$18 Million Loan Request (City Council Jan 14th Agenda Item)

We are only a few days into 2013 and most of us have discovered that we will have to make do with less this year. Before January ends, Oak Ridgers will realize that fact again when they receive their water/sewer bills which will reflect the second rate hike since last May.

But before you have a chance to see your newly increased bill, city council may take an action that will cause your rates to rise a third time before 2013 ends. On January 14th, city council will vote whether or not to apply for two state loans totaling $18 million. This debt, in addition to a large portion of the $15 million issued since September 2011, will pay for work affiliated with an EPA Administrative Order which requires the city to stop sewer overflows.

All $33 million borrowed will be paid by Oak Ridgers through multiple increases in your water and sewer rates. The amount of those increases is not determined until after each round of debt is issued. In other words, the city first borrows on your behalf and then determines how much it will charge you without consideration for your ability to pay.

If council approves these loans, Oak Ridge’s debt will rise from $186 million to $204 million. It is worth noting that your debt totaled $104 million just a decade ago and you’ve since made about $110 million in debt service payments.

With those concerns (and others) in mind, I submit the following open letter to my fellow council members:

Mr. Beehan, Mrs. Garcia-Garland, Mr. Henlsey, Ms. Miller, Mr. Mosby & Mr. Hope:

Monday night, we face a tough decision when we vote on the proposal of burdening our citizens with $18 million more debt for the sake of the EPA order. As you know, the results of the first two rate increases caused the average rate payer’s bill to rise 30%. These loans will more than double the recent issuances and could result in an average total increase of 60% or greater. As we learned from the initial attempt last February, several businesses have seen much higher increases than 30% with some reporting as much as 100%.

Our residents and businesses CANNOT afford additional rate hikes. They do not have unlimited income and we do not have the right to continue to force them to pay for our city’s mistakes.

I appreciate the intent and importance of the EPA order as well as the job our city staff is doing to achieve compliance. After all, our health and safety should be a top priority. I also understand the fear behind council’s past decisions in wanting to avoid additional fines and penalties. But we should not react out of fear and rush to increase our debt so steeply prior to exploring all of our options. If passed, council will have issued new debt over the last 16 months at a rate of $2 million a month. According to the data provided by Martin McBride, we are already losing $1 million per month in DOE payroll because those employees are choosing to live elsewhere. We risk driving even more away and eliminating any competitive advantage Oak Ridge may have had in attracting new residents and businesses.

We must resist the temptation to hide behind the excuse “The EPA made me do it.” As Mr. Watson pointed out in his June 25, 2012 memo, the EPA has not told us how to fix our problems. Nor have they told us how much money to spend or where to obtain funding. Those decisions are entirely up to us. Before we issue more debt, there are at least three major points that council must address.

First, we must clearly communicate to the public a total cost estimate. They were already paying for $48.5 million of water/sewer debt (including over $20 million on sewer overflows) prior to the EPA order. Estimates for the preparation and implementation of the remediation plan have ranged from $23-$33 million. What has not been calculated is the total interest on the debt, the $3,000-5,000 that thousands of individual home owners may have to pay to repair their own laterals and the millions more that will be spent on up to 10 new permanent employees. By my math, it doesn’t seem too farfetched to expect a bill that totals nearly $100 million. I sincerely hope someone will prove me to be grossly out of range in my estimate.

 In spite of promises to the contrary, no alternative solutions have been pursued. We have yet to understand what exceptions the EPA may be willing to make with regards to a timeline or other cost delay or saving measures. Though we’ve now increased rates twice, we have yet to negotiate higher rates for our largest customer, DOE. And we have done nothing to explore funding through existing revenues or re-allocation within our budgets.

Finally, we still do not have a debt policy. The city verbally committed to establishing a policy with limits and parameters well over a year ago. Zero discussion has been had since. Council cannot possibly make a responsible decision about this loan request without understanding our limits and the ramifications of exceeding those limits.

If council approves these loans, we will irrevocably bind our community to further rate hikes and relinquish any leverage we may have had with DOE or the EPA in seeking their assistance. If we opt to forego these loans, however, we can retain some level of control and flexibility.

Rather than rubber stamping this debt, let’s do the hard work expected of us to best serve the public. Let’s task the city manager and city attorney to provide us with choices. Let’s each identify areas of lesser priority or overlap within the budget and come to the table with three to five alternatives. Let’s do something to champion for the people who elected us before selling them out down the path of least resistance.

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