Kotzebue residents may have noticed a spike in their water, sewer and garbage costs over the last several months. The city has been gradually increasing utility rates since January. By the end of the year, most residents will have seen a $30 increase for these services.
“Over the past many years, the utility rates were around $130 per month,” said City Manager Tessa Baldwin. “In December, we'll be paying a total of about $160 a month for water, sewer and garbage.”
But even those higher rates won’t be enough to cover the city’s operating costs, Baldwin said.
The utility rate hasn’t increased since 2016 and the water, sewer and waste departments are currently operating at more than a $1.7 million deficit, which impacts the city’s ability to receive certain grants and pay off loans.
According to Baldwin, the city needs to continue raising the rates to keep up with inflation.
“The fuel costs, rent and food, shipping prices — and then on top of that, the inflation rates have steadily increased over the past three years,” she said. “If the city were to increase following the standard inflation rate, there would have been a 25% increase on utility billings for several years.”
Operating under a budget deficit can affect the city in several ways.
Every year, Alaska communities are evaluated by the state’s Department of Commerce, Community and Economic Development. The department assesses operations and maintenance capacity of a community’s water and wastewater utilities, and then issues something called a RUBA score.
Chelsea Sieh, Kotzebue’s financial director, said this year that the City of Kotzebue received a low RUBA score due to “a budget deficit for water, sewer and garbage utilities.”
According to Sieh, the low score greatly impacts grant funding and the ability to apply for certain grants. She said many municipal grants require a financial match from the city, usually 5-20%. If the budget isn’t balanced, the city typically has to pay a higher percentage, Sieh said.
The city’s goal is to reduce the utility deficit by half a million dollars over the next 3 years. To help in that effort, the city contracted Alaska-based consulting firm DOWL to conduct a utility rate feasibility study.
“Operating costs are expected to go up in the next five years,” said Kristi Thompson, a representative from DOWL. “Water lines need to be improved and replaced. Projects need to be done like sewer line replacements. The landfill needs to be improved.”
Thompson said the feasibility study is in the preliminary stages. City Manager Baldwin says she hopes Phase 2 of the study will be complete by this December, which will coincide with the end of the city’s fiscal year.
Additional rate increases would need to be approved by the City Council. The public will have two opportunities to comment before any decision is made.
