Sanitary District Fees Spur Debate

Sewer hookup charges at center of unprecedented challenge for seats on board

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For the first time in years, voters have a choice of candidates for the Northern Gila County Sanitary District board.

Three outsiders upset about impact fees have challenged a group of incumbents.

Shirley Dye, Gary Bedsworth and Greg Friestad have pooled their resources to unseat Pat Underwood, LaRon Garrett and Guy Pfister.

The challengers say the public needs far more information about how the board has accumulated more than $14 million from impact fees imposed on homes and businesses that hook up to the sewer system. They maintain that impact fees imposed by the sanitation district and Payson have contributed to the collapse of the building industry in Rim Country. They say the sanitation board should focus on increasing economic growth, instead of scaring it away.

The incumbents say they are surprised by the challengers’ concerns, especially since their opponents had never attended a board meeting.

Moreover, the incumbents say they have received few complaints from customers about a safe, efficient system that has amassed enough money to grow without burdening users.

And that’s were the candidates agree. All say the district, which provides sewer service to nearly every home and business in Payson, has a strong track record and is exceptionally run.

But the challengers wonder if the district could do more.

With storefronts and restaurants sitting empty for years, they question if the sanitary district’s fees are part of the problem.

For example, before the Ayothaya Thai restaurant opened in 2011, the owners paid more than $24,000 to the sanitary district.

The incumbents say that rate is justified because every new business and home means more waste for a 28-year-old system nearing capacity.

The district must soon expand the plant and someone has to pay for it, say the incumbents. Instead of floating bonds or raising rates, new users should contribute to the cost of expansion, they say.

“The board before, probably before any of us were on, said we are going to have the people that are here pay for the plant that is here and the people that move in from here on are going to have to pay for the next part of it,” Underwood said.

Underwood, Pfister and Garrett say they understand how someone who has never attended a meeting or done the research might not understand why the district has millions in the bank or charges the fees it does, but they are not hiding anything.

“We have taken people’s money, we’re not going to put it in the bank and sit on it like these people think we are, we are going to do something with it,” said Joel Goode, the district’s general manager.

In fact, in the last 10 years, the district has spent $15 million on system improvements.

The challengers continue to argue, however, that the district has the money to expand and therefore could lower its steep fees.

“They are flush with money, but I don’t think they are cooperating with the total environment of the community,” Bedsworth said.

Dye said she heard that businesses run away when they learn how high the sanitation and town’s impact fees are.

“The restaurants are having a horrible time because impact fees are so high,” she said.

Goode said this is unfair.

Recently, Big Lots, PetSmart and Big 5 Sporting Goods all announced they were opening stores in town.

Because they are opening in existing spaces, the district didn’t charge them anything.

“The property has enough reserve capacity already paid for (from years ago, and previous owners) to accommodate this change in use,” he said. “This is an example of how these fees stay with the property and in many cases, a new business may come into a location where there are credits already available. Move in ready, so to speak.”

History of the sanitary district

The District formed in 1965 to deal with increasing growth.

Soon, the town outgrew its initial plant and in the 1980s, a moratorium limited new construction.

Unprepared for the rapid growth, the sanitary district didn’t have the money to expand the system. Goode said it was a troubling time.

Coupled with federal and state grants, the district got the current plant built by 1984, but carried a local shared debt of $3.5 million.

“At that time, the board said we are never going to let this happen again,” he said. “We look really bad, so what they said is we are going to charge as we go along.”

Over the years, the district increased the plant’s capacity from 1.8 million gallons per day (gpd) to 2.2 million gpd, using money collected from new users.

The money did two things, Goode said. No. 1, it retired the district’s debt and two, it paid for future expansion.

The plant today

Planning includes constant upgrades and improvements to meet Environmental Protection Agency and Arizona Department of Environmental Quality standards.

The district recently completed a $1.4 million upgrade of the headwork’s facility, a new testing lab, bio-solids building and two new presses.

Another firm is engineering construction plans for expansion work expected to start within a few years.

Goode said expansion work is crucial because the plant is nearing its committed capacity.

Currently, the daily flow through the plant is roughly 1.5 million gpd. The plant can handle 2.2 million gpd. When the district went over 80 percent of its 1.87 million gpd-committed capacity, it had to start showing the regulatory agencies that it was working to expand, he said.

