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Judges Approve SD1 Budget Without Rate Increase, Restore Sewer Lateral Program

The budget passed by the Sanitation District 1 board of directors earlier this month was approved by Judges/Executive Kris Knochelmann of Kenton County and Steve Pendery of Campbell County on Monday, with some changes.

Those changes were not as significant as Pendery proposed, however.

The SD1 board votes on a budget that then must be approved by at least 2 judges/executive from Boone, Kenton, and Campbell Counties. Boone County Judge/Executive Gary Moore was not present Monday.

When the SD1 board approved its budget on June 16, leaders in Northern Kentucky's older communities along the river were upset. The board passed a budget without restoring funding for a residential sewer lateral program and allocating more dollars for suburban development. The budget also declined any rate increase for SD1 customers.

Newport Mayor Jerry Peluso, Covington Mayor Sherry Carran, and Covington City Manager Larry Klein spoke to Knochelmann and Pendery on Monday during the public meeting at SD1's offices in Ft. Wright, urging that they restore funding for the sewer lateral program. Many others in attendance took to the podium to discourage any consideration of a rate increase.

Pendery recommended adoption of the budget with a 5% rate increase. He cited the financial situation of the utility and pointed out that by 2020, SD1 would be facing a deficit of $20 million. "In a private business you're able to cut as much as you need," Pendery said. "It's different when you have a public utility."

With funding for suburban development, including an annual pot of cash worth $4 million for the purpose of growth activities, there needs to be specific plans for the development, Pendery said. To fund projects without generating revenue, "That's not the right way for running a public utility. That's a recipe for running it into the ground."

"The organization is not getting the money that it needs now," he said. 

The best way to save money, Pendery explained, is not through staff cuts or through efficiencies in the workplace, but rather through a new agreement with the Environmental Protection Agency (EPA) with whom SD1 has a consent decree that aims to bring the utility up to federal environmental standards. Pendery believes that a renegotiation is forthcoming and will be beneficial for SD1, but not if the utility is not completing its requirements, something he said the proposed budget does not allow.

"I think the budget is inadequate to do what we know we need to do," he said. 

SD1 executive director David Rager explained that the budget calls for revenues of $97.8 million and expenses of $113 million. "We're spending more than we're taking in," Rager explained. The budget accounts for no rate increase, declining sanitation consumption, reduces the utility's financial reserves, and protects its credit rating, he said. It also holds any activity related to the EPA consent decree. The operating budget is nearly $1 million less than it was a year ago.

"We are going through the organization and looking for ways to save money," Rager said. 

The $4 million set aside for new growth opportunities will help expand capacity for SD1 in Richwood in southern Boone County where a residential community is expected to get bigger. It also calls for design work for a project in Hebron that could eventually land 1,000 jobs, leaders speculated. But that is years away, and to dedicate funds for it now at the expense of the sewer lateral program and the consent decree is unwise, Pendery stated. He motioned that reservations of capacity in Hebron be removed until funding sources are secured.

His proposed 5% rate increase on sewers and 1.85% increase on storm water fees would restore the roughly $600,000 for the sewer lateral program and maintain EPA consent decree projects. 

Knochelmann disagreed with the rate increase and proposed an alternative that pulls the sewer lateral funding from the $4 million set aside for new growth projects. Ultimately, Pendery accepted Knochelmann's alternative and the revised budget was adopted. 

Knochelmann's proposal also yanked Hebron efforts from the plans until design work is completed there. He also called for a stronger working relationship between board members, elected leaders, SD1 staff, and community members, and for a long-term plan by the board within six months that clearly lays out what the organization's goals are related to new development.

Written by Michael Monks, editor & publisher

Photo: Newport Mayor Jerry Peluso addresses Judges/Executive Knochelmann (left) and Pendery (RCN)