got a whiplash-inducing case of sticker shock earlier this month, and he had the sewer fee for his restaurant to thank for it.
The sewer charge, applied to the restaurant’s just-arrived annual property tax bill, ballooned from around $5,000 to $22,000 for the 2011-2012 year, a 340 percent increase.
“This is probably the largest affront to small business that I’ve seen here in a long time,” Schumacher told the Mill Valley City Council Monday night. Schumacher was joined by a host of local restaurateurs, each of whom said they saw a huge surge in their annual sewer rate.
In Schumacher’s case, the dramatic spike had two culprits. Bungalow 44 had an undetected water leak during the summer, at which time water usage is measured as part of the formula to calculate its output to the sewer system, and thus its sewer charge. The leak accounted for approximately $10,000 of Bungalow’s increase, according to city officials.
The rest of it stemmed from the , offering the odd twist of a decision producing a backlash four months after it was made. For residential customers, the rate rose from $297 annually to $600 annually, a 102 percent increase that drew the attention and ire from the community.
For businesses, the increase was more complicated. The jump from $297 to $600 was for “equivalent dwelling units (EDUs),” and a single-family home is one EDU. A “strength factor” also applied to businesses, however, based on the “strength characteristics of the wastewater discharged” by the business. Water usage was also incorporated into the formula.
For restaurants, that strength factor was 3.0, among the highest, which equated to approximately a 140 percent sewer rate increase. The move caught many restaurateurs by surprise, particularly in the midst of an economic downturn.
“I don’t think this is the right time to have this type of addition to our property tax bill,” said Paolo Petrone, co-owner of . “We’re all trying to run our businesses as best we can just to survive and certainly we cannot handle an annual increase like this. This is a pretty dramatic mistake.”
The backlash came as the council was considering a proposal to contract with HF&H Consultants, which helped the city navigate the process of its sewer rates earlier this year. The council gave the green light Monday night to having HF&H study the possibility of having residential customers transition to flow-based rates, which already apply to commercial entities. The more water you use and sewage you producem, the higher your rate.
Paula Reynolds, the chair of the city’s Business Advisory Board, asked the council to ensure that the study looked at its potential impact on businesses but also to “rethink and roll back the disproportionately large sewer taxes that have resulted [from the earlier rate increase].”
“The biggest enemy of business is unpredictability, and this was not predicted,” she added.
“How does this even happen?” said owner Paul Lazzareschi of the city’s lack of a sewer rate increase for 7 years and a subsequent hike that . “Somebody dropped the ball here for seven years and continued to drop the ball.”
Alan Abrams, a board member of the Chamber of Commerce and its representative on the Business Advisory Board, urged the council to reconsider its rate hike for businesses, saying he was worried for smaller operations that might not able to bear the cost.
“We may lose businesses because of this,” he said.
co-owner Doug Canepa agreed, noting a wide range of rising costs for business owners, including health insurance.
“This could be the last call for some of these businesses,” he said.
City Manager Jim McCann vowed to work with local restaurateurs and merchants hit hard by the increase and come up with possible short-term mitigation. Councilman Andy Berman suggested the city provide low-interest loan guarantees to allow businesses to pay back the sewer charges over time.
“That would be my way to partner with the business community,” Berman said. “I’m feeling everybody’s pain on this.”
When the Mill Valley City Council , it vowed to move toward flow-based rates for residents, thereby providing the incentive that reducing water consumption would result in a lower sewer bill.
City officials in June cited a number of factors in approving the rate increase, citing rising costs from the (SASM), the joint powers agency that collects and treats wastewater for approximately 28,000 residents in Mill Valley and five neighboring sanitary districts, as well as more stringent state regulations and an Environmental Protection Agency order issued in the wake of SASM’s massive 2008 spill of more than 3 million gallons of wastewater. The spills resulted in a $1.6 million fine.
The lion’s share of the rate hike goes towards an overhaul of a large chunk of the city’s 59 miles of sewer pipes, much of which dates back some 50 years. Under a mandate from the EPA, the city did a video-based inspection of 12.6 miles of its sewer lines as a basis for determining a sewer repair plan. The survey found the system to be laden with a variety of defects, including cracks, holes, blockages and tree root intrusion.
That work is expected to cost approximately $2.25 million a year over at least the next 10 years, according to city officials.
But while city officials sad the increase was essential to pay for much-needed improvements, they shared the surprise of business owners about the scale of the impact.
“This is clearly bad timing that we ended up putting through such a major increase,” Vice Mayor Garry Lion said.