Petersburg faces 53% wastewater rate hikes over 5 years for major projects

Petersburg Borough Assembly heard Monday that wastewater customers face a 53.5% cumulative rate increase over five years to fund major capital projects and stabilize the wastewater fund.

Waterworth consultants recommended a 20% wastewater rate increase for fiscal year 2027, followed by increases of 15%, 7%, 7%, and 4.5% in subsequent years. The average 4,000-gallon user would see their monthly bill rise from $62.54 to $75.05 in the first year, a $12.51 increase.

The rate hikes are driven by three major capital projects: a $5.1 million Scarborough Bay project, a $10 million effluent disinfection system required by the Environmental Protection Agency, and $3.4 million in repairs to Pump Station 4. Without the increases, borough cash reserves are projected to fall below the operating threshold by 2028 and reach negative by 2029.

Borough Manager Steve Giesbrecht said the borough does not yet know what the disinfection system will cost. The borough received an $8 million earmark from Senator Lisa Murkowski's office that will allow engineers to scope the disinfection project once funds are available, but final costs remain uncertain.

A Waterworth consultant presented the financial model to the assembly. The consultant explained that the baseline scenario with no rate increases beyond the 25% hike enacted last year would deplete wastewater fund reserves. The recommended rate structure aims to maintain cash reserves at approximately $900,000, above the operating threshold of four months' expenses and sufficient to buffer against unexpected capital expenses.

One assembly member asked whether spreading the increases more evenly over time would achieve the same cash position. The consultant demonstrated that a 10% annual increase would keep reserves below the operating threshold for a prolonged period unless extended beyond five years.

Assembly Member James Valentine said sticker shock is worse than longevity. He suggested that flatter increases might be preferable even if they lasted longer.

Another assembly member expressed concern about asking voters to approve another bond after recent rejections. The member said voters have rejected bonds three or four years in a row. The member added that while the assembly wants to support wastewater, the member will not deny any rates the borough needs.

Giesbrecht noted that the disinfection system project is not unique to Petersburg. He said it is happening in Wrangell and Ketchikan and other cities up north. He said there is pressure on the delegation to provide funds.

The assembly did not vote on the rate increases Monday. The presentation was informational only. Borough staff will return with an ordinance for updated rates at a future meeting. Assembly members requested additional scenarios showing different rate structures, including flatter annual increases and their impact on how long cash reserves would remain below the operating threshold.