Dear Chairman Fagan and Commissioner Ennis,

Please accept my apology for being out-of-order and interrupting during the March 16th Budget Oversight Commission meeting. I am very sorry, but the unusual statement by Commissioner Ennis that Sedona’s [residential] sewer rate “is half of what Bullhead City’s is or less than half” was beyond frustrating. The fact is, CDM’s TABLE 12 RATE SURVEY, wherein Bullhead City’s “Monthly Residential Bill” was listed as $63.92 for residents in Sewer Improvement District No. 1 ($31.00/mo flat & $395/yr Conveyance & Treatment) and as $104.75 for residents in Sewer Improvement District No. 3 ($31.00/mo flat & $884/yr Conveyance & Treatment), glaringly failed to disclose the predominant sewer fee scenario in Bullhead City.

I specifically asked our City Manager about Bullhead City rates during the March 25, 2010 Waste Water Rate Study Open House and learned that 50% of Bullhead City is not under an ADEQ Consent Decree and pays a flat $31.00 per month residential sewer fee, no more. This, of course, is lower than Sedona’s $32.54/mo residential fee before five years of increases were approved by the City Council, effective July 2010. A corrected copy of CDM’s TABLE 12 and necessary disclosure of the flat $31.00 per month sewer fee for Bullhead City residential areas not under an ADEQ Consent Decree were never forthcoming to Sedona citizens. Rather convenient that this $31.00 monthly sewer fee was omitted from CDM’s TABLE 12 RATE SURVEY thus facilitating hefty annual sewer rate increases for five years (possibly ten) and the laundering of City Hall’s self-created WW financial mess through the wallets of ordinary residential customers with absolutely no responsibility for the pollution of Oak Creek or the City’s enormous WW system bond debt, isn’t it?

According to the rumor-mill, voters were told that City sales tax revenue and Bed Taxes would be used to pay for the wastewater system back at the time it was approved. This was confirmed at the March 16th meeting by Commissioner Pack who stated the sewer system was sold to the citizens by promising that “the tourists, through hotel and sales taxes, would pay for this.” Thus we see that the City has gone back on its word and rescinded the agreement it made with the voters — an agreement in effect until the current fiscal year — via socialization of Sedona’s sewer rate costs on the backs of innocent residents and the subsidization of out-of-towners (tourists) who frequent the polluting businesses along Oak Creek.

Incidentally, the last I checked the hotel fee in Yavapai County Sedona was 13.725% (3% Bed Tax, 3% City Sales Tax, 6.6% State Sales Tax, 1.125% Other). In Coconino County Sedona it was 14.475% (3% Bed Tax, 3% City Sales Tax, 6.6% State Sales Tax, 1.875% Other). Only a few weekends ago my husband made hotel reservations in Omaha. The hotel tax there is currently 18.16%. To get hotel fees in line with other cities, I believe the Bed Tax in Sedona needs to be raised from 3% to 6.6%, and I respectfully request the Budget Oversight Commission investigate and recommend City Council action to bring Sedona’s hotel fees in line with other major destinations.

Some important issues with regard to CDM’S WASTE WATER RATE STUDY in addition to the Bullhead City sewer fee fiasco:

A. CDM’s APPENDIX 1 EXISTING DEBT SERVICE [“based on the existing total debt service provided by the City on 6/15/2009”] lists the Series 2005 Excise Tax Bond P & I obligations for both FY 2018-19 and FY 2019-20 as $4,284,000. A review of the 2010/11 ANNUAL BUDGET “Excise Tax Revenue Bonds, Series 2005,” Page 144, reveals the $4,284,000 debt service requirement for FY 2018-19 is the last payment due and owing on this bond. The $4,284,000 entry for FY 2019-20 in CDM’s APPENDIX 1 is in error. This is a duplicate entry; the correct amount is ZERO.

