Faced with being more than $14 million short for its wastewater treatment plant upgrade, the Live Oak City Council is staring at what Mayor Diane Hodges described as "four choices, all of them bad."

While the $22 million low bid for the plant upgrade is less than the $25 million estimates, the city only has $7.5 million in funding secured, City Manager Tom Lando told the council during a Monday study session.

"Cutting to the heart of the matter, the problem is we don't have the money for that," Lando said of the planned upgrade, which is being mandated by the state Water Resources Control Board.

The city has an April 2009 deadline to upgrade its wastewater treatment or face fines up to $10,000 per day. Lando said Live Oak will not meet the deadline.

He gave four possible options for the board to consider, but the focus was put primarily on either building the plant as is or scaling the project back to a smaller capacity.

The board could choose to go ahead with the current project as planned, which would give the city a new plant with a flow capacity of 1.4 million gallons per day. But as representatives from consulting firm Eco:Logic told the board, based on what loans and grants the city could get for financing, the remaining costs would require the city's sewer rate to increase from the current $45.17 per month to between $75 to $85 per month.

Lando called the amount "obviously not realistic, unacceptable, will not work."

Instead, he proposed scaling back the treatment plant upgrade to a capacity of 700,000 gallons per day. Doing so, Lando and Eco:Logic estimated the costs would be cut down to $15.5 million, which would require a fee increase to between $57 and $67 per month.

The council expressed its dislike of facing rate increases with any option presented to them.

"At this point, it seems inevitable the rates are going up," Councilman Al Fortino said.

Lando said the rate increase would have a particular impact on current residents on fixed incomes, a position Hodges echoed, noting residents would be looking at paying at least $90 a month for water and sewer.

"When you're making only $800 a month, how can a person do that?" Hodges said.

Other options presented were an alternative operator proposed for wastewater treatment by city development stakeholders and creating a regional wastewater plant with Yuba City and Sutter County.

State water quality officials encouraged the regional approach and Lando said it is still worth considering for the future, but initial costs for the city to go regional would not be much different than the full upgrade.

The board decided against starting the process for rate increases by May 21, which also means based on deadlines for bids received, an upgrade will need to be rebid — whether it's scaled down or not.

Council members said there needs to be meetings with Live Oak residents before any actions are done on a rate increase.

"We haven't educated the people of this community," Councilman Chuck Epp said.

Contact Appeal-Democrat reporter Robert LaHue at 749-4713 or rlahue@appealdemocrat.com.