Huge Rate Increase Could Cripple Austin’s Water Utility

By Bill Oakey – May 21, 2014

If you have been recently stunned by the tax appraisal notice on your house, how would you feel about a 30% increase in your water rates next year?  And then, how about a new “drought fee” on top of that base rate increase?  As hard as that sounds to swallow, it is actually possible unless the City Council listens to citizen appeals to take other measures to help the Water Utility.

On May 7th, the Austin American-Statesman published a sobering article that details the scenarios for what seems like unimaginable rate shock coming to City water customers.

The utility plans to increase its base water rates next year, resulting in a monthly bill of $49.12 for the typical homeowner, up from $38.35 this year — a 30 percent jump.”

And that’s just the beginning.  While you are reading this, a new committee is reviewing options for calculating the new “drought fee” that would accompany the base rate increase.  Below are the five options being considered.  Be sure to keep reading to the end, because there are some ways that the City can avoid clobbering the ratepayers with such punitive and onerous rates.

Options for the Proposed Drought Fee

Option 1

Fee of $1 (Stage 3) or $2.75 (Stage 4) for every 1,000 gallons that any customer (a home or business) uses.

Fee for typical homeowner (who uses 7,000 gallons a month): $7 (Stage 3) or $19.25 (Stage 4)

Total water bill: $56.12 (Stage 3) or $68.37 (Stage 4)

Option 2

Different fees for each type of customer (single-family homes, apartment complexes, smaller businesses and larger companies/agencies) for every 1,000 gallons used.

Fee for typical homeowner: $5.18 (Stage 3) or $18.41 (Stage 4)

Total water bill: $54.30 (Stage 3) or $67.53 (Stage 4)

Option 3

Similar to Dallas’ program. For residential customers, fee would kick in only if they use more than 11,000 gallons per month. All nonresidential customers would pay a fee regardless of how much water they use.

Fee for typical homeowner: $0 (Stage 3 or Stage 4)

Total water bill: $49.12 (Stage 3 or Stage 4)

Option 4

Different fees for homes and businesses; fees also based on amount of water used.

Fee for typical homeowner: $5 (Stage 3) or $22.50 (Stage 4)

Total water bill: $54.12 (Stage 3) or $71.62 (Stage 4)

Option 5

Different, flat fee for each type of customer (single-family homes, apartment complexes, smaller businesses and larger companies/agencies).

Fee for typical homeowner in Stage 3: $4 (Stage 3) or $12 (Stage 4)

Total water bill: $53.12 (Stage 3) or $61.12 (Stage 4)

How Can the City Help the Water Utility and Avoid the Devastating Rate Shock?

Earlier this year, the City announced that there was a $14.2 million budget surplus in the General Fund.  Readers of this blog rallied to the defense of taxpayers and convinced the City Council not to spend this surplus.  I have made a proposal to the City Council, asking them to transfer the budget surplus to the Water Utility to help hold down any forthcoming rate increase.  (See the previous blog entry, “A Possible Breakthrough for the City’s $14.2 Million Budget Surplus.”)

In addition, the budget surplus should be even higher by the time the City Council begins budget deliberations early next month.  I have asked the Council to itemize the large amount of leftover funds from 900 unfilled staff positions that were funded in the current year’s budget.  Unless most of those positions have been filled since early January, then the City should have an additional surplus that could be transferred to the Water Utility.  For long-term accountability to the taxpayers, I have recommended that the City follow the policies of other cities, such as Honolulu and Portland.  These cities do not allow individual departments to stockpile large amounts of money from unfilled positions.  The danger is that the money can easily be spent for other projects.  We need better oversight of taxpayer money, and the City Council needs to exercise its authority over the budget process.

The final option that the City can use to help the Water Utility is to sell some unused and unneeded land that the was purchased by the utility.  Why should ratepayers be saddled with huge rate increases, while the hot summer wind blows over many acres of unused property that the City could sell for a handsome profit?

How Does the Fitch Bond Rating Service Feel About Our Water Rates?

The Fitch Bond Rating Service has made their position clear in their May 19th review of the Water Utility’s bonds.  Below is an excerpt from their report:

DECLINING RATE AFFORDABILITY

“Fitch considers AWU’s combined water and wastewater rates somewhat high relative to income levels of city residents, and in comparison to other large urban systems. Although rate hikes on a combined percentage basis have been fairly modest over the last several years, the city’s total monthly residential bill currently amounts to about $88, equal to an above average 2.1% of median household income.”

“The Rating Outlook for the series 2014 bonds and outstanding parity water and wastewater revenue bonds is revised to Negative from Stable.”

Now, we just have to wonder…Is anybody down there at City Hall listening…?

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