How the City should update water rates

August 2, 2015 12:01 by Ryan

As the sunlight has streamed into City Hall during the last two years, one thing has become extraordinarily clear: we’ve been substantially underfunding our infrastructure. One of our largest problems right now is that we need to refurbish the City’s 3-million-gallon water tank on Whistle Lake Road, and we have essentially no reserves in our retail water funds to pay for it.

The initial staff proposal was to borrow money from general revenue to pay for the tank’s refurbishment. The problem with that is we’d have to borrow all of the money over just five years, and the water utility funds would have to pay interest to the general revenue funds, necessitating a substantial increase in retail water rates. The staff proposal to structure those rates was simply to double the base rate (currently about $10).

When we discussed this issue at City Council early this year, I proposed instead that we apply to the Drinking Water State Revolving Fund for a loan for the money required to refurbish the 3-million-gallon tank. The DWSRF loans are extremely low interest (as low as 1%), and would result in an lower immediate cost to ratepayers. The loan application period starts September 1, and we should find out around the end of year if we are accepted.

Next, I argue we should change our water rate structure so that customers are incentivized to conserve water, and pay significantly more if they choose not to. The staff proposal to simply double the base rate would negatively incentivize water conservation and be a significant burden on customers that use small amounts of water. My water bill, for example, is regularly about $12—which is only $2 more than what I’d pay if I used no water at all.

There are three problems with our current water rate schedule:

1. We are not collecting enough revenue to pay for our infrastructure costs.

2. Our flat base charge is too large in comparison to our small demand charge (per gallon of water).

3. Our demand charge is the same rate whether you’re using a few gallons or many thousands of gallons.

Problem #1 is making us scramble to find money for the 3-million-gallon tank, and we’re seeing water line breaks because we’re not quickly enough replacing our aging pipe infrastructure. We need to spend more money on both.

Problems #2 and #3 result in making our fee schedule regressive, impacting small water users proportionately more than large ones; and so customers using a lot of water don’t feel much increased cost so there’s not a significant price signal to conserve.

As you can see from this Association of Washington Cities utilities fees survey, many jurisdictions have a progressive, inclining fee structure, where the demand rate increases as you use more water. Your first 1000 cubic feet might be charged at $50/cf, but your next 1000 cubic feet is charged at $70/cf, providing a significantly greater disincentive to waste water. (1 cf is about 7.5 gallons.) We can structure our schedule to reduce the fiscal impact on small water users, while making large users pay an appropriately larger share.

Many councilmembers and staff are reluctant to move to an inclining-fee structure, mainly because it would be more complicated to calculate, but also because…it might incentivize people to conserve water, and thus reduce revenue. But many cities are able to make an inclining fee structure work just fine—92 cities in the 2012 AWC survey have an inclining-fee structure, versus only 47 for our uniform-block-style structure. We have absolute control over water rates, so we can adjust them as necessary to meet our revenue targets, while providing proper incentives and price signals to ensure conservation.

When the City Council last discussed this in the spring, we directed that staff bring back to us a new water rates proposal as soon as possible, so that we could begin phasing in new water rates slowly. Staff hasn’t gotten back to us yet. We eventually will revisit this issue sometime this year, and I hope you will provide comment to the City Council at that time about how important this issue is.

Comments (4) -

Kelsey Miner

August 2, 2015 12:55

Those all sound like great ideas. Would it be possible to post before the next meeting on this topic, so that I make sure to make it? Thanks!

Kelsey Miner

Jan

August 2, 2015 12:57

Oh Ryan, you know they don't want to raise rates on the two Cash Cows that use most of our water. Make the refineries pay for the use of taxpayers' resources. So sad to see Anacortes City Council stuck to the teat of this dirty Cash Cow. No BombTrains. No Xylene plant (a neurotoxin & carcinogen). No taxpayer funded CPR for a dirty, dying industry. Please read Vision 2030_Economy, and get yourself on the right side of history. Will take some cajones, but I hope you'll find your courage to be a bold, respected leader.
Your sorely disappointed voter,
Jan Woodruff

Jan

Joy Atwood

August 6, 2015 15:38

I am in favor of discontinuing our water fluoridation.
How many dollars do we now spend adding poison to our water?  Systemic fluoride does not help our children's teeth.  Topical application is known to be beneficial.  Do your homework on adding fluoride to water systems.  Many countries and States are WAKING UP TO THE FACT that this was set into practice in the 1940's and todays science does NOT support systemic treatment.  How much are we spending????

Joy Atwood

Chris McCool

August 26, 2015 15:21



A doubled base rate also probably hurts those that are on fixed incomes (as many are) in the area. I also don't understand the "it's hard" or "it's complicated" mentality as an excuse to not do what is fair and right for constituents.

You have only to look at gas prices as a clear example of people being incentivized towards conservation. Gas prices rising and consumers choose to drive less or choose to carpool more, or both. As prices lower, as they are now, you can see a clear increase in wasteful driving practices.

Water ought to be far easier to commodify on a tiered usage structure than fluctuating gasoline prices, particularly with other cities who have done the same for examples and case studies and the incentive to conserve is much more long term in the case of water vs gasoline.

Chris McCool

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