Published on November 19th, 2009

Rates set to increase with new city budget

By CINTHIA RITCHIE

After two days and almost six hours of tweaking, the Seward City Council passed a resolution approving the 2010-2011 biennial budget on Nov. 10.

If adopted on Monday, Nov. 23, residents will notice increases in electric, water, harbor and sewer services.

Combined utility rates (electric, sewer and water) will increase by about $9.44 a month for city residents and about $6.77 for those living outside the city limits.

According to Seward city manager Phillip Oates, the rate hikes were inevitable.

Tourism numbers have been down 33 percent from last year's second quarter, according to city finance manager Kristen Erchinger, and sales and bed tax have taken an 8 percent to 10 percent hit; exact numbers won't be known before the date of budget adoption.

"If we just look at tourism, it looks down. But Seward has diversified," Erchinger said. "The safety net this year is the hope that we get the check from Exxon."

When received, the $1.6 million settlement check for interest conferred from Exxon Valdez oil spill settlement penalties will cover three months of the general fund.

"We're all kind of holding our breaths over next year," said Oates. "Our real goal is to develop a budget that has a safety net."

Safety net or not, residents and area business owners aren't happy about the increases, which they say will further burden businesses already smarting from a downturned economy.

"2009 was not a good year for anyone, and we don't expect 2010 to be much better," said Ron Wiles, operations manager of Kenai Fjords Tours. "We find ourselves in an increasingly competitive market, so raising fares has not been an option."

Tom Shirk of Seward Windsong Lodge said that his business was down by 40 percent this past summer and he, too, expects the trend to continue through next year.

"We've had to reduce our workforce by 29 percent," he said.

Maintenance means higher fees

The recent Bird Enterprise Fund Review found many of Seward's utilities on the verge of collapse if not upgraded or maintained within the next five years. The electric utility was highest on that list, totaling an outstanding debt of $7.3 million plus about $4,337,000 of needed critical repairs, from broken guy wires to transmission poles to distribution lines and loadtap changers.

It's a thorny situation, agreed Oates. "We've been giving a considerable break for the electric consumers," he said. As a result, the city is now forced to increase rates during what he referred to as "the greatest recession since the Great Depression."

The city previously ignored rate increases recommendations of a 1993 Beck Rate Study and residential customer charges have shown no increase in the past 16 years.

The Bird Review suggested a 5 percent per year electric rate increase for five years.

The current 2010-2011 approved budget shows a 5.15 percent utility increase for residents within city limits and about 5.5 percent for businesses for the next two years. After that, rate increases will depend on CPI (Consumer Price Index).

Public comments posed the questions of selling the electric utility as a way of keeping down cost. According to Mayor Willard Dunham, no prospective company has offered to maintain the backup power systems. "I caution you to think very long and hard about what that backup power means to you," he said.

While the new budget also eliminates industrial utility rates, the council agreed on the need for special utility rates for businesses such as Icicle Sea Foods and Alaska SeaLife Center, which use an abundance of water and electricity in daily operations.

Shrik estimated that his business paid approximately $105,000 in electric costs through October of this year. Next year's increases will total about $5,750.

"That's a tremendous increase, from a business standpoint," he said. "We believe the City of Seward should manage its overhead. Passing these increases to our lodge and our customers is a bad idea."

"It sounds from public comments that we've been raising rates for years when, for heaven's sakes, we haven't raised them in years," Oates said.

Resolution 2009-115 amending electric rate increases eventually passed unanimously through the council, though council member Vanta Shafer's vote sounded anything but pleased.

Harbor hikes

Budget projections of harbor moorage fees at $5 to $30 per foot depending on vessel length were too high, according to harbormaster Kari Anderson, leading to increases of 8 percent to 9 percent for larger vessels.

"That's a pretty big hit," she said.

Oates agreed. "If we increase out of bounds with other harbors that could certainly have an effect on Seward," he said.

Fees at Seward Marine Industrial Center had also been posed for an increase of $15 to $20, again depending upon vessel length.

According to Wiles, actual moorage fees, with the proposed fees, would rocket up to 12 percent. That could cause his company's fees to go up 70 percent.

"That's not a modest increase," he said.

His company presently pays $11,000 a year for storage of one vehicle at Seward Marine Industrial Center.

"With the loss of a cruise ship (next year), we can't raise our fees. People won't pay more," he said. "We reduced our staff this year, and I've already made reductions for next."

Small business and charter owner Dianne Dubuc said that she didn't feel she was in a position to raise customer prices. Yet with increases in slip fees, moorage fees, daily parking fees and electric utility rates, she'll end up shouldering most of the burden herself.

"I have to stay competitive," she said. "Visitors want to find a deal and will go elsewhere. Please don't run already struggling small businesses out of town."

After hearing Anderson's input and public comments, the council amended Resolution 2009-116 to reduce the projected harbor and Seward Marine Industrial Center fees.

Wiles was appreciative of the reductions. "We've had to reduce some of our trips," he said. "We've shortened the season a couple of weeks for various trips. I'm glad the council has worked with harbor patrons to keep rate increases at a reasonable level."

Still, he thinks he's going to see another year of tough choices for local businesses.

"The city needs to look at more ways of cutting their operating and overhead," he said. "At this point, I don't think that cutting any expenses should be off the table."

By the end of the two-day budget session, Oates felt they had made prudent progress, Shafer thought they had done a good job and Vice Mayor Jean Bardarson thanked the public for their input.

Council member Tom Smith simply said, "Whew."

Cinthia Ritchie can be reached at critchie@alaskanewspapers.com, or by phone at

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