Thursday, July 24, 2014

Measure P asks: Are the water rates fair?

From page A1 | April 25, 2014 |

Do you think the rates crafted to pay for Davis’ river water diversion project are fair?

That’s the question behind Measure P, the initiative that allows the community to weigh in on the city’s current and future water rate structure.

Proponents say the measure gives democracy a chance to decide the rates’ fate. Opponents say it’s far more than an unnecessary revisiting of a process that involved the community already — it could destroy the project.

At first, the water rates enacted by the city to pay for a Sacramento River water diversion project would triple the cost of the average  homeowners’ 2013 water bills by 2018. However, the city embarked on a process this week that could reduce future cumulative increases by 8 percent.

Why pay more?

The water rates that residents are paying now and the potentially more expensive consumption-based rates that take effect in January were recommended two years ago by the city’s Water Advisory Committee. The City Council approved the rates using a Proposition 218 process that included giving property owners a chance to protest in writing.

As the council members point out in their ballot argument, Yolo Superior Court Judge Dan Maguire ruled against the most substantive claims of a lawsuit against the water rates in late January. Other aspects of the case will be decided after a trial scheduled for Nov. 5-7.

“Opponents of these approved rates are challenging them yet again,” Measure P opponents’ ballot argument reads. “We urge you to vote ‘no’ to end the delay tactics.”

The cities of Davis and Woodland are partnering on a $228 million Sacramento River water diversion project that was approved by Davis voters in March 2013 as Measure I.

Now, with the project having broken ground this month and the train leaving the station on Davis’ estimated roughly $107 million share of the cost of the project, the water rates that could burden the average homeowner are set to pay the bills.

However, the consumption-based rates, as the name implies, base their price on water usage through the dry six months of May through October. That allows residents to set, partially, the rate for the rainy and dry months for the next year.

Why reject the rates?

Some proponents of the initiative, like Ernie Head, have admitted that their efforts are an attempt to derail the project entirely. Many other Measure P supporters focus instead on the fairness of a consumption-based rate, which bases an entire year’s rates on only six months of use.

Former Mayor Sue Greenwald and economist Mark Siegler, vice chair of the Water Advisory Committee, say voters should approve Measure P to spur the City Council to revisit the consumption-based model and work up a 12-month measurement, instead of the six-month summertime measure.

“The new CBFR water rate structure is extremely punitive to those who use more water in summer, as it relies on summer water use to determine year-round rates,” proponents say in their ballot arguments. “However, there is no evidence that provision of summer water is significantly more costly. The rates, therefore, are arbitrary and unfair and will create great discrepancies unrelated to ratepayer income. … We cannot conserve our way out of higher bills.”

If Measure P passes, the rates will be reconfigured by the City Council, going through another Prop. 218 process. If Measure P is defeated, water rate opponents lose one more battle, but not the war. That will be decided if the lawsuit against the rates is wholly defeated at trial this fall and if there is no appeal.

Will Measure P kill the water project?

Opponents of Measure P and city staff say approval of Measure P will cause a default on the city’s obligations to the water project, resulting in costs that far exceed Davis’ $107 million share.

In a presentation to the City Council this week, Herb Niederberger, the city’s general manager of utilities development and operations, said if Davis defaults, it would owe damages to Woodland of $50 million. In addition, Davis would end up paying $100 million more over the long term because of missed opportunities to get low-interest rates.

Niederberger also said there will be no major impact if large irrigators — like the city itself, the Davis school district, Village Homes and El Macero — opt out of the surface water project and use well water instead. He said that’s because the city had figured on that when it set the rates.

That seemingly deflates a major plank of the campaign to pass Measure P. Nancy Price, a major Measure P booster, told the council she did not see any reason why the consumption-based rates could have anticipated an exodus of the best customers.

Price, Greenwald and others have said that if the large irrigators opt out, the cost burden will fall even heavier on the remaining ratepayers.

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




Discussion | 17 comments

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  • Jim LeonardApril 25, 2014 - 7:23 am

    Passing Measure P would be a positive sign for lenders. Right now they don't know what to think. After Measure P passes and the Citizens sign on to whatever the next rate agreement would be, the lenders could be confident the City would not back out of its side of the deal. What the City wants is simply a blank check to collect whatever moneys it deems "necessary"; the City is fear-mongering when it claims passing Measure P would sink the project. Stop being conned and get some control over your lives. Vote Yes on Measure P.

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  • April 25, 2014 - 10:39 am

    No, passing Measure P will cause Davis to lose out on more favorable debt financing, costing taxpayers more to build the surface water project, which is going to get built one way or another. Proponents of Measure P will not kill the surface water project, but just end up adding costs to consumers water rates.