B. The City’s 2010/11 ANNUAL BUDGET “Excise Tax Revenue Bonds, Second Series 2004” (Dated October 1, 2004) reveals on Page 143 that:

1. Of the original $18,415,000 Series 2004-2 bond obligations $13,860,000 is for WW system-related projects and $4,555,000 is for the City Hall Purchase.
2. $2,050,000 in principal payment obligations will be deducted with respect to the City Hall Purchase over the first eight years of the Series 2004-2 Bonds (FY 2004-05 through FY 2011-12).
3. ZERO, NADA, NOTHING in principal payment obligations will be deducted with respect to the WW system-related projects over the first eight years of the Series 2004-2 Bonds. Is this legal? Of note is that deferred principal payments of $2,970,000; $3,130,000; and $2,790,000 will kick in and become due and owing during the last three years of the five-year period of sewer rate increases (FY 2012-13, FY 2013-14 and FY 2014-15).
4. The accounting treachery associated with the Series 2004-2 Excise Tax Revenue Bonds benefits the General Fund and City Hall overspending at the expense of the WW Fund and Sedona’s overburdened sewer ratepayers. It will result in excessive P & I payments from the WW Fund of approximately (a) $1.25 million during the five years of approved sewer rate increases and (b) $2.1 million over the fifteen-year life of the bonds.

C. Many numerical amounts in the tables, charts and spreadsheets in CDM’s RATE STUDY, as well as most amounts for wastewater rates, rate components, fees and service charges, are excessive due to CDM’s APPENDIX 1 (EXISTING DEBT SERVICE) $2.1 million Series 2004-2 bond overcharge and the duplicate $4,284,000 debt service entry re the Series 2005 Bonds. Thus, the proceeds needed for WW Fund debt service through Fy 2019-20, the last year covered in CDM’s APPENDIX 1 EXISTING DEBT SERVICE Schedules, are overstated by approximately $6.4 million P & I.

D. According to CDM’s FIGURE 1, FY 2009-10 SEWER UTILITY SOURCES AND USES OF FUNDS PER ERU (Page 3) data, 54% of the annual sewer cost per residential charge per ERU is attributable to WW system debt (i.e., approximately $6 million debt service/year). Raising residential sewer fees from $32.54 to $57.28 over five years is a 59% increase and to $75.08 over ten years is a 231% increase. Without even adjusting/correcting the $5.5 million to $6.4 million P & I debt service overcharge in CDM’s WW RATE STUDY, a sewer fee increase for the first five-year period under a zero debt scenario works out to a negative 5% (54% – 59%), while a sewer fee increase under a zero debt scenario for ten years works out to a negative 177% (54% – 231%). I believe these findings point to a massive WW system debt overload problem and the immediate need to reduce sewer fees very significantly via accelerated debt reduction.

E. How much are other Verde Valley municipalities charging during these bad economic times when so many area households are struggling to make ends meet? Clarkdale’s monthly sewer fee is $28.00 per residential user, Cottonwood’s is $25.00 and Camp Verde’s is $31.50. I believe the City of Sedona must do right and forego the last five years of sewer rate increases (FY 2015-16 through FY 2019-20). The City should not change the monetary transfer to the Waste Water Fund from the General Fund as a result of adopting new sewer rates, either. Effective with the FY 2011/12 ANNUAL BUDGET, all such transfer monies, together with about $20 million of the very large reserve in the Waste Water Fund, need to be utilized to begin systematically eliminating the City’s enormous Waste Water Fund debt of $52.5 million (per 2010/11 ANNUAL BUDGET DEBT SUMMARY, Page 138).

F. When the WW plant was coming on-line, old-timers complained they would be assessed $32.54 per month regardless of whether they were single homeowners or had twenty people living in their homes. Concerned citizens were told that some type of METERING would be implemented to make up for the inequity, but the City never did anything. During the recent WW rate increase process, City Hall once again promised citizens that some type of METERING would be considered for implementation before any more increases are proposed.

G. If City Hall’s ten-year plan includes more than five years of WW rate increases this is wrong. Five years is all the City Council approved.

IN MY VIEW, IT IS NOT THE RESPONSIBILITY OF THE RESIDENTS AND BUSINESSES OF SEDONA TO PAY FOR CITY HALL’S FISCAL MISMANAGEMENT, INDEBTEDNESS PROCLIVITY, POOR DECISIONS AND BLATANT ERRORS.

Sincerely,

Jean Jenks of Sedona, Arizona

(Also sent to Chairman Fagan and Commissioner Ennis April 7 2011)