That is where the millions in reserve funds collected though capacity fees comes in.

Every dollar goes back into the system through maintenance or expansion.

“We are not hoarders,” Goode said.

Bedsworth admits Goode has done a good job managing the system. In fact, he has done so well the district has too much money, he says.

“I don’t know how prudent that is. I suspect in a hurting economy there is an opportunity to partner with the town for growth,” Bedsworth said. “I am not questioning anybody on the board, but I believe there needs to be a change.”

Dye agreed, saying she is running to help bring new growth to town.

“The main reason I am running is because I think the fees are too high,” Friestad said. “We should be able to reduce these fees without sacrificing the quality of present and future service.”

Capacity fees

In a recent campaign ad, Bedsworth, Dye and Friestad questioned why the district has not adopted a new capacity fee schedule that will encourage commercial growth.

The incumbents say their polices have promoted development in the community. One policy, for instance, lets businesses pay for additional capacity over a five-year, interest-free term.

They did this, in part, to help the Ayothaya Thai restaurant open, Garrett said. The district had charged the restaurant’s owners $24,000 for additional capacity in the system – too much for the owners to pay up front.

The district justified the fee because the space was formerly an automotive shop that didn’t generate much waste. Since a restaurant uses more water, the owners had to buy space in the sewage system.

“The Ayothaya Thai restaurant was a very thankful recipient of this deferred capacity agreement,” Goode said. “The same deferred plan is allowed for a single family, owner-occupied home for a two-year period. There are numerous business and homes currently receiving this assistance.”

But why was the restaurant charged $24,000?

According to the district’s fee schedule, each seat at a restaurant generates an average of 25-30 gallons per day and the rate per gallon per day is $18.80. The board set these rates based on an engineer’s recommendations.

Since the restaurant needed an extra 1,300 gpd in capacity, they had to shell out $24,000 — a hefty sum for a restaurant just getting off the ground, challengers say.

Fees compared

A Roundup survey of other sanitation districts found charges here at the high end compared to other connection and capacity costs.

The Roundup asked Fountain Hills, Pinetop-Lakeside and Camp Verde districts how much it would cost a 33-seat restaurant to open in their area, an example used in the NGCSD’s rate structure. The investigation showed each district structures its capacity fees quite differently. However, based on the charge for a 1-inch meter, inspection fees and the cost to run a pipe from the restaurant to the street (called a lateral), Pinetop-Lakeside was the most expensive at $16,005, a mere $45 more than Payson’s sanitary district.

Fountain Hills would charge several thousand dollars less. Camp Verde charged the least – a bargain basement $1,000.

Camp Verde, however, has 1,200 connections and processes at most only .325 million gpd. Payson’s plant can process 2.2 million gpd and has more than 10,000 connections.

Fountain Hills has 13,500 connections and Pinetop-Lakeside, 7,961.

Besides stretching out payments, Goode said the district has helped businesses in other ways.

Recently, the Journigan House restaurant reopened and the district could have justified charging for a higher capacity because it had added more seats.

“Not wanting to be the bad guy,” the district decided to charge them based on history of the account, Goode said.

“We told them we would charge them based on previous operation; if things change drastically they will owe more money,” he said. “We try to treat them fairly.”

In addition, the district gives real estate/land developers alternative pay schedules.

A developer can pay half of the fees at signing and the remainder when a building permit is issued.

While the board has let businesses stretch out payments, the board has not considered lowering fees.

Garrett said the district needs that money for expansion work.

While the board could float a bond or raise rates to fund this work, the board decided it would charge new users and not existing customers.

The incumbents and Goode say this just makes sense.

“Consider those who have previously paid their fair share into the treatment facility,” Goode said. “Should they be asked to pay again when the capacity is all gone and there have been no funds collected to pay for the needed expansion?  How would this pay for the business person who has paid their fair share and now, a new competing business, comes into the community to be subsidized?”

Underwood said he stands by this policy.

“The board decided a long time ago they would stay out of debt,” he said. “We look to the future and save for the future.”

Pfister praised the district’s policy.

“When we replace a section of sewer that ages or breaks, we pay for it out of pocket,” he said.

