Does SD1 Need Another Rate Increase?

SD1 Proposes a 5% Rate Increase

The board of directors for Sanitation District No. 1 (SD1) is proposing a 5% rate hike for sanitary sewer and stomwater service for the upcoming fiscal year. If approved Northern Kentucky residents would see rate hikes in their sanitary sewer and stormwater bills beginning August 2014. According to SD1, rate payers would see an average monthly increase of $1.98 on their SD1 bills for sanitary sewer service and a hike of 24 cents per bill for their stormwater service. The SD1 Board of Directors announced the rate-hike proposal, along with a public comment period, in a recent meeting (Higher sewer bills proposed for NKY, 2104).

The increase to the stormwater fee is more than the usual annual cost-of-living increase, about 2 percent. According to SD1 executive director David Rager the proposed rate hike is to pay for maintenance of stormwater infrastructure that cities have transferred to SD1.

“Rate changes are needed in order to fix and continuously maintain aging sewer pipes in the Northern Kentucky region,” Rager said.

The proposed SD1 budgets for the fiscal year – July 1 to June 30, 2015 – are $12.7 million for the stormwater utility (up from about $12.4 million); and $84 million for wastewater service (up from the current budget of $82 million), Rager said (Higher sewer bills proposed for NKY, 2104).

Sewer Capacity is Hurting Growth and Development in NKY

Sewers have reached their capacity in the fast-growing Hebron area, mostly north of Interstate 275. SD1 says it has no money for an upgrade. Developers, meanwhile, are sitting on plans for 2,700 single family homes on hundreds of acres in that part of Boone County, wondering when the sewer issue will be resolved (Boone Co. sewers pose serious threat to development, 2014).

Lack of sewer capacity is not just a concern in Hebron. Developers say it won't be long before the problem crops up east of the Richwood Road exit off Interstate 71/75 toward Independence, which includes a number of properties zoned for commercial and industrial use. A similar situation is percolating in Campbell County, near the AA Highway and U.S. 27 (Boone Co. sewers pose serious threat to development, 2014).

Treatment plants are not the problem. The Hebron area is served by a plant in Kenton County, and the opening last year of the Western Regional Treatment Plant in Boone County means there is adequate capacity to serve existing and future development needs. The problem is getting wastewater to the plants because of deficiencies in pump stations and pipes (Boone Co. sewers pose serious threat to development, 2014).

The Infrastructure Problem

A federal Environmental Protection Agency (EPA) consent decree, in effect since 2007, requires SD1 to comply with the Clean Water Act.

"When we get a 3/4-inch rainfall, we're dumping raw sewage in people's backyards in 180 locations across Northern Kentucky," SD1 Executive Director David Rager said. "The community grew so rapidly and did not factor in the need to up-size its infrastructure to handle that increase. And we need to do something about that."

Rager said SD1 inherited most of those problems in 1995 when it became the regional agency overseeing sewage collection. Before that, each city in Northern Kentucky ran its own system.

The overflow fix is a $1.2 billion construction project, and when financing is figured in, the total rises to almost $3 billion, Rager said. As it now stands, that work is to be completed by 2025. Rager, who has headed SD1 since January 2012, acknowledges that isn't feasible.

"If we spend money to fix those (overflow) problems, we don't have money to fix these problems (related to development)," Rager said. "It becomes a matter of choices."

According to Rager there are areas in Northern Kentucky where developers could build without additional investment in wastewater facilities. Those would be much smaller developments than in the Hebron area (Boone Co. sewers pose serious threat to development, 2014).

The Hebron Sewer Study Committee

Last September, Boone County Fiscal Court appointed a committee to examine sanitary sewer challenges in the Hebron area and consider ways to pay for system upgrades. The committee has seven members, which includes developers, county officials and business executives.

Its report, released in March, identified four alternatives for a long-term system solution, with price tags ranging from $15.1 million to $19.6 million. It also identified a "mid-range" option that would provide service for the foreseeable future, at a cost of $5.9 million (Boone Co. sewers pose serious threat to development, 2014).

