City Council approves two-year budget resolution and tariffs that businesses say will squeeze them more

Posted on: November 11, 2009 | musiclover | 4 Comments | Print Article | Rate Post:

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(Heidi Zemach for Seward City News)

Like it or not, whether you own a small or large business, or you’re just a resident Joe or Jane who works for someone else, city fees are going up everywhere. But rest assured, it looks like the city won’t be cutting any of its staff, or lowering the level of services it provides.

Following a 5 ½ hour two-day meeting Monday evening, Nov 9th, and Tuesday afternoon, the Seward City Council passed a resolution adopting a biennial budget for 2010 and 2011 and enacted resolutions amending its tariff structures. The budget, which will come before the council for adoption November 23rd, was accompanied by a broad spectrum of fee increases to help the city replenish its electrical, water, sewer, harbor, parking enterprise funds in order to provide ongoing maintenance or replacement of infrastructure and assets.

The general fund budget currently assumes 8-10% decrease in sales tax, camping, bed tax revenue from 2008 actual levels—as the city has not received figures for Seward’s tax revenues from the Kenai Borough for the summer tourist season. The city plans to set aside $1.3 mi of the $1.6 mi award it hopes to receive from Exxon Settlement Funds, and place it into a separate fund allocated for 1-3 month reserve levels in case of future hard times or emergencies. All of raw fish state tax money received will go into the harbor fund.

Business owners and harbor users who spoke during public hearings on the tariff resolutions Monday and Tuesday all objected to the number of city fee increases proposed—especially for electric and harbor fees. Increasing city fees for everything from electricity, to harbor parking, will squeeze local businesses further and turn newcomers elsewhere, they said.

The most significant fee increase in the two-year budget approved is for electric rates. The council approved a 5% increase in all of its rate categories in 2010, and another 5% in all categories in 2011. The rate of increase thereafter would be tied to the Anchorage Consumer Price Index (CPI) for the previous five-years. The new tariff eliminates the Industrial Rate for large consumers, but it allows the council to create special electric rates for businesses in that category—such as Icicle Seafoods Inc., The Alaska Railroad and Alaska SeaLife Center. Seward Electric also start passing along all new fee increases (or decreases) imposed by Chugach Electric to its consumers—something that it has not done for several years.

Average electricity/water and sewer rate bills combined will increase by $9.4 per month for residents within city limits, or 5.19%, according to Finance Director Kristin Erchinger. The electric bills of those living outside city limits will experience a $6.71 monthly increase, or 5.82 % on average, she said. But that doesn’t count the fuel factor fee from Chugach Electric, which is based on natural gas prices month to month. Large in-town businesses can expect an average $5.5% increase in their local electricity rates, Erchinger said.

“It’s a tremendous increase from a business standpoint,” said Tom Shirk, a representative of Seward Windsong Lodge. He calculated it would amount to a 10-12% increase in the electric bill by 2011, or about $5,750 more. Windsong saw a 40% decline in customers last year, and reduced its workforce by 29 jobs, Shirk said. It also worked hard to reduce its own energy costs.

Most disconcerting is that the city would increase electric rates for those outside city limits, said Rhonda Hubbard. She called it “taxation without representation.” “You really should consider whether you should be in the utility business,” Hubbard added, saying the utility should actively seek out alternative sources of energy. Tim McDonald echoed her sentiments, saying that Seward has the best natural energy potential in Alaska, and that the council should “throw away the blinders.”

Alternative energy is not the problem, as Seward doesn’t produce its own energy, Chugach Electric does, said Councilman Tom Smith. The real problem is how to pay to maintain the city’s aging distribution system, such as wires and transformers. Chugach Electric says Seward experiences 40% line loss in certain areas because of problems in its system, said Mayor Willard Dunham.

“Here we are faced with electrical rate increases at the same time as we’re in the greatest recession since the depression,” City Manager Oates said, commiserating with the council for having to make touch choices. He called previous councils “shortsighted” for ignoring the opportunity to increase electric rates incrementally to pay for infrastructure improvements, and for taking $1.6 million out of the electric enterprise fund, to help other funds. Oates said these utility increases will only allow the city utility to meet its most critical needs, not future repairs in upcoming years.

Proposed increases in moorage and dockage fees for vessels at the Small Boat harbor and at the Seward Municipal Industrial Center (SMIC), also took public heat—especially an effort to increase fees for vessels stored long-term, to discourage owners from abandoning them.

“Please don’t balance the harbor on the backs of small businesses,” said Dianne Dubuc, a charter vessel owner. “I am not in position to increase prices to my guests,” she added. She suggested the city rely on raw fish taxes and the CPI adjustments for generating income, rather than raising fees. Doubling parking fees at the harbor to $10 would hurt workers downtown, especially her young employees, Dubuc said.

The fee increases at the small boat harbor would constitute a 12% increase in actual expenses for his tour company, said Ron Wille, operations manager at Kenai Fjords Tours. It would mean a 236% increase if a vessel they hope to sell stays in storage at SMIC for more than 300 days. “Derelict Vessels don’t pay their bills by definition,” Wille said, so increasing fees on those who do pay would be unfair.

Hubbard, who owns a fishing vessel, said it’s getting more and more difficult to get fishing vessels to come to Seward over Valdez, Homer, Cordova and Kodiak. Instead, there are lots of transients here, she said. Raising funds through CPI, moorage fees, plus city sales tax is “double dipping,” she said. Hubbard thanked the city for giving all the raw fish tax money to the harbor, however.

Sue Kaanta, who has waited three years for a slip for her vessel, after leaving Seward for awhile, encouraged accountability for any additional rates for the harbor. The last time she was in town the city had increased rates to pay for the new fish stations—was the fee lowered after they were built, she asked?

Ron Long, a harbor business owner and private slip holder, encouraged better budgeting rather than raising all the money required for the harbor repair and replacement fund through user fees. Referring to the workers he has had to fire, Long said: “Downsizing sounds healthy, but when you tell a single parent you don’t have a job—it’s different,” he said.

“We’re not asking for a special rate for our company—we want to be part of a healthy, vibrant economy,” said Tom Tougas, who owns Hertz, and some cruise ship and tour bus operations. He said his company moved its most expensive boat out of Seward to Haines, which had a lower head tax. As the city increases fees, it will decrease sales and property taxes, Tougas warned.

Hearing all this, the council amended their 2010 harbor tariff increase proposed for the small boat harbor: cutting dockage fees for vessels 45 to 79 feet from $20 to $15/month; and vessels 80 feet and longer from $30 to $20 per month. They reduced proposed rates at SMIC, from 15 cents per linear foot to 10 cents per linear foot per day. Vessels staying beyond one year will be charged 20 cents (rather than 30 cents) per linear foot per day.

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