Americans love to spend money on invisible things.
Revealing Juneau's invisible burden: Water and wastewater 031214 NEWS 1 Capital City Weekly Americans love to spend money on invisible things.

James Brooks | Ccw

Juneau Public Works director Kirk Duncan peers into an empty sewage tank at the Mendenhall Wastewater Treatment Plant on Friday, March 7 during a media tour of the facility.

James Brooks | Ccw

Juneau Public Works director Kirk Duncan explains the functions of the Last Chance Basin, also known as the Gold Creek Wells, which supply most of Juneau's drinking and industrial water.

James Brooks | Ccw

Juneau Public Works director Kirk Duncan is spotlighted by a maintenance light on the lowest level of the Mendenhall Wastewater Treatment Plant during a tour March 7.

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Wednesday, March 12, 2014

Story last updated at 3/12/2014 - 2:26 pm

Revealing Juneau's invisible burden: Water and wastewater

Americans love to spend money on invisible things.

Stealth fighters, invisible fences, electronic books, radio, computer memory, Bitcoins - and now, the City and Borough of Juneau.

This month, the CBJ has begun debating a new rate structure for its water and sewer system. To most Juneauites, this network of pipes and plants is invisible: Turn on a tap, and water appears. Flush a toilet, and it goes away.

Now, the CBJ is asking the public to consider paying more for this invisible service. Over the next 10 years, Juneau's water and sewer system will need $72 million in improvements. New wells will be drilled, new pipes will be laid, and new water treatment facilities will be built. Two-thirds of the money will be spent on wastewater improvements. The remaining third will go to drinking water.

According to a study from Washington state-based FCS Group released last month, homeowners will be asked to pay for most of this $72 million expense. Currently, the average homeowner pays $96.62 per month for both water and sewer. That could rise to $163 per month by 2023.

A new rate may also change the sweetheart deal being given to one of Juneau's biggest water users - the cruise industry.

Water issues

Drive uphill from downtown Juneau, past where houses give way to steep cliffs. Cross a wooden bridge, and you'll reach the Last Chance Basin, home to a mining museum and the source of Juneau's drinking water. Five wells dot this area, but there's a problem - there isn't enough water to go around.

"It's a balancing act," explained Juneau public works director Kirk Duncan.

Public works' five wells tap an underground aquifer and can produce up to 5 million gallons of water per day. In the winter, that much isn't needed. Right now, Juneau uses about 2.5 million to 3 million gallons of water per day. In the summer, as hotels fill with tourists, that figure will jump to 5 million gallons per day. When cruise ships dock, the figure rises again. Five cruise ships can draw a million gallons of water per day.

When Last Chance isn't enough to meet demand, Public Works turns on its Salmon Creek pump for another million gallons of water per day.

But Salmon Creek isn't a reliable source. Alaska Electric Light and Power relies on Salmon Creek water for power generation, and it can turn off the flow to Public Works. AEL&P also has water rights in Gold Creek, which flows through the Last Chance Basin. If Public Works runs its Last Chance pumps full-tilt for too many days in a row, it risks drawing down Gold Creek and violating AEL&P's rights there.

"The Last Chance Basin is in danger of being overdrawn," said Randy Wanamaker, a CBJ assemblyman and chairman of Juneau's utility advisory board. "To pump hard during the summer to provide water for the cruise ships, and then pump hard during the winter for our community, it's in danger."

Cruise control

Last summer, the water situation grew so dire that Public Works cut off the cruise industry, limiting it to 200,000 gallons of water per day. In November, CBJ engineering director Rorie Watt issued a memo declaring in plain English: "Well field production in the Last Chance Basin has been declining to the point that the Water Utility was unable to meet peak drinking water demand this summer."

If Public Works were an ordinary business, this problem would be easily fixed. Too much demand means you re-invest your profits into new wells or new equipment to ensure more supply.

But Public Works is not a business. Since 2003, the last time water rates were revised, it has been selling its water at a loss to the cruise industry.

According to a Public Works presentation given in the CBJ assembly chambers on Feb. 12, it costs Public Works $3.25 to produce 1,000 gallons of water. "We sell to to cruise ships for 70 cents per thousand gallons," Duncan said.

That fee is for water sold to the private Princess and AJ docks; ships that dock at city-owned docks pay a higher fee due to Port and Harbors charges. There's also a monthly service fee, but it doesn't come close to recouping the cost of producing Juneau's water.

In total, Public Works budgets just $60,000 in annual revenue from cruise ship water sales. That's a drop in the bucket for the department's budget and far below what the department charges Juneau residents.

According to Public Works' most recent rate study, the average Juneau home uses about 5,500 gallons of water per month. Given a bill of $26.40, that works out to $4.80 per thousand gallons. Using that math, the cruise industry's million gallons is worth $4,800 each day.

During a tour of the Last Chance Basin, Duncan explained that subsidizing the cruise industry is a political decision that isn't his to make.

When the subsidy was implemented, cruise ships were shortening or canceling their stays in Juneau in order to take on water in Skagway, Duncan said. That meant fewer tourist dollars in Juneau.

