Higher Sewer Bills Raise Concerns For City
by Alan Yonan Jr, Star Advertiser, POSTED 10/12/11
Oahu’s high sewer and water bills, combined with more than a billion dollars of spending needed to upgrade the aging sewer system, raise “credit concerns” as the city prepares to issue a new round of waste-water revenue bonds, according to a report by Fitch Ratings.
Fitch assigned an AA rating to the $165 million bond issue, just one notch below the top rating of AAA. The city is selling an additional $67 million in waste-water bonds to refund outstanding debt. The bond issues, to be placed this week, are due to mature in 2024 and 2022, respectively.
Fitch said recent steep increases in the sewer portion of customers’ bills have driven the average monthly water and waste-water payment on Oahu to $129, or about 2.4 percent of the median household income.
The city raised the residential sewer fee by 175 percent between 2006 and 2011. Future rate hikes will be more modest, Fitch noted. Increases for fiscal years 2012 through 2015 will be 4 percent annually and then increase by 5 percent in 2016 and 8 percent in 2017.
The increases could push the average monthly bill to 3 percent of median household income by 2017, Fitch said.
“The high relative combined bill, the pace and scope of the recent rate increases and the continued high level of capital still needed continue to be credit concerns,” Fitch analysts wrote in the seven-page report released Monday.
“These concerns are somewhat mitigated by the demonstrated ability of the city to put rate increases in place and maintain a strong level of cash flow to contribute towards the capital plan,” the report continued.
“The ratings primarily reflect the very strong financial position of the system and the proactive steps taken by the political leadership and management team to address many years of delayed spending on system capital infrastructure,” according to the report.
The average $129 residential bill on Oahu, which assumes water usage of 10,000 gallons a month, includes a $95.13 charge for sewer services and $33.74 for water, said Kathy Masterson, who co-authored the report. The estimated bill did not include a Board of Water Supply proposal to increase water rates by 70 percent over the next five years.
A major expense for the city will be improvements at the Sand Island and Honolulu waste-water treatment plants as required under a 2010 agreement reached last year with the Environmental Protection Agency. Under the EPA consent decree, the city pledged to make major improvements to its waste-water system, including $1.7 billion in improvements to the sewage treatment plants alone, according to Fitch. The two plants are the largest of Oahu’s eight waste-water treatment plants, processing about 80 percent of the island’s sewage.