Rager said SD1 doesn't have the money to pay for any of it. "If you want SD1 to pay the $5.9 million to help with the problem in Hebron, that means we're going to raise rates on everybody across Northern Kentucky," he said, And that still wouldn't address problems in Campbell and Kenton (Boone Co. sewers pose serious threat to development, 2014).

NKY Finds It Difficult to Trust SD1

Prior to Rager taking over the executive directorship, SD1 committed numerous occurrences of fraud, abuse and waste, which can be found in the then Kentucky State Auditor Crit Luallen’s report Examination of Certain Policies, Procedures, Controls, and Financial Activity of Sanitation District 1, 2011. SD1 has a dark and shady history in Northern Kentucky whereby they have incontrovertibly abused the public trust (Just Say “No” to the SD1 Rate Increase, 2013). When our locally elected officials have confronted Rager about these incidents he simply says, “It happened prior to him being there.”

These responses don’t build confidence with the rate payers. Although Rager is correct regarding his involvement with SD1, this still does not absolve him of having to repair the damaged done by his predecessors and rebuild that trust with the NKY community. SD1’s sullied reputation makes it very difficult for the rate payers to trust this special district charged with managing our sewer and stormwater services. This was a major reason the public protested when SD1 proposed a 9% rate increase in 2013 (The SD1 Rate Increase Victory!, 2013).

The diminished public trust may be why some are upset by SD1 failing to take the lead on finding solutions for the problem.

"My personal feeling is they're not trying to do anything yet," said Boone County Commissioner Matt Dedden, a member of the Hebron sewer study committee.

Another member of the committee, John Toebben, is president of Toebben Builders and Developers. The company is anxious to build in Hebron. He chides SD1 officials for what he calls a "lackadaisical" attitude toward finding solutions.

"If we can't find money for dire infrastructure needs, there's a problem. I think the money's there, it just needs to be redirected. And they need to have the will to make some progressive changes," Toebben said.

The Ten Percent Solution

According to Rager, the ultimate solution will require creativity and conversations with the community. "Do you want us to focus on sewage in people's backyards? Do you want us to focus on development? And if they say 'we want you to do everything,' then somehow we need to grow the pie. That may mean developers will have to put in more money, and maybe communities will have to fund expansion of the system (Boone Co. sewers pose serious threat to development, 2014)."

I thought a better suggestion was earmarking 10 percent of SD1's budget to be set aside for future infrastructure. Although according to Rager, "Given our current finances, that's not reasonable.”

I believe all special districts providing services to Northern Kentucky, that face the prospect of increasing community development, should have a percentage of their budgets set aside for growth. By Rager’s own admittance the communities in NKY didn’t take into account the need to up-size their sewer and stormwater infrastructure when it experienced rapid growth in the 1990’s. Why was future infrastructure not being accounted for by these unelected and thus unaccountable boards then and now? Financial professionals recommend that we maintain six month’s salary for any future issues in our employment status. Shouldn’t the boards of our special districts be held to a similar standard? Regardless of whether or not SD1’s rate increase is approved, infrastructure will continue to be a stumbling block for growth if the boards of our special districts fail to plan ahead and balance their budgets accordingly.

Want to comment on SD1’s rate proposal?

Anyone who wants to comment can do so in writing or in person. The deadline for the public comment period is June 13, 2014.

Email This email address is being protected from spambots. You need JavaScript enabled to view it. . Include “Rate Comments” in the subject line.

In person 8 a.m. to 4:30 p.m. Monday through Friday at the main office, 1045 Eaton Drive, Fort Wright.

Customers can mail their input using forms that are at www.sd1.org, in SD1’s main office lobby and at library branches in Boone, Campbell and Kenton counties. Send by postal delivery mail to Valerie Forsyth, SD1, 1045 Eaton Drive, Fort Wright, KY 41017.

After the public comment period ends, SD1’s board will meet with Boone, Campbell and Kenton counties’ judges-executive to review the proposal and consider the comments before determining any rate changes. The judges-executive are scheduled to meet at 9 a.m. June 23rd with the SD1 board. After that, the three full fiscal courts will have a chance to consider the rate hikes (Higher sewer bills proposed for NKY, 2104).