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Auburn City Council split on regional sewer deal points

Approved set with no increase to rates called ‘unrealistic’
By: Jon Schultz, Journal Staff Writer
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LET’S MAKE A DEAL

The Auburn City Council approved a set of 34 conditions that need to be met for the city’s involvement in the regional sewer project, and the deal points will now be sent to Placer County and the City of Lincoln for those officials to review.

Following are some highlights. The entire list can be found on the City of Auburn's website by downloading the Feb. 25 City Council agenda with attachments.

-- Financing that would provide complete rate stabilization for Auburn, including no rate increases.

-- Governance would be a Joint Powers Authority with Auburn having a strong voice and veto power over major changes.

-- Auburn’s buy-in for the common section of the pipeline is estimated at $2.8 million. This would be in the form of an agreement with Placer County.

-- Lincoln would be responsible for environmental work for everything related to the Lincoln plant, Auburn plant and regional pipelines.

-- Auburn could opt to use the common pipeline before the county-related regional project is awarded, estimated by September.

-- Auburn would reimburse Lincoln as the work is completed – not up-front.

-- Auburn’s budget for this project is currently $36.3 million but would be adjusted based on actual construction bids, proposed retention of Auburn plant and pipe.

-- Auburn owns, operates its ponds, pump station and pipelines, and Lincoln operates its plant and regional pipelines.

The Auburn City Council became more divided on the regional sewer project on Monday, approving a set of deal points that made some members comfortable, while others said they were unrealistic.

They did, however, agree the discussion needed to be brought to a larger forum.

The council voted 3-2 to send the deal points, contingencies that need to be met for Auburn to join the project, to Placer County and the City of Lincoln, and also unanimously approved expressing interest for a joint workshop on the project.

The deal points will be immediately sent for review by Placer County and Lincoln officials requiring response within a month. Auburn would have to pay $36.3 million to join the project, which would have a total estimated cost of around $100 million.

If the deal points are accepted as-is, joining the project would not affect Auburn ratepayers beyond the standard increases with the consumer price index. A recent Auburn city staff report found “minimal compelling reason” to go regional if rates cannot be stabilized by obtaining the necessary outside funding.

Talks of a regional sewer project have been ongoing for more than a decade, and although Auburn’s current plant is in compliance, some believe going regional would help mitigate costs to meet future standards.

Auburn’s temporary regional sewer committee of council members Dr. Bill Kirby and Bridget Powers had been meeting with the other jurisdictions in small groups to come up with a proposal. This joint workshop would get all the parties as a whole in the same room, along with the public, to iron out any questions and inconsistencies that remain.

“I think that’s probably what has been missing in order for us to get to a more definitive point,” Powers said.

The list of 34 deal points covers the various agreements that Auburn would enter into: a Design and Environmental Review Agreement, a Construction and Initial Operations Agreement and governance.

Council members Kirby, Powers and Keith Nesbitt voted in favor of sending forth the deal points, while Mike Holmes and Mayor Kevin Hanley voted against it.

Nesbitt said he understands the benefits of going regional and likes the idea, but he’s “uncomfortable” with it because there are too many variables that could affect Auburn citizens.

“I may never be comfortable completely, but I will be a lot more comfortable with these deal points,” he said. “If they meet these deal points, I’ll support it.”

Holmes and Hanley both doubted any likelihood the deal points would be accepted.

“I have talked to members of the board of supervisors and the City of Lincoln,” Holmes said. “We’re going to be very, very dissatisfied with the responses that we get.”

Hanley had been the lone dissenting vote for drafting the deal points at the Feb. 11 council meeting, and he said then the city should cut all ties with the regional project.

Monday, he called the current deal points “unrealistic” and said the city owes it to the other parties to draft a reasonable proposal, which would include increasing Auburn’s sewer rates, and that is the question council members should be weighing.

“Yes, our plant is state-of-the-art now. Yes, it is up to date. No, I don’t trust Lincoln. Bottom line, I’m not sure I trust the county,” Kirby said. “I trust the deal points to put a governance in place and that will protect Auburn rate payers.”

For rates to remain stable, the city would need $18.16 million in outside funding to subsidize its costs of buying in.

That’s assuming the city uses about $3.3 million in “regionalization reserves” and unspent bond proceeds from the city’s sewer fund to help offset the capital costs, lowering the amount to be financed to about $33 million.

Placer County Supervisor Robert Weygandt said within the next few weeks the county has to reach closure on whether the City of Auburn is “in or out” of the project.  Weygandt initially raised the idea of a joint workshop at Monday’s meeting.

Placer County Supervisor Jack Duran offered on Feb. 11 to contribute a minimum of $7 million from the county’s general fund to help fund Auburn’s portion, though that would be subject to approval by the county board of supervisors.

Without any subsidies, the annual sewer rate for a typical single family dwelling in Auburn would increase by $180, from $726 to $906, if the city went regional. The county’s $7 million contribution would lessen the effect on annual rates by $60, bringing them to $846.

However, Duran said it would be disbursed to the city at $1 million per year instead of a lump sum.

The possibility of receiving State Revolving Fund loans on zero percent financing would be more of a challenge for Auburn than Placer County, which had been exploring the option, Auburn Public Works Director Bernie Schroeder said.

Obtaining that rate is contingent on several factors, including a jurisdiction qualifying as a “disadvantaged community,” based on its median household income compared to sewer rates, and only 33 percent of Auburn meets that criterion, according to the staff report.

 

Jon Schultz can be reached at jons@goldcountrymedia.com. Follow him on Twitter @Jon_AJNews