Wednesday, August 20, 2014

Yes on P: Davis water rates need a do-over

Final Graphic for Davis Enterprise Op-Ed (April 27, 2014)

By Sue Greenwald and Mark Siegler

Homeowners and tenants of single-family homes soon will be paying 40 percent more for each gallon of water than other residential users under the new water rates adopted by the City Council. Not only is this unfair, it ultimately will result in higher costs for most ratepayers and lead to adverse unintended consequences.

We all agree that if you use twice as much water, you should pay twice as much — but not the almost three times as much (or more). Yet that is what single-family homes will be paying under the new water rate structure. Voting yes on Measure P will repeal this rate structure and send a strong message to the council to implement a rate structure that is fair to all.

Residents of single-family homes will pay 40 percent more per gallon than other residential users, and far more than commercial users, for two reasons: 1) reliance on summer-month peak use to determine two-thirds of the bill year-round and 2) using meter size to determine a portion of the bill.

The new rate structure is untested. While there is nothing intrinsically wrong with an experimental rate system, it is incumbent upon first adopters to assess the distributional implications to assure it is both fair to individual users and fair across user classes.

Fair rates become increasingly important as our water costs escalate astronomically. The costs of new surface water and wastewater treatment plants will result in our municipal utility bills being among the highest statewide.

False peak-use analysis

Mayor Joe Krovoza and the council claim that it is fair to charge the median homeowner 40 percent more for each gallon of water used because they say the cost of the surface water project is dictated by “peak” summer use. Similarly, they argue that it is fair to charge one household less per gallon than its neighbor year-round if that household can afford an extended summer vacation. This “peak use” argument is based on false assumptions.

First, the city claimed that we needed the surface water project for reasons that have nothing to do with peak use, such as “securing river water rights,” “improving water quality” and “complying with new salinity and selenium standards.” In fact, city consultants proved that we could have achieved all necessary current goals — including meeting peak capacity — without the project. And the council acknowledged that further downsizing of the treatment plant would not significantly decrease total project costs.

There is simply no justification for shifting the costs of this massive project disproportionately to any category of user.

Given the extraordinary water costs that we soon will be paying under any rate system, there will be huge incentive for water conservation without this massive extra penalty. And since everyone will adjust to the high water costs by conserving, conservation won’t bring significant savings to ratepayers because rates will have to rise to pay for the fixed costs.

The City Council has made the incorrect claim that two-thirds of people will be paying less under this new system (when compared to the equally unfair Bartle-Wells rates). This false claim relies on the assumption that big summer irrigators like the city, school district and some large-lot neighborhoods will pay massively more.

The council knows, however, that these users are planning to opt out of irrigation by digging their own wells, further shifting the costs back to remaining ratepayers. Thus, most people actually will be paying far more since this opting out has not been adequately calculated into the current rate estimates.

The city’s calculations also assume substantial future growth, and assume that future subdivisions will use the same amount of summer water as existing homes. But because of this new rate structure, new subdivisions are also likely to opt out of irrigation by digging their own wells.

So by using the summer-based rate system, the city is virtually forcing our largest ratepayers — which include some large-lot neighborhoods, the city itself and future new subdivisions — to dig expensive private wells for irrigation. This will leave existing residential users and existing businesses to subsidize the indoor water of those who opt out. Yes — existing ratepayers probably will end up subsidizing indoor water use of new subdivisions.

Unintended consequences

The council has claimed that it is environmentally preferable for large irrigators to opt out and kick the costs back to the remaining ratepayers because “potable water should not be used for irrigation.” But shallow wells are salty wells, so irrigating with these wells causes more saline runoff polluting our streams and rivers.

And according to city-hired consultants, shallow wells are the ones that cause subsidence (not the deep wells the city has been using). Yet salinity pollution and subsidence risk were two main reasons given by the council for undertaking the extraordinarily expensive surface water project in the first place. Economically and environmentally, it is crucial not to price our major irrigators out of the market.

We expect no major water cost relief from the touted water project cost reductions. The reductions are exaggerated; some, like the low-interest state loans, are not likely to materialize because the City Council chose to privatize the operations, and some involve sleight of hand, i.e., shifting capital costs over to operations and maintenance.

The council’s last-minute 8-percent rate reduction does nothing to address the fact that single-family homes are paying 40 percent more, and that major irrigators are being forced out of the system. And it is just an optimistic guess; if the cost of providing service is higher, rates will have to rise to cover costs.

Finally, no dire consequences will result from the passage of Measure P, as claimed by the council and staff. These are the usual scare tactics. The only thing that will result from a very short delay is a fairer rate structure.

Whether you believe there were less expensive ways to responsibly manage our water needs (full disclosure: we do), the council has chosen this course, and it is incumbent upon our City Council and the council alone to come up with rates that don’t unfairly penalize any user group.

Please vote yes on Measure P.

— Sue Greenwald is a former mayor of Davis and served on the City Council for 12 years. Mark Siegler served as vice chair of the Davis Water Advisory Committee and is a professor of economics at Sacramento State.



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