Thursday, March 5, 2015

Water rates are too high

From page A10 | December 13, 2013 |

Davis water rates doubled from 2002-03 to 2012, and consumption fell about 30 percent from above 200 to about 150 gallons per capita per day. Depending on use patterns, the new rates imposed will increase user water costs in 2018 by a factor around 3.0.

Present city water revenues are about $13 million per year. With the city-estimated 20 percent conservation, a 2018 rate-increase factor of 3.0 will generate about $31.4 million per year, an additional $18.4 million per year. This is much more than needed to finance Davis’ cost share of the Woodland-Davis Clean Water Agency’s river water project ($106 million) and the city system infrastructure upgrades ($52 million). Financing these via municipal bonds or special low-interest state loans over 25 years costs about $10.2 million per year.

To ensure that river water is available in the summer (less of it in dry years), Conaway Ranch water is being purchased at $1.8 million per year. Most of the city’s 15 high-nitrate intermediate wells will be phased out, with an estimated saving of $1 million to $2 million per year in pumping and water treatment costs. Also, some infrastructure can be reused.

So the total net cost to the city of all the above is about $10 million to $11 million per year, as compared to the additional 2018 revenue of $18.3 million per year! That is a lot of pork — about $200 million over 25 years!
This huge excess revenue ($8 million per year) violates Prop. 218, which makes it very clear that revenues derived from fees or charges shall not exceed the funds required to provide the service. A second violation is that the charge to individual properties “shall not exceed the proportional cost of the service attributable to the parcel”: The cost per gallon of water must be the same for all properties.

The inclining rate and consumption-based fixed rate structure both violate the latter, with larger users paying more per gallon.
Actually, larger users subsidize smaller. The former require a larger system, which reduces the cost of a gallon of water due to economies of scale. For example, a 2-foot-diameter pipe to Woodland carries four times the water of a 1-foot-diameter pipe, but the increased cost of pipe, trenching, right-of-way, etc., of the former is much less than a factor of four!

F. Paul Brady



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