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logo_lettereditorBy Jean Jenks, Sedona Resident
(November 26, 2017)

To help pay for the sewer system required by the courts, in 1999 the City Council formulated a financial plan and moved to subsidize the Wastewater System by allocating city sales tax revenue for the city’s Wastewater Fund instead of instituting property assessments. (Ref: “City Finances Part 2: Sedona’s Wastewater Fund,” SEDONA BIZ, September 11, 2009).  The small population would not have to carry the cost burden of the sewer system, and the commercial areas along SR 89A, SR 179 and the two residential subdivisions polluting Oak Creek got off the hook financially. Currently, although the sewer system is not completed, the City has been reducing the promised sales tax subsidy. Once 47%, now it’s 25%. According to an email I received from Charles Mosley on 8/15/2016, “At this point we estimate over 60% of the City area has access to the sewer system.”

WILL THE CITY GO AFTER CURRENT SEWER USERS FOR FUNDS?  Two Bullets under Staff Recommendations for Improvements and Extensions on Page 4 of the WWMP Update – Executive Summary (Exhibit A) bring certain financial issues to light. 

1.     Bullet #1: The Finance Department is recommending the rate increases outlined in the 2014 Fee Study continue. What?!! The current fiscal year is the last year of fee study increases. Four years of 4% rate increases were recommended by the Consultant and adopted. “Council agreed by majority consensus to approve the financial plan recommendations for a 4% per year increase in rate-based revenues for FY 2014-15 through FY 2017-18; and a reduction to 30% in the sales tax subsidies to the Wastewater Fund in FY 2014-15, followed by 25% in FY 2017-18.” This decision from the January 15, 2014 Council Meeting was cast in concrete during the May 27, 2014 PUBLIC HEARING. 

2.     Bullet #4: “funding for extensions could require an increase to tap fees, monthly fees or some kind of special assessments.”  An increase in the monthly sewer fee from $0 to $10.00 or More was discussed during the Wastewater Master Plan Update PUBLIC MEETING held on December 5, 2016.  Since a subset of residents are on the sewer and pay the monthly fee, increasing it to fund extensions to new areas has to be discriminatory as I see it. Also,isn’t the sales tax subsidy that’s systematically being reduced meant to fund expansions?

3.      The Assistant City Manager and the Financial Services Director’s “WASTEWATER FUND ANALYSIS – REDUCTION IN SALES TAX SUBSIDY” Memo dated April 21, 2016, speciously states: “The 2013 rate study, adopted by Council, included an annual 4% increase to the City’s sewer rates through FY20 with a 3% increase in FY21 through FY23.” This Memo, claiming nine years of rate increases when there were but four, was found EMBEDDED in the voluminous PROPOSED BUDGET 2016-17 (405 pages). 

4.     The Assistant City Manager states on Page 10 of the 471-page PROPOSED BUDGET 2015-16 that: “On May 27, 2014, the City Council adopted a new wastewater rate structure which tied the rates to the cost of providing service and included a four percent (4%) increase each July 1st, from 2014- 2018.” 

IS THE CITY MAKING MONEY FROM RESIDENTIAL SEWER RATEPAYERS?

 1.   “Based on the analysis, while the annualized visitor population represents 55% of the total annualized visitor population, the visitors contribute less than 25%  of the funding for the operations of the wastewater system.” The pie charts on Page 6 of 29, PROPOSED BUDGET 2017-18, show the Estimated Visitor Population of 55.4% pays 24.6% of the cost of WW operations, while the Resident Population of 44.6% pays 75.2% of the cost of WW operations. Of course, it’s only approximately 60% of the Resident Population of 44.6% that’s on the sewer and pays 75.2% of the cost of WW operations. (The WW Total Funding percents are different as they include the decreasing sales tax subsidy.) The budget proposal states: “As the debt service is paid off and the sales tax subsidies are reduced, the portion of funding attributed to the annualized visitor population will decrease under the current fee structure.” The WWMP Update fails to address and consider rectifying the discriminatory nature of the current user fee structure.

2.   The Assistant City Manager and Financial Services Director additionally state in the WASTEWATER FUND ANALYSIS – REDUCTION IN SALES TAX SUBSIDY Memo that: “40% of the wastewater operating revenue is coming from the General Fund. In addition, since fiscal year 1989, the General Fund has subsidized the Wastewater Fund with over $104.5 million of city sales taxes.” WHOA, 1989 is ten years before subsidies began, and the amount might be blatant. To reiterate, according to “City Finances Part 2: Sedona’s Wastewater Fund” by Mike Ward (SEDONA.BIZSept. 11, 2009):  “In 1999 the Sedona City Council formulated a financial plan. Instead of instituting property assessments to help pay for the system required by the courts, the City Council moved to subsidize the wastewater system by allocating city sales tax revenue for the city’s Wastewater Fund.”  

3.     Wastewater Fund SAVINGS: Changes to the wastewater fund revenue and expenditure forecasts since the 2013 Fee Study are resulting in savings. A total interest savings of $l.57 million from bond refinances, $4 million less in projected expenditures for wastewater capital projects, a sales tax revenue increase of $1.86 million and an anticipated drop in debt service payments by $.62 million during the FY14 through FY19 period of the rate study accelerated the reduction of the subsidy to 25% in FY 2017–one year early–when the City Council opted to not suspend the 4% sewer rate increase for the fiscal year.  (Ref: PROPOSED BUDGET FY 2016-17, Pages 11-13).

4.     Making the Wastewater Fund Self-Supporting:  Certain high ranking staff want rates to be based on the cost to operate the wastewater system without an outside subsidy.  I don’t think it apropos that the City has been reducing the sales tax subsidy at a time when just approximately 60% of the City area is on the sewer; about 11 areas are unsewered. I believe the City needs to stop reducing the sales tax subsidy and forego trying to run an incomplete, costly sewer system like a business.  And instead of the WWMP – Executive Summary (Exhibit A), why aren’t citizens seeing the Wastewater Master Plan report itself on the Council’s website? Additionally, why no figure of the estimated cost to the City? Alarming!