Sunday, May 15, 2005

Water Rates Redux

Give the Standard-Times points: after a week of editorial leads that had left me scratching my head, the paper gave front and center Sunday paper exposure to two editorials calling them out, one of them mine. Water is my subject here, I will try to stay on topic.
The most common reaction to the rate increase has been that we, the taxpayers, did what was asked of us, conserved water as asked, and being rewarded with a rate increase isn't fair. Absolutely true, but now that such sentiment has accomplished a rearrangement of the Council, absolutely irrelevant to dealing with the existing set of facts. So sorry, but a lot of times life isn't fair. The water utility is in a serious shortfall, and the contingency fund cabinet is bare. What we need now is for Council to put the utility back in the black with the lowest rate hike possible and make some needed changes to keep this from happening again.
The water conservation rules were written as though San Angelo was still totally dependant on the resevoir water, and as low as the lakes were, made sense in that context. The elephant in the living room everybody ignored was our contract for Ivie pipeline water. We buy 15,000 acre/feet annually from Ivie, take or pay, a number that made a lot of sense when we were using over 20,000 ac/ft. Unfortunately, a combination of a great conservation effort by the people and an unusually wet, cool summer left us with way over a million gallons of water the utility had bought, but could not sell. For a number of reasons, we didn't even take the excess and dump it into O. C. Fisher Puddle.
The summer weather was beyond anyone's ability to predict a year ahead, but there is no good reason the utility income shortfall should have come as a total surprise. Public works should have been putting Council on alert that we have a dramatic change in useage and income looming long before the pile of elephant poop in the living room became unignorable.
The recent rate hike was not the lowest available, it certainly wasn't the only plan available, but it was the plan with four votes, and because of that we never got a good look at options. Councilman Morrison tried to introduce an unspecified plan as an amendment to a motion by Councilman Holguin. Morrison stated his amendment was allowed under Robert's Rules of Order, at which time it was pointed out the Council had never adopted and did not operate under Robert's. That discussion devolved into pocedural discussion, and really none of it mattered anyway, the four votes needed were there, and we got this rate hike. Specifically what Morrison had in mind, we still don't know, save he stated repeatedly he would not vote for an increase of over 10%, so I presume his plan came out to that.
I do have some specific ideas, I hope we can get Council and staff to look at them. Some money could be raised by tinkering with the base rate, or meter rate increase. Roughly 8,000 of the 36,000 meters in town are the larger capacity, up to six inch meters. I believe we could raise those larger meter rates, even double them, if in the tradeoff the price per gallon for everybody, large industrial users included, went down. I have not been able to get numbers on how many of which size meters we have and what the gallon sales through them are, so I cannot set a figure on how much total revenue that could produce. It would be nice if staff, which does have those numbers at hand could give us some revenue projections there.
The one compromise that was accepted was to extend the period to recoup the contingency fund from two years to three. That reduced the water sales component of the increase substantially. Going to four years would have reduced the necessary increase more, but that was resisted because doing that could cause the bond rating people to lower our credit rating for future borrowing. I agree, we have a commendably good rating there and don't want to see it drop. Is that lower rating a "might", a "probable", or a "maybe, who knows, we ain't really asked"? In dealing with a very real rate hike vs. a somewhere down the road maybe, I am inclined to want to hear more about the real likelihood of hit on our credit rating. Adding one year to the rebuilding of the contingency fund would lower the rate increase noticeably.
The four vote majority did not care to entertain the idea of giving ourselves a tax break at all. The water utility is treated in many respects as a separate corporate entity. The city cannot tax itself on property the city owns, but it charges the water utility something called PILOT, or payment in lieu of taxes. Last year this was $704,000, money that still is the city's but counts toward the water utility shortfall of $1.4 million. We could give ourselves a 50% reduction there, the same sort we give corporations we want to attract or keep. It is true that unlike the corporations we give this ad valorem break to, the water dept. is not going to pick up and move, so I guess Council didn't see that PILOT break as necessary to economic development and job retention. The fact that giving the water utility a tax break would give us common folk a break didn't tweak the interest of "gang of four" voting to bump rates.
I suggested that we could use 4B sales tax money to pay for some capital projects, specifically the new water tower planned for southwest Angelo. That got shot down, as it was not specified in the ballot language, and Lewis was not sure it was a legal use of those revenues. I have done some research on the Attorney General's website looking at attorney general's opinions. One out of Sonora, JC-0400, seems on point and would allow such a use. The Sonora request for an opinion had to do with a type of park not specifically mentioned in the ballot language, but where that language had included parks generally. The opinion does note that a ballot proposition on water supply or water conservation projects must "clearly describe" the water supply facilities or water conservation program. In our case, while some $20.5 million was designated for water supply projects, no specific project, ie pipeline, lake, well or such was further specified; in fact one of our objections to this item in the sales tax reauthorization was that the amount given would not be enough to fund any of the major options such as Hickory pipeline or full scale Deslination plant and indeed, at no time in the sales tax debate did anyone specify precisely what project that money would fund. We will grant that the ballot language was sufficient to pass the "clearly describe" test, but then contend that since no specific project was named, and the ballot language did not exclude such as a water tower, we fall back on the next protection under 5190.6 Sec.4B. Under that, the city must publish its intent to use 4B money for specically that water tower and then, if no one comes with a petition opposing same signed by 10% of the registered voters within 60 days, it flies with no further voter approval needed.
Now somebody tell me that if we propose to lower the water rate increase some more to reflect that megabuck item, that 10% of the voters will hasten down to challenge it. I believe the bids are still open on the water tower, but I recall hearing $2 million as a working estimate. I am quite confident that those residents who don't even have enough pressure to make lawn sprinkler heads pop up will consider that tower a legitimate water supply project.
Whatever specifics finally get settled out, I am convinced the new Council will revisit rates and eventually lower them. The other thing Council needs to do is institute a regular, rather than crisis-driven ongoing review of water rates so we are not again shocked when we step in the pile of elephant poop. As part of that, I would hope they change up the department structure so that our water/sewer/trash bill pays for just that and nothing else. I see no reason for my water bill to pay for Park Police to chase graffitti artists out of the skate park, we have a couple hundred regular officers for that.
Any suggestions to lower costs and rates are welcome. My last bill was $44 for 3,000 gallons. I think we can do better than that.