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  • April 25, 2014 - 12:59 pm

    Can you tell us specifically why? Otherwise, you're just saying nothing.

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  • Sue GreenwaldApril 25, 2014 - 11:04 pm

    This is not true. The City has probably already lost its opportunity to procure low interest loans when the council decided on the design/build approach with privatized operations. State regulations prohibit State low-interest loans this type of project.

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  • April 26, 2014 - 11:22 pm

    Sue, you include the key word "probably" when you share your personal OPINION about low interest loans for the project. You either KNOW what you are talking about, or you are blowing hot air. Only your hairdresser knows for sure.

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  • Davis G'maApril 25, 2014 - 7:44 am

    I accidentally received a letter from the El Macero Homeowner's Association about opting out of the water project. In it, they said that El Macero homeowners must be, by law, part of the water project because their properties are protected by City fire departments, their water goes to City sewers, etc. Perhaps Dave meant the golf course, which brings up an interesting question. Muni is probably irrigated with well water, but are the homes in North Davis Meadows able to opt out of the project? The same arguments that force El Macero residents to participate in the program apply to all developments serviced by the Davis Fire Department, city sewers and sewage system.

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  • April 25, 2014 - 10:40 am

    I think you answered your own question!

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  • Sue GreenwaldApril 25, 2014 - 2:26 pm

    Omitted from this article is our major finding: The median Davis single family home will be paying 40% more for EACH GALLON of water year round than other residential users, and much more than commercial as well under this rate structure. That is the main point, and that is why we need a fairer rate structure. Additionally, by basing the rates on the previous year's summer usage, we are giving massive incentive for some of our best customers, i.e., some of our large lot neighborhoods like El Macero and Village homes, the City, the School District and future new subdivisions to opt out. There is nothing in Niederberger's statement that "deflates" our argument in any way. If large irrigators opt out, of course it will increase the amount that remaining ratepayers pay.

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  • Matt WilliamsApril 27, 2014 - 12:01 am

    In making the above 40% claim Sue diverges from the facts, and makes an apples-to-oranges comparison. The median Single Family home uses 150 ccf (112,200 gallons) per year, and under the 2015 rates would pay approximately $4.30 per ccf (just over one half of one cent per gallon). Those "other residential users" that Sue is referring to are in the Multi-Family Residential (MFR) class. A MFR customer using 150 ccf per year under the 2015 rates would pay a bit more than $4.30 per ccf because MFRs typically have a significantly larger meter than SFRs and therefore pay a higher Distribution Charge for that increased capacity and meter replacement cost. ____________________________________ The above numbers are taken from the 16,433 account database i reference in my comment below. .

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  • Sue GreenwaldApril 25, 2014 - 3:06 pm

    Okay, I just went back and verified the facts. Although the whole issue of whether or not the city took the opting out into account when calculating the rates is of secondary importance, Mr. Niederberger’s statement is, in fact, incorrect. The City had NOT “figured on” the opting out of the “city, the school district, Village Homes and El Macero “ or of new subdivisions when they calculated the rates. All the city did was assume 20% conservation for everyone, and an extra 20% conservation from the City. With the extraordinarily high water rates that are coming, this conservation would likely occur even without the complete opting out of irrigation by the big users. So again, Herb Niederberger is not accurately presenting the facts on this issue.

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  • Matt WilliamsApril 26, 2014 - 11:39 pm

    Sue Greenwald's statement above is 100% incorrect. In my role as a member of the Water Advisory Committee I worked very, very closely with both City Staff and Bartle Wells, the City's rate consultant. We pored over the annual consumption data for the 16,433 accounts in the water system. Based on our findings from that detailed historical data, we applied specific price elasticity factors to different customer classes, as well as individual use patterns within those classes. For the Irrigation Only class, as well as the Tier 3 consumption within the Single Family Residential class, we projected a 40% water usage decrease for all the users therein. We clearly understood that some users in that grouping might reduce their irrigation consumption by 100%, but others would only reduce theirs by 10%. In aggregate, the blended reduction BUILT INTO THE RATES that we approved in the Proposition 218 noticing process was 40% for the heavy irrigation cohort, and 22% for the entire 16,433 customers over the 5-year rate period. ________________________________________ One additional point that is worth noting is that the aggregate consumption of the 16,433 accounts actually increased over 8% from 2011 to 2012. Add that 8% to the 22% and the functional projected consumption decrease BUILT INTO THE RATES is 30% overall. ___________________________________ Should, anyone be interested, I still have those spreadsheets which allow me to fact check the occasional assertions that Sue and other Measure P supporters occasionally put forward.

