Sunday, October 20, 2013

Water Bill Blues 2

About a month ago I wrote an article about my water bill. In examining my bills for the past six years, I concluded that conserving water provides little savings. One can argue that this is how it should be since whether you draw a single gallon or 100 gallons, the pipes, storage tanks and pumps must all be working. Rather than pursuing this further, now I would like to look at the recent rate hikes that we have seen and will be seeing for some years to come.

Over the past few years my water bill has nearly doubled. The bi-monthly charge for water (including basic charge and per unit charge) went from an average of over $100 per bill in Sept 2009 to 2010 to around $200 from September 2012 to 2013. My water usage did not change significantly over this time period. This dramatic increase and projections for more of the same have been of great concern to many people in the city. For those with higher water demands, the bills may have increased even more with the new tiered billing system (intended to encourage conservation). These increases have residents clamoring, and may pose a particular hardship for lower and fixed income residents who live in single-family dwellings.

Part of the increase is due to the rising cost of water itself. Our water comes from two sources. Most of our water comes from groundwater from the San Gabriel Basin Aquifer. A “water master” (no I am not making this up) determines the amount our city is allowed to draw. When our needs exceed this allocation we have to buy the overage from another source, Metropolitan Water District. This accounts for some of the increasing water expenses. For the past few years the city has paid between $400,000 to nearly $1 million per year for this excess. The amount varies depending on city demand and rainfall (which impacts groundwater levels). As the cost of providing water statewide climbs this modest expense will in all likelihood increase dramatically, but for now, it is a very small part of the picture. 

The second, and far larger, reason for our rapidly expanding bills is the dilapidated state of our water infrastructure. For years pumps, pipes, and water storage tanks were allowed to age with little thought of how we would deal with this in the future. Money was not put aside for these inevitable expenses. Well, the future is now and we have been faced with significant infrastructure challenges. We can no longer pass on the cost. As a consequence, the city floated (excuse the pun) and passed water infrastructure bonds in 2004 and 2009.

The 2004 bond was for $8.8 million. The capital improvement surcharges applied from 2004 to 2009 went to pay off this bond. The 2009 bond was for $43.9 million, and again I must say, the future is here. Yes, it is easy to pass a bond, especially when the need is clearly demonstrated, however, paying the money back is another matter.

During the October 16, 2013 City Council meeting Councilman Michael Cacciotti expressed concerns over the proposed water rate hikes needed to service the debt for the $43.9 million water bond. He proposed putting off the current water rate increases needed to generate $428,000 for the first six months of 2014 by using other city money. The city attorney is checking to see if this is allowed under the terms of the bond. Whether it is allowable to do this or not, it must be emphasized that this would only take care our debt obligations for the upcoming six month period.

The money that Councilman Cacciotti is suggesting for this short-term fix is general fund money generated by a utility user tax (UUT). The UUT is a 7.5% tax placed on utilities, such as water, electricity and gas. (To compute this tax on your own water bill multiply the cost of water - the basic charge plus the charge for units used - by .075.) It is my understanding that this revenue is intended for use in the general fund for things like parks, street and other ongoing infrastructure repair, and city programs. According to Councilman Cacciotti there is around $500,000 this year in the city revenues generated by the water portion of the UUT. It is this money that Cacciotti is suggesting we use to put off for six months the pain of paying for what we all agreed (in approving the water bond) was a necessary expense. We will still have to confront paying the interest and principle of the bond until it is paid off.

The second possible source of money that Cacciotti suggested we might look at is the money generated through the Water Efficiency Fee. This is charged at 14¢ per unit used. This fee goes to water and resource conservation programs in the city like the recent classes on water conservation. The city has used some of water efficiency fee to hire a water conservation specialist to run these programs. There is currently a fund balance of around $500,000 earmarked for conservation programs.

The UUT, the Water Efficiency Fee, and the water bond all received voter approval but now that the consequences of the debt incurred from the bond are at our door, we are outraged. The political solution suggested by Councilman Cacciotti is just “kicking the can down the road.” Whether we reallocate money intended for ongoing city expenses to service our debt, we will still have to face the debt for the months and years required to pay it back. Using the Efficiency Fee for a temporary reprieve is, in the long term, “penny wise and pound foolish” because water conservation would have saved the city between one-half to one million dollars per year had we not needed to purchase excess water from Metropolitan Water District, and this expense is only likely to increase.