  1. We need to remember that it took us 2 years to get in this shape. There was a shortfall at the end of 2003, an average year. We would have been in trouble at the end of 2004 even if it hadn't been wet and cool, just not as much. We really need to be doing annual reviews of our water rates and usage.

    We also need an annual accounting of where our water money is going.

  2. I was able to get a sample ballot from the Sept. 11 sales tax election. The description of the water projects allowed under paragraph one was more detailed than I had recalled this weekend. In light of that, use of 4B money would probably not fly under that paragraph.

    This is not to say we cannot use 4B money for the water tower. I believe the case can be made that the water tower is an acceptable use under paragraph three, "suitable infrastructure necessary to promote or develop business enterprises." A good arguement can be made that the tower is not itself a "water project", in that it neither increases nor decreases the water supply, but serves as infrastucture to better deliver and distribute water we already have in areas of town where that is a problem.

    absolute worst case would be to authorize this use of 4B money through a city-wide referendum. With that approval, we would be bulletproof. I really don't think we would have a problem simply going the route of publishing the intention to use 4B funds and waiting 60 days to see if anyone raises a serious objection in the form of a petition signed by ten percent of the voters.

    Make plain a few things: using 4B funds will not affect how much tax a resident pays, we will be paying that extra sales tax for twenty years; if we take the tower out of the water utility budget, we can lower the rate increase.

    If we should determine to be extra cautious and go with a referendum, the next uniform date would be Sept. 10 this year. Mind you, this will not be a do-over of the sales tax itself, that we have decided. This would be strictly to authorize a specific use of the tax we already have, and will continue to have. This suggestion is in no way an attempt to refight the basic half cent tax itself.

    Actually, we might expect one or more referenda relating to the economic development tax. Circumstances change in the course of twenty years. I doubt that the most ardent proponent of the tax will argue they have foreseen every eventuality that might pop up over that long a span.Had Goodfellow been closed, we almost certainly would be seeing such an election to authorize use under the first act passed by this legislature, one correcting an oversight and allowing 4B money to be used to finance conversion of abandoned military bases to industrial parks and such.

    A city wide referendum would cost roughly $15,000, hardly a huge sum in the context of $70 million plus budget.

    In any case, my point is that while I was mistaken on ballot language and the precise avenue we would need to take to make this happen, we clearly can make this happen and lower our water bills by that increment.