Yachats may have been under-charging biggest water users for years

By QUINTON SMITH/YachatsNews.com

What do you do when after three years it’s discovered that you might be under-charging the biggest water users in Yachats?

That’s the $27,000 question that could be facing the city of Yachats.

Tom Lauritzen, a Yachats resident and former finance consultant for the city, has apparently unearthed a 3-year-old mistake in rates for the city’s biggest water users. On Tuesday he broke the news to the city’s Public Works and Streets Commission, which had three members attending their first meeting.

“The objective here is not to assign blame,” Lauritzen told the commission. “The objective is to ascertain the correct number and decide how or if the city gets its money back. It’s something we’ve got to fix and move on.”

The origins of the problem started in 2014 when the city decided it needed a new utility billing system. As part of that the city began looking to update its water and sewer rates, which had been unchanged for eight years. Among the goals was to establish new base rates for water with additional base rates for high-volume users. The city also wanted to start charging hundreds of second homes and vacation rentals a monthly minimum.

The new rates went into effect in February 2016.

While going over city finances later that year Lauritzen found that two big users were missed in converting to the new rates. Then, while helping auditors in the fall of 2017, Lauritzen noticed a dramatic loss of revenue even as water use increased during the tourist season. He suspected the under-charging problem was more widespread.

But any progress on the issue got delayed in a change of city managers that fall and the press of other business.

Lauritzen said he brought the possible problem to City Manager Shannon Beaucaire in 2018. She asked financial experts at the Albany-based Oregon Cascades West Council of Governments to look at the issue. They recommended some adjustments to certain accounts, which she told YachatsNews.com on Wednesday were made.

Lauritzen said he outlined the problem in an October 2018 letter to the City Council and candidates seeking two council seats and the mayor’s position in the November general election. Only John Moore responded, he said.

But after waiting months and seeing no progress, Lauritzen alerted Bob Bennett, chair of the public works commission who had helped determine the 2016 water rates.

Based on rates and individual water use reports from the city, Lauritzen looked at water use for the nine largest customers. He found that six of the nine were being under-charged and three over-charged.

A chart presented Tuesday to the commission showed how the miscalculated rates affected the five largest water users. Since 2016 the city under-charged four of the businesses by $27,000; one was over-charged $1,500.

The names of the businesses were not made public, but they are motels, restaurants, an assisted living facility and a large apartment complex. In 2014, Lauritzen said, the top 10 water users consumed 44 percent of the city’s water.

Commission will study before offering plan

On Tuesday, the commission voted unanimously to have Bennett and Tom Fisher study water use and billings for the last six months of 2018 and determine where the rate structure might be off. They hope to have that done by its April meeting.

Moore and Beaucaire told YachatsNews.com on Wednesday that they want to see what Bennett finds in the 2018 water records before sounding further alarms.

Beaucaire also said the Council of Governments recommended that the city undertake a water rate analysis, which she will propose to the Budget Committee when it meets this spring.

Lauritzen is confident his analysis of the rate problem is accurate.

“The chance of it being wrong is remote because we have so many data points that agree,” he told YachatsNews.com.

On Tuesday, after an extended discussion, the commission put off if or how to ask the businesses to pay a corrected bill. For the two largest water users those undercharges range from $4,400 to $6,800 a year, according to Lauritzen’s study.

Most commissioners agreed that it would be a mistake to go back and ask under-charged businesses to repay a bill because of the city’s error.

“It’s going to be enough of a shock when they see their new bill,” Fisher said.

Ann Stott, who ran unsuccessfully for mayor in November and joined the commission Tuesday, thought there was “nothing wrong with going back and asking them to pay back” for under-charged water.

“If the federal government sent me a check for $100,000 by mistake they’d ask for it back,” she said.

But Ron Urban, also a new member, said the city should correct the issue “immediately,” reimburse businesses which were overcharged but not go after those undercharged.

Lauritzen told the commission that the businesses are not aware of the billing issue. Bennett and commissioner Tom Bedell said the city needed to talk to each business owner, explain the mistake and let them know their water bill could be increasing.

Lauritzen said the good news is that the problem doesn’t extend to hundreds of the city’s 850 water customers, but just a handful.

“You’ve got a problem in front of you,” Lauritzen told the commission Tuesday. “You’ve got to fix it and determine what to do going forward. The question is how do you want to push this? We’ve cost ourselves $27,000 so far.”