Tuesday, January 27, 2015

Council emphasizes conservation in new water rate design

From page A1 | July 03, 2014 |

The Davis City Council voted unanimously Tuesday to pursue a water-rate design that relies almost exclusively on a pay-as-you-go, unit-by-unit charge.

The framework is based on a water rate crafted by Matt Williams, one of the architects of the controversial consumption-based fixed rate, and Donna Lemongello, a critic of CBFR, which was rejected by voters on June 3.

The new 87-percent variable rate design is aimed squarely at conservation. It spares low-end residential users much of the expense of a higher fixed rate, but tags high-end users with ostensibly more of an equal share of the cost of the water than a design with a higher fixed rate, according to graphs shown by Williams.

Low water users are those who use less than the median 11 ccf of water per month; high water users consume roughly 29 ccf per month.

The new design is another victory for Measure P supporters, who have been vocal champions of a rate design that is as close to 100 percent variable, or volumetric, as politically palatable for the City Council.

“The fairest thing to do is to charge per gallon used,” said former Mayor Sue Greenwald, a primary proponent of Measure P.

The rate is by no means novel. Other communities like Paso Robles, San Francisco and Santa Rosa have high volumetric rates, according to city staff and Councilman Lucas Frerichs. However, the 87 percent volumetric rate will need to be underpinned by an $8.5 million rate stabilization fund, taken from water revenue, to satisfy lenders in the water rate bond market.

Douglas Dove, president of water rate consultants Bartle Wells, cited that figure and included a quote from Mark Northcross, the city’s bond market adviser, saying a high volumetric rate could downgrade the city’s water bonding rating from “A+” to “A.”

While that may not sound too bad, if it happens, it could increase the interest rate the city pays for bonding on millions of dollars.

While the City Council chose a new rate design Tuesday, it does not mean that rate will go into effect right away. The council still must vote again to approve Proposition 218 notice language explaining the rate to ratepayers and provide a protest vote process.

According to Herb Niederberger, Davis general manager of utilities, a series of actions related to the Prop. 218 process could take until Oct. 1 to finish. That would be just in time to establish the new rate and begin collecting payments to meet Davis’ obligations for the joint Woodland-Davis surface water project.

But it was not all kumbaya Tuesday during the City Council’s deliberations and with members of the public who spoke about the water rate designs.

Elaine Roberts Musser, a local attorney and chair of the city’s Utility Rate Advisory Committee, urged the council to go with a 60 percent volumetric rate design with a 40-percent fixed component. That structure, she said, would result in the lowest possible bonding interest rate and would not be as much of a burden on high-end irrigators, like the Davis school district and the city, who are supported by taxpayers.

Plus, the council should act fast to secure new rates and not take its time, Musser said, as local attorney and Measure P proponent Michael Harrington once suggested to the URAC.

“Let’s focus on fulfilling Davis’ obligation in a timely manner,” Musser said.

Councilman Brett Lee voted with the rest of the council after spending weeks suggesting that he would vote for the 40-percent fixed rate design. Lee questioned Tuesday whether the cost of replacing water meters is part of the 13-percent fixed cost of the rate the other four council members were supporting.

Dove’s answer was yes, seemingly resolving the issue for Lee.

Mayor Dan Wolk cited Article 10 of the state Constitution when he made the motion to move ahead with the high volumetric rate design. The action was to ensure the legal defensibility of a high volumetric rate because that section of the state Constitution explicitly calls for conservation measures.

Mayor Pro Tem Robb Davis asked city staff to come back with quarterly reports on the state of water conservation in Davis.

Councilwoman Rochelle Swanson summed up the council majority’s thinking when she said it is the policy makers who must come up with the best political calculation possible.

“I think (the 87-percent volumetric rate) is the right thing to do because it’s good for conservation,” she said, adding that the URAC did its job, despite not being able to recommend a rate.

“I think they made it clear this was a decision that the council had to make.”

— Reach Dave Ryan at dryan@davisenterprise.net or 530-747-8057. Follow him on Twitter at @davewritesnews



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