Tuesday, January 27, 2015

Council picks hybrid rate structure for water bills

From page A1 | December 19, 2012 |

BigStock photo

When it comes to picking a water rate structure, it’s all about fairness.

The Davis City Council ultimately decided Tuesday that to blindside ratepayers this year with the consumption-based fixed rate model that charges residents based on previous water usage would not be fair.

Instead, unanimously, the city’s policy-makers decided to move forward with a more familiar structure for the next two years, buying them time to inform residents of the upcoming change, and then installing the CBFR model.

For those first two years, while the city of Davis and its ratepayers begin to pay off the $113 million Woodland-Davis Clean Water Agency project, the city will bill customers at a fixed rate based on the size of their water meter and then a variable rate based on an inclining block tiered structure.

Residents consuming 18 ccf of water can expect their monthly water bills to climb to $42.95 on May 1, 2013. The average consumption for single-family homes in Davis is 15 ccf.

After two years, and once the city educates the community about the forthcoming CBFR structure, the city will switch to that model, which tracks water use over a six-month summer peak period and charges customers the majority of their fixed fees based on that usage.

The CBFR model was invented by two Davis Water Advisory Committee members, Frank Loge and Matt Williams, earlier this year.

Customers also will continue to be billed for a base fixed fee determined by meter size, but then a uniform variable rate based on water usage.

In 2018, under CBFR, residents using 18 ccf of water may see their monthly rates jump to $119.94.

While the council members all appeared to acknowledge that the consumption-based fixed rate model is the most advantageous for the majority of water consumers in the city, they also agreed that the hybrid structure is the only fair way to implement it.

Councilman Brett Lee first made a motion to implement the inclining block rate structure for only one year before making the switch to CBFR in order to realize the benefits of the structure sooner.

But Councilwoman Rochelle Swanson eventually persuaded Lee that giving customers an extra summer to prepare would be more appropriate.

“Two years gives them extra time,” Swanson said. “By doing (the inclining block structure) for first two years, (residents) are really going to see where they’re at.”

Meanwhile, in January, city staff will return to the council with a final five-year rate schedule based on the hybrid rate structure the council chose Tuesday.

The council then will finalize the schedule and structure and send both out in Proposition 218 notices to all property owners in the city. Non-property owners also will receive rate information from the city, because they ultimately will bear the cost of higher water, too.

If more than half of the property owners protest, the new rates will not take effect. But if the rates fail, the city essentially will not be able to pay for its share of the joint project with Woodland.

The Woodland-Davis Clean Water Agency project will pump water from the Sacramento River, treat it and pipe it to Davis and Woodland, supplementing each municipality’s ground well drinking water supply.

In addition to the rate structure and rates, the project itself is up for a public vote. The council decided in October to put the project on the line through an all-mail binding vote, called Measure I.

Ballots are set to be mailed to all registered voters in Davis the week of Feb. 4. The ballots are due back to the Yolo County Elections Office by March 5.

If either the rates or the project fail, the city of Davis’ participation in the Woodland-Davis project would be in jeopardy. That fact was not lost on the council Tuesday.

“We entered this process to build a new water project,” Mayor Pro Tem Dan Wolk said. “(We needed to implement) a new rate structure and I’m glad that CBFR has come out of this.

“(But) to me, the rates are secondary to the larger issue, and that’s the project.”

The city will ask its financial consultant this week to poll the creditors from whom Davis hopes to receive financing for the surface water project regarding the hybrid rate structure the City Council approved Tuesday.

Last week, the consultant told the council that the CBFR model actually was an attractive structure to creditors, possibly meaning advantageous financing terms for the city and subsequently lower rates for residents.

The council also approved the structure it will implement for the first two years with bills made up of 40 percent fixed costs rather than 50 percent in order to reduce the impact on lower water users.

If creditors balk at the 40 percent, which essentially means that the city will depend more on variable rates to pay off the project, the city still has the opportunity to move that number back up to 50 to satisfy the institutions.

— Reach Tom Sakash at tsakash@davisenterprise.net or 530-747-8057. Follow him on Twitter at @TomSakash



Tom Sakash

Tom Sakash covers the city beat for The Davis Enterprise. Reach him at tsakash@davisenterprise.net, (530) 747-8057 or @TomSakash.
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