Returning to our water bills and our options for reining in these ballooning costs. There ain’t a lot we can do. As mentioned above, Councilman Michael Cacciotti suggested the possibility of using existing funds to service our debt for the first six months of 2014. After that we could, if it is legal to do so, continue to use UUT and Efficiency Fee funds towards the water infrastructure costs. Unfortunately even if we do divert this money from its intended purposes, this would only reduce our water bills slightly (for me these fees represent 8%, of my water bill), and would not cover the cost of repaying the bond. Slice it how you like, we must pay for these essential infrastructure repairs.

As you can see, water rates are going to have to increase to service the debt incurred from the water bond. Interestingly, the city is also required to give notice of water rate increases. If more than 50% of water users issue objections, the rates cannot be increased. One might ask: why are we allowed to approve a bond without approval for the funds needed to service it? And this brings me to my next comment about Councilmember Philip Putnam’s desire to change the way this approval is gotten.

During the October 16, 2013 City Council meeting, Councilman Putnam said that he felt it was unfair that protests from more than 50% of the ratepayers were required to prevent the rate hikes. He would like to see this changed so that water users could vote, yay or nay, on these hikes. Let us assume we make the change Councilman Putnam suggests and we put it to an up or down vote. I, like Councilman Putnam, want our government to be transparent and fair but I do not see how holding up a false illusion of city participation accomplishes this. What happens if it is not approved? Do we then default on the bond that was approved in 2009? (For more information on the October 16 city council meeting, check out the Pasadena Star News article.)

I appreciate the difficulty our elected city officials are having as they try to solve problems that were years in the making. I appreciate the difficulty citizens have with these rapidly increasing costs. Nevertheless, it is important for us to be realistic and understand that water has been undervalued for many years and we can no longer continue doing this.

As citizens, we need to elect officials who will continue with the responsible actions needed to restore our aging infrastructure. These individuals will have to make hard decisions on how these costs will be distributed, but we will have to pay for them in the end. I would like to recommend Diana Mahmud as a clear thinking and fair-minded candidate for city council who is especially qualified to work with others to solve these problems.

Recently I returned from a six-month visit to India. While staying in a guesthouse at a premier scientific institution I learned that for the past many months permanent residents did not have water in their apartments during daytime hours. Apparently there was a leak in the underground water pipes so water had to be delivered daily by trunks. There was only enough water to keep the apartments supplied from about 6 PM to 10 AM. Consider the inconvenience of this situation! Families with young children were living in many of the apartments. Think of it, no running water, day after day for months. In addition to this extreme hardship, add the fact that poor infrastructure means that the water delivered, either by pipe or truck, is so impure as to cause illness, requiring residents to purchase water purification systems or bottled water. We often fail to realize how fortunate we are to have clean water. Water is essential, however, we must pay for it!

Due to a broken water pipe, water trucks make daily deliveries to residential housing at a scientific institution
in India. They are only able to provide enough water to offer running water from 6 PM to 10 AM each day.
Appeal by residents to restore daytime running water after months without it.


Brent Morgan said...

Hi Barbara - I almost wrote a lengthy response to your previous post, but either refrained or deleted it before posting. It wasn't that what I had to say was particularly controversial or contrary, it's just that I felt it was a bit futile and that I'd said it before.

I'm still sort of feeling that way.

Back in 2008 I looked at tiered pricing and found tiers for two nearby California regions priced as follows:

"Region II (cooler coastal cities): Tier 1: 0-12 CCF $2.549; Tier 2: 13 CCF and up $2.93. Fixed costs: $14.35
Region III (warmer inland cities): Tier 1: 0-16 CCF $2.067; Tier 2: 17 CCF and up $2.378. Fixed costs: $12.25

What drives the price difference? Is it an acknowledgment that the lot sizes in the Inland Empire are typically larger and covered with a greater amount of grass needing a greater amount of water than coastal lots? Or is there a maintenance cost that's higher for the older infrastructure of RII?"

What I found when I went looking for answers is that the issues are simple enough, but there's little intelligent public commentary - even at the interested amateur level (which I consider myself to be at).

We therefore have to rely on our public and semi-public institutions to make wise choices for us. It seems like your councilman who is looking for a way out of a needed bond issue (AFTER THE FACT) isn't willing to make the responsible and entirely reasonable investment in infrastructure, or he is willing, but wants to pirate money from facilities improvement funds to do so. Shame on him.

RV said...

Fantastic research and article! I too have been conserving water with various methods to use less, via gardening or home uses, and the rates keep going up. Yet people just don't understand how precious water is. I remember as a kid visiting my grandmother in Mexico how they would turn off the water use at 7 PM. That's when I realized how lucky we are to have water 24 hours a day. Our values of this lushes green lawn has got to change. Keep up your great job of educating us!