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Gilroy
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October 15, 2021

Council to businesses: Turn off tap or pay

A year after Gilroy’s chief engineer revealed that dozens of
businesses owed the city nearly $20 million for overusing its water
and sewer systems, the council unanimously passed a pair of
ordinances it hopes will end the inordinate consumption and
eventually raise about $5 million for new pipes.
A year after Gilroy’s chief engineer revealed that dozens of businesses owed the city nearly $20 million for overusing its water and sewer systems, the council unanimously passed a pair of ordinances it hopes will end the inordinate consumption and eventually raise about $5 million for new pipes.

Rather than send collectors to more than 120 businesses in these frigid economic times, the new water and sewer ordinances aim to reduce companies’ monthly usage and subsequently relieve Gilroy’s over-taxed pipes. Staff expects a handful of businesses not to cut back, though, and they will owe the city about $5 million for new pipes to help handle their demand on the aquatic system. Companies are suppose to pay a one-time “impact fee” before they open and then pay their separate, much lower water and sewer bills each month based on actual usage. Yet, throughout the past 20 years, dozens of businesses ranging from restaurants to medical facilities have had greater impacts than they paid for.

When City Engineer Rick Smelser first reported last year that businesses were exceeding their monthly limits by about 7.9 million gallons of water and about 13.4 million gallons of sewage, he said that equaled nearly $20 million worth of impact fees the city should have collected to handle that extra traffic. The city had no recourse at the time, though, because the original 1986 ordinances did not spell out how staff should monitor actual use and what penalties Gilroy could assess. The new ordinances, however, rely on a $30,000 software program the city is setting up to eventually track all 918 of its users, and specific language addresses stiff penalties for regular abusers, most of whom the city hopes it can whip into greener shape to avoid billing.

“That ($20 million) only matters if we don’t reduce the overuse,” Haglund said at the council meeting Monday as Smelser nodded his head.

While businesses that cut back won’t have to pay for the extra faucet and toilet use they have enjoyed, council members have agreed that the plan makes sense at a time when companies are already coping with an unforgiving economy. Caught in its wake last November was West Coast Linen, the former laundering service at 8190 Murray Ave. That business topped Smelser’s November 2007 list with $2.2 million in unpaid impact fees, but he said Monday that better data and the software system showed that West Coast Linen actually owed the city nothing, which company representatives claimed last year.

If staff cannot get businesses to reduce their usage or renegotiate fees, the city will be hard pressed to maintain its 80-mile underground network of pipes, some of which date back to the early 1900s, according to Smelser and sewer officials. With no developers building and paying into the impact accounts, the water fund began the year with a nearly $3 million deficit, and the sewer fund – which helped finance the purchase of Gilroy Gardens – will begin next year with a $1.7 million deficit. These deficits will continue through 2015 unless the council cancels or delays millions worth of expenses it promised during the last decade’s development boom.

Impact fee agreements between businesses and the city have turned out to be very inaccurate with regard to projected water and sewer use. Out of 242 allocation agreements:

-60 businesses exceed water allocation

-$2.1 million is owed in unpaid water fees ranging from $485 to $400,000 per business

-119 businesses exceed sewer allocation

-$17.4 million is owed in unpaid fees ranging from $225 to $1.9 million per business

Commercial/industrial sewer impact fees are:

-$3,966/100 gallons per day

Commercial/industrial water impact fees are:

-$8,208/1,000 gallons per day

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