Asked why the board has never discussed lowering impact fees, Pfister said no one ever presented the district with a formal proposal. If they had, “I think it is something we would review in a heart beat.”

“We kind of think that if no one is coming they must not be upset and if they are not upset we must be doing OK,” Underwood said.

Asked why the board had not taken the initiative, Pfister admitted they could discuss rates.

“Maybe we need to review that,” he said.

Underwood said if someone had a better rate structure, he is open to hearing it, “but we still have to expand and that requires rates and fees.”

Garrett agreed, saying the board thinks it is only fair to charge new customers for expansion work.

“We have the option of either doing this so we have the funds to pay for stuff or we can wait until we are in a real bind and jack the rates up on everybody to pay for those things,” he said.

Furthermore, Garrett disagrees with the challenger’s claims that the district’s rates have scared business owners off.

He says a combination of the economy, restrictive borrowing and fees for water and electricity are part of the problem too.

However, faced with increasing complaints about the district’s rates, Garrett, Pfister and Underwood said they are open to rate discussions after expansion work is done.

That could take several more years to complete.

Still, residents can rest assured that everyone on the board has the community’s best interests in mind, Pfister said.

“Take a look at the sanitary district and you are going to see one of the cleanest, most efficient business that you will ever see,” he said. “They do a phenomenal job, they have an amazing safety record and up until now we were never in the paper, which is an amazing thing considering we are in almost every house.”

The challengers say they are not dismayed.

For too long, fees – adopted years before any of the incumbents joined the board – have gone undisputed. For too long, businesses have had to pay too much to hook up. And for too long, the board has gone unquestioned, they say.

They have vowed to ask the tough questions and make the necessary changes.

Ask away, the incumbents have retorted.

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Gary Bedsworth

Gary Bedsworth

• Past president of Restaurant Association, Lee County, Fla.

• Bachelors’ degree in business from Michigan State University

• Payson resident eight years

• Vice Chairman of Planning & Zoning Commission and Northern Gila County Fair

• Chairman of Mayor’s Water Task Force

• President of Pinion Ridge Property Owners Association

• Founding Board member of Payson Fly Casters & Trout Unlimited Chapter #530

“They (the NGCSD) are flush with money, but I don’t think they are cooperating with the total environment of the community.”

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Shirley Dye

Shirley Dye

• Roughly 15 years in sanitation administration with a sewer contractor

• 2008 graduate of Payson Leadership Academy

• Member of Payson Transportation Advisory Board since 2009

• Vice president of local Tea Party

“The restaurants are having a horrible time because impact fees are so high.” I want to find out if those can be changed.

Greg Friestad

• Engineering manager with Quest Communications for 25 years

• Appointed Rural Addressing Coordinator for Gila County

• Started Northern Arizona Blue Stake Utility Locating Service

• Served on Payson Planning and Zoning Commission six years and Gila County Commission two years

• Payson resident 33 years

“The main reason I am running is because I think the fees are too high. With $14.5 million in the bank and an average operating surplus of $668,000 for the last five years, we should be able to reduce impact fees without sacrificing the quality of present and future service.”

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LaRon Garrett

LaRon Garrett

Incumbent

• Appointed to board eight years ago

• Worked in private civil engineering consulting 14 years

• Hired by Town of Payson in 1994 as town engineer

• Currently Payson’s public works director – responsible for streets and roads and water departments

• Civil and environmental engineering degree from Utah State University

“If people have concerns they should ask questions. We are very open – we aren’t hiding anything.”

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Patrick Underwood

Patrick Underwood

Incumbent

• Appointed to board two years ago

• Serves on Mogollon Sporting Association

• Town of Payson Board of Adjustments

• Payson resident 35 years

• Former restaurant owner, real estate developer

“I am a pro growth kind of guy.”

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Guy Pfister

Guy Pfister

Incumbent

• Appointed to board six years ago

• Former president of the Rim Country Hospice Foundation

• Owned commercial refrigeration company Service Plus

• Former realtor and chef

“We have had a really solid team of people with nothing but good intentions… I have been in town long enough to know that they (the NGCSD) are extremely well run and I appreciate the fact you get to work with people that know how to run a good, clean business.”

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