Burke brings Paradise Valley sewer fund deficit into focus

Paradise Valley Town Hall is at 6401 E. Lincoln Drive. (File photo)

Paradise Valley Town Hall is at 6401 E. Lincoln Drive. (File photo)

The amount of money dedicated to pay for the management and treatment of wastewater generated by town residents and commercial enterprises is operating at a structural deficit — something Paradise Valley Town Council is looking to cure.

Since the late 1980s the Town of Paradise Valley has been paying the city of Scottsdale a yearly fee to manage and treat the municipality’s sewer water flow as the town does not provide the service. Paradise Valley owns the sewer infrastructure — wastewater collection lines, sewer caps and wastewater flow meters — but it does not own wastewater treatment facilities and is unable to properly treat and manage wastewater, town officials say.

In fiscal year 2014-15 the Town of Paradise Valley paid Scottsdale $1.6 million for this service, numbers show.

Kevin Burke

Kevin Burke

“The reason we are operating at a structural deficit is that the sewer fund operates completely by itself,” said Paradise Valley Town Manager Kevin Burke in a Sept. 29 phone interview. “Our rates are high enough that we are able to pay for the Scottsdale bill but not high enough for debt service and a capital replacement fund.”

The main issue stems from debt service taken on by the town in 1998 but not its ratepayers. The added debt was needed to provide to fund capacity at the Scottsdale wastewater treatment plan, Mr. Burke says.

This fiscal year, Paradise Valley Town Council is scheduled to transfer $650,000 million into the sewer fund to cover debt service of $9 million for bonds issued in 1998, according to Dawn Marie-Buckland, the town’s administration and government affairs director.

“There has been a lot happening over the last few years with the sewer fund,” she said at Sept. 24 work session discussion at Town Hall. “We want to look at what gaps are here. We need to make sure we have sufficient funds. Right now we are working with the city of Scottsdale to determine what those future costs will be.”

As Mr. Burke points out in the existing intergovernmental agreement, the terms of service are open-ended and negotiations with Scottsdale have just begun.

“We are in the early stages of negotiations on the IGA,” said Scottsdale spokesman Kelly Corsette in a Sept. 30 written response to e-mailed questions. “We have had two meetings with a third scheduled for Oct. 5.”

As new resort properties are likely to sprout over the next few years within Paradise Valley town limits, Mr. Burke says a true understanding of capacity and wastewater flow is essential to understand before assessing potentially new costs to ratepayers.

“In terms of the annual budget, right now our revenues are covering the majority of our operating expenses with Scottsdale. What it is not covering is the debt service,” he explained. “We, again, have to address debt, future operations and future capital needs. We have launched the rate study but the key element to that is a new IGA with Scottsdale.”

According to Ms. Buckland, the municipality has budgeted for a $2.9 million total budget for sewer operations and debt service requirements.

“We are barely covering operations,” she said of the just under $650,000 General Fund allocation within this year’s operating budget thus far.

Mr. Burke says the majority of work under way entails understanding the need and proper costs assigned to ratepayers as utility needs are better understood.

“It is perpetual IGA, but they were looking to make a rate change a few years ago. Let’s do some work and negotiate a new contract and amend the IGA,” he said. “We have been living in this bridge time for about 1.5 years where we have said, ‘hey we don’t think the rate increase that you are composing is fair and we haven’t yet negotiated a new IGA.”

Town officials say the municipality has 19 pipes feeding wastewater into Scottsdale, but only 13 of those have meters — making it difficult to understand the true capacity needs of Paradise Valley.

“Some of the thinking is should we put meters on the other six?” Mr. Burke asked. “These have all been discussion points that will go into the next version of the IGA we hope to have drafted by the first quarter of next year.”

Independent Newsmedia Arizona Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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