By Marcia Kuszmaul

Homer Independent Press

What does it take to provide water and sewer services in the city? How does the city pay for it?


The answer to the first question is $426.7 million – the value of Homer’s water and wastewater capital infrastructures, according to a recent analysis by HDR, a design and engineering firm. How to answer the second kicked off the city council’s discussion of the city’s utility rate model at its Feb. 9 worksession.


City Finance Director Elizabeth Fisher teed up the conversation with two slides detailing the current replacement value of Homer’s utility infrastructure and projecting the cost of a replacement schedule over the next 60 years.


“I don’t think this information is out there anywhere for people to conceptualize and fully understand what it takes to provide that utility,” Fisher said in presenting her numbers. 


Considering the age of the current infrastructure components, Fisher projects the city should invest or spend about $9.7 million towards infrastructure each year over the next 10 years. She said the investment over the initial period will be large then start to decline “primarily because we haven’t done a very good job to date funding these repairs. We defer a lot of our maintenance.”


Daniel Kort, Public Works director, said the city has done a good job holding rates down for consumers, but is “not putting enough in the bank and enough infrastructure back into the ground.”


The city has a water and a sewer Capital Asset Repair and Maintenance Allowance (CARMA) with a combined balance of $2.1 million. Fisher said the city has relied on outside sources to fund major infrastructure repairs and replacements. (For example, the recent $937,868 federal award for the A-Frame Water Transmission Main replacement is funding 41% of the project.) Fisher said that’s a risk because outside funding is becoming more difficult to source.


Council members’ ideas to fund capital improvements and build an adequate reserve ranged from setting aside a percentage of utility revenue to charging a minimum usage fee to assessing fees for “dark houses” that are not occupied year round.


They also noted that higher CARMA reserves would require budget code and financial policy amendments.


According to Utility Financial/Rate Setting Policies, the city must conduct a comprehensive rate study at a minimum of every five years to ensure financial sustainability. The last study was in 2023.


For its Feb. 23 worksession, the council will take a closer look at the HDR analysis, utility rate and fee models from comparable communities, potential amendments to financial policies and strategies to build reserve funds.


A complete video recording of the Feb. 9 worksession with transcript is available from the city website.