"As I remember, there were reasons for that at the time," said Wanamaker, who voted for the subsidy in 2003. "It gave them a reason to come to Juneau and spend dollars."

The assemblyman said he recalls the subsidy was already in place when he voted for the 2003 rate structure but cannot recall when it began.

Running the numbers

There's no doubt that the cruise industry benefits Juneau. What's in question is whether the city's subsidy is worth the price.

According to an August 2012 study performed by McDowell Group for the Alaska Wilderness League, cruise passengers spend, on average, $197 per person in Juneau. Cruise ships are expected to make 495 stops in Juneau this year, and the city may break the million-passenger mark after reaching 995,000 last year.

That would mean $5 million in revenue from Juneau's passenger fee and $9.85 million in sales tax revenue for the city.

There's no way to know how much of that revenue - or the secondary revenue created by cruise ship jobs - would disappear if Juneau eliminated its subsidy. Wanamaker thinks it might be time to start looking at that question. "Bringing the cruise ships here is a good idea, but can we afford to do it at 70 cents?" he said. "I think it's time to evaluate whether we should continue to do that."

The February study presented by FCS Group offers Juneau two options. The first option includes across-the-board rate increases for all water and sewer uses. As in 2003, when all water bills rose by 19 percent and wastewater rates by 39 percent, everyone's rates would rise by the same rate. The second option, called Cost of Service, would raise rates by different amounts. Big seasonal users, including the cruise industry, could see their rates double. Unmetered homes, (the majority of Juneau homes) would see their rates stay flat - or even fall - before rising gradually until 2023.

"Seasonal customers (are) paying significantly less than their share," the FCS Group presentation states. The Cost of Service increase would make rates more equitable.

If the city examines its cruise ship water subsidy, it may also need to look at the wastewater rates it charges cruise ships.

In 2003, the last time the city seriously examined rates, Juneau did not take wastewater from cruise ships. Since then, Juneau has begun taking wastewater from the Princess Cruise Lines dock, and Duncan said Public Works is planning to roll out wastewater service to other cruise docks in the next few years.

The messy problem

Like its water system, Juneau's wastewater system functions invisibly - at least, it's supposed to. "You flood someone's home with water, they're going to be unhappy," Duncan said. "You flood their home with sewage, and they're REALLY going to be unhappy."

Wastewater management is a highly technical business, he explained during a tour of two of the city's treatment plants last week. Unobtrusive, they blend into the scenery and emit no odor - until you open the door to one of the rooms where the treatment takes place.

Within vast darkened chambers are roiling, foamy tanks full of things better left to the imagination. "All this stuff is hidden," he said during a phone interview.

At the Juneau-Douglas Wastewater Treatment Plant on Thane Road, metal-roofed sheds spread over open acres conceal the vast treatment tanks. Near the airport, the Mendenhall Wastewater Treatment Plant condenses that acreage into a single building housing four mammoth concrete-walled tanks. "The amount of electricity we use is astronomical," he said.

Duncan hopes to make Juneau's treatment process more efficient in the next decade. He wants to introduce energy-efficient equipment, upgrade pumping stations and buy a new sludge incinerator to take care of what the treatment plants leave behind.

Juneau's current incinerator is broken, and the city is shipping its sludge south at exorbitant expense. Buying and installing a new incinerator will cost $10 million but may be cheaper in the long run.

According to one proposal within the FCS Group rate study, wastewater rates for an average single-family home would rise from $70.22 per month to $114.89 per month in 2023.

Duncan said it's not a fun idea, but it's unavoidable. "We have to do something. We can't just keep shipping (sludge) south forever," he said.

Revealed costs

When costs go up, life in Juneau will change. To date, Public Works has held three public hearings and several information sessions about the proposed rate increases. Only 10 or 20 people showed up at each hearing, Duncan said, and according to notes taken at the hearings, the predominant topic was the question of affordability: If water and sewer rates rise, will Juneau become unaffordable?

The Alaskan Brewing Company is, outside the cruise industry, one of the largest users of Juneau's water and wastewater system. The brewery uses 1.5 million gallons of water per month to make beer distributed across the United States.

Geoff Larson, co-founder of Alaskan Brewing, sits on the utility advisory board chaired by Wanamaker. "We're always facing costs fundamentally rising," he said, adding that water is "not in our top five cost centers."

He hedged his bets when asked whether more expensive water would lead to more expensive beer. "Ultimately, when the costs go up, they have to be passed through," he said, then added, "quality of our water is our top concern. While I don't like it, I do support the rate increase."

Duncan said his mission is now to help people see things from Larson's perspective. In 2003, ratepayers came out of the woodwork to complain - after the assembly acted to raise rates.

He was hired as Public Works chief in 2011 and wasn't around to hear those complaints. Still, he's learned from history and begun holding public hearings to get feedback. The assembly isn't expected to vote on the rates until May, which means there's still time for people to get involved in the process, he said.

The former head of Eaglecrest Ski Area, he knows he faces a tall task to get the money Public Works needs. "I'm always up for a challenge," he said.