for by residential and other ratepayers.

Now you can tell the City Council what you think at community budget forums on Thursday, April 27th and Thursday, May 7th. Here are the details:

City Council Community Budget Forums:

• April 27, 6:30 to 8:30 pm         Floyd Light Middle School, 10800 SE Washington St
• May 7, 6:30 to 8:30 pm         George Middle School, 10000 N Burr Ave

To get ready, here is a summary of problems and CUB’s recommended solutions.

Problems and Solutions:

1) End sewer development charge revenue loss that is a subsidy to developers
Background: Sewer systems are constructed with excess capacity in anticipation of future growth. As new development occurs, state law outlines the method, based on straightforward economic calculations, that sewer utilities use to assess a charge that is essentially a reimbursement per new dwelling unit. Sewer system development charges ensure that current ratepayers are not covering all the costs of building Portland’s sewer system. It is appropriate that developers pay their fair share since sewage treatment plants and other sewer system facilities were built to accommodate growth.

Problem: In 2011, the City Council reduced the sanitary sewer system development charge paid by developers to BES, evidently due to the economic downturn. BES has lost potential revenue in each of the following fiscal years as a result. For example, an additional $2.8 million could have been collected by BES during the last completed fiscal year that ended in June of 2014, if the City Council had returned to its historic practice of charging the sewer system development charge at the level allowed under state law.

Solution: CUB says this loss of legally allowed revenue is a subsidy to developers that has to stop. CUB urges the City Council to return to its past practice of charging developers the full sewer system development charge allowed by state law.

2) End ratepayer subsidies of developer and industrial waste fees
Problem: BES charges developers fees to review building and land use plans for compliance with environmental and other regulations. But these fees don’t cover the actual cost to BES, and ratepayers make up the difference. Since it helps all ratepayers if BES has more customers, an 80 to 90% cost recovery rate is acceptable. But during the last completed fiscal year that ended in June of 2014, the cost recovery rate was only 50% of an 80% goal. This represents about $1 million in lost revenue to BES and is an inappropriate subsidy to developers.

The other BES cost recovery shortfall is an inappropriately low fee charged to industrial waste discharge permit holders. During the last completed 2013-14 fiscal year, BES lost about $500,000 compared to the fee CUB believes should have been charged.

Solution: CUB supports improved cost recovery of these BES fees and urges the City Council to end these subsidies paid for by ratepayers.

Benefit to Ratepayers
Adding all that up, customers would have saved $4.3 million in their rates had the City Council implemented these changes for the 2013-14 fiscal year. It is time to end these subsidies paid for by BES ratepayers. These changes can be phased in over two fiscal years, but ending these subsidies should begin in the fiscal year 2015-16 budget currently under consideration.

Tell the City Council
City Council Community Budget Forums:

• April 27, 6:30 to 8:30 pm         Floyd Light Middle School, 10800 SE Washington St
• May 7, 6:30 to 8:30 pm         George Middle School, 10000 N Burr Ave

The key people to contact urging support of CUB’s BES budget recommendations are Mayor Charlie Hales or Commissioner Nick Fish:

• Mayor Hales at .(JavaScript must be enabled to view this email address) or (503) 823-4120
• Commissioner Nick Fish at .(JavaScript must be enabled to view this email address) or (503) 823-3589

Please feel free to contact me with questions or other suggestions at (503) 227-1984 x24 or .(JavaScript must be enabled to view this email address).

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