Sanitation District 1 (SD1)
SD1 is classified by Kentucky State Auditor Adam Edelen as a non-taxing special district which collects fees for wastewater (sewer) and storm water management. It has grown from a small wastewater utility serving the river cities in Campbell and Kenton counties to the second largest wastewater utility in Kentucky. It is the largest special district in northern Kentucky serving over 30 cities within the three counties of Boone, Campbell and Kenton County.
SD1 Increases Rates 4.9% in July 2014
In July of 2014 all three fiscal court judge-executives - Boone's Gary Moore, Kenton's Steve Arlinghaus and Campbell's Steve Pendery - approved a 4.9% sewer rate increase. Officials with the Northern Kentucky Sanitation District No. 1 said they should expect more increases in coming years prior to county leaders approving the increased rate (NKY sewer rates going up 4.9%, June 2014).
The residents of Northern Kentucky probably weren’t surprised by that announcement. An Enquirer analysis shows the agency's fees have risen 291.8 percent since 2000 after adjusting for inflation into 2014 dollars (NKY sewer hike could be 4.9%, June 2014).
Federal Reserve Bank of St. Louis and Enquirer research
What's left of the rate increase – an estimated $1.86 more a month or $22.32 a year for a house with three to six rooms – will pay for the district's rising fuel and chemical-treatment costs, and for emergency breaks in the system, said SD1 Executive Director David Rager.
There won't be enough room to pay for new sewers in areas such as Hebron or southern parts of the three counties that have garnered the attention of developers, nor projects that would ease flooding in more urban areas such as Covington, Rager said (NKY sewer rates going up 4.9%, June 2014).
NKY’s Crumbling Sewer Infrastructure
Cities in Kenton and Campbell have been dealing with sinkholes in the streets due to deteriorating sewer lines. Covington has at least 42 sinkholes – so many that the city has run out of steel sheets to cover them. (Campbell mayors hope to help end sinkhole saga, April 2015).
Rager said SD1 used to do about 75 repairs a year across Campbell, Boone and Kenton counties. That cost about $600,000 annually but the program was cut due to budget constraints (Campbell mayors hope to help end sinkhole saga, April 2015).
The Kenton Mayors Group passed a resolution asking SD1 to restore a program it ended in July 2013 that helped residents cover costs and repairs of crumbling sewer laterals and streets.
The vote tally was 14-1 with Erlanger Mayor Tyson Hermes being the only vote against the resolution (Mayors seek sinkhole solution in NKY, April, 2015).
The sewer laterals always have been considered residents’ property. They extend from houses and buildings under streets and to sewers. Property owners are expected to foot the bill for repair costs. That includes paying for the pipe that runs under the street and to the sewer. It also includes paying for the road to get fixed. But it’s an expense that can cost individual residents anywhere from $3,000 to $15,000, according to the mayors.
Residents don’t always know that, and some can’t afford to pay for the entire repair and restoration of the road, the mayors said (Mayors seek sinkhole solution in NKY, April, 2015).
Campbell County mayors have also informally agreed to ask SD1 to restore the program. (Campbell mayors hope to help end sinkhole saga, April 2015).
"The reason for the cut in the first place was rate increases," Judge-executive Steve Pendery said. That means that restoring the SD1 program could require rate increases to help cover its cost (Campbell mayors hope to help end sinkhole saga, April 2015).
SD1’s Financial Track Record
SD1 customers may be more open to a rate increase if it weren’t for the fact that they have a wretched track record of fiscal responsibility toward its rate payers.
In August 2011, Kentucky State Auditor Crit Luallen’s audit of SD1’s books found the public utility had violated its own competitive bidding rules, has apparent conflicts of interest with board members and has lax accounting controls (Auditor: SD1 has violated own rules, has lax accounting controls, August 2011).
More recently, the Bank of Kentucky won SD1's banking services through public bidding in August of 2013. When SD1 got ready to close the Huntington Bank accounts and transfer the money to the Bank of Kentucky in January 2014, Huntington found the discrepancy of $234,000. After nearly a year of investigation the board agreed to hire forensic auditors to determine the source of the discrepancy (Forensic auditors investigate SD1’s missing $234K, January 2015).
Unfortunately rate payers are held hostage by these public utilities because there is no accountability. The board members are appointed by the judge-executives of the fiscal court and therefore are unelected by the rate payers. Further, unlike consumers in a free market, rate payers have no choice but to accept their services.
The Hebron Sewer Study Committee Report
SD1’s fiscal challenges have also stalled new housing development. The Hebron Sewer Study Committee, consisting of city officials and community stakeholders, was formed to review and explore sanitary sewer challenges within the Hebron area of Boone County. The ad hoc committee issued its final report to the Boone County Fiscal Court.
Among the committee’s findings is a recommendation that the Boone County Fiscal Court challenge the Sanitation District No. 1 board and staff to evaluate all aspects of its operation. The purpose of the evaluation would be to identify cost savings that could be redirected toward system improvements.
The committee also suggested the fiscal court should discourage the consideration of non-traditional utility service funding models that involve participation and/or subsidies from local governments (Hebron sewer committee seeks evaluation of SD1, March 2014).
SD1 has taken some steps to become more efficient with plans to spend $80,000 to study the best way to upgrade its 20-year-old billing system, which does not allow for paperless billing, consolidation of bills from multiple properties or an automated phone system (NKY sewer rates going up 4.9%, June 2014).
Given SD1’s abysmal record of fiscal responsibility the rate payers should be demanding they examine their operation and look for efficient methods of administering public funds.