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  • Curt MillerApril 25, 2014 - 8:55 pm

    "Fairness" isn't the issue. While the facts are pretty clear that Davis is under a state order/law/requirement to meet waste discharge standards (something all liberals/Democrats hold dear to their hearts under the operative philosophy that the more laws the better), there is absolutely NO clarity as far as Davis taxpayers understanding the convoluted, ridiculous scheme known as consumption-based rates. Obfuscation and ineptness are certainly a trademark of this city council and all of its predecessors the past 25 years.

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  • Sue GreenwaldApril 25, 2014 - 11:02 pm

    Actually, Brown & Caldwell, in their city-commissioned report, determined that the city could meet all our state and federal discharge requirements with our current groundwater system. But that isn't the issue at hand, the issue now is whether or not these rates are fair. I hope that everyone will read both the Pro and the Con op-eds in this Sunday's Enterprise, and decide for themselves. You can read them now by typing "Yes on P" and "No on P" in the search box on this site.

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  • JMApril 25, 2014 - 10:04 pm

    Naïve question. Apologies for my lack of understanding the system but would appreciate an honest answer- why isn’t there a fixed $ cost for each CCF used? If I know how much each CCF costs, as a consumer I would be able to adjust my monthly consumption and decide if to conserve water or pay for keeping my yard green. This must be the fairest solution,,, pay for what you use. Any other billing system implies that someone is not paying their fair share. Anyone wishes to clarify?

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  • Sue GreenwaldApril 25, 2014 - 11:09 pm

    I wish there were a fixed charge per ccf used, JM. Hopefully the council will implement a rate structure that approximates a fixed charge per gallon used. Goodness knows, the rates will soon be so high that we will be conserving every drop of water with a fixed charge per gallon used.

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  • April 26, 2014 - 3:28 am

    What is the rational for not using a fixed rate per ccf ?

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  • Matt WilliamsApril 27, 2014 - 1:19 am

    That is an excellent question JM. Bob Dunning has made the argument that water in our lives and gasoline in our cars are roughly equivalent. Bob is absolutely right. There are two major components of cost associated with running our cars (a few minor ones too). Those two costs are 1) the cost per gallon of the gasoline we purchase to make the car run, and 2) the capital cost of the purchase of the car [most frequently the debt service on the financing of that capital cost of purchase]. Water in Davis is very similar, and the two costs are 1) the cost per gallon of the electricity to pump the water we use and the chemicals to treat the water we use, and 2) the capital cost of the infrastructure needed to deliver that water to us. _______________________ In the automobile world the cost per gallon of gasoline regardless of what car you are pulling up to the pump is exactly the same. Corolla, Camry, Lexus, Mecedes and Ferarri all use the same gas and the car owner pays the same amount per gallon. For water in Davis under the CBFR rates starting 1/1/2015 the same is true, regardless of whether you live in a condominiun and use a very small amount of water, or live in an El Macero large lot home with lots of irrigation requirements, or operate a small business that uses only toilet and sink water, or Sudwerk Brewery using lots and lots of water, you pay the exact same amount per unit of water (one ccf = 748 gallons), which in the 2015 rates is $0.86 per ccf. _________________________ In the automobile world you also end up with a very different car payment depending on what kind of car you choose to purchase. Your monthly car payment for a Corolla is much less than for a Camry, which is much less than for a Lexus, which is much less than for a Mercedes, which is much less than for a Ferrari. The cost to manufacture the car you buy is what determines its cost, and your monthly car payment. Further, regardless of how many miles you drive, that car payment is due at the same amount each month. ____________________ Although very few of us do it, if we add our gasoline purchases and our car payment together each month and divide that total by the number of miles we drive, we will get a very different dollars per mile figure each month. Some months the dollar per mile will actually be Infinity Dollars because we actually drove zero miles. ________________ Our monthly capital debt service payment for the amount of water capacity that has been built to serve each of us parallels the car example. A condominium with no outdoor use is effectively a Corolla and because very little capacity has to be built to meet the peak demand of a no-yard condo, it gets a small "capital debt service" payment the same way that a Corolla gets a small car payment. Apartments are like condos. The apartment dwellers have chosen a Corolla lifestyle and therefore qualify for a Corolla monthly capital debt service payment. A single family house with a small yard is like a Camry ... more capacity (to irrigate that small yard in the hottest summer day) and a somewhat bigger capital debt service payment. Want a bigger yard and/or more extensive planting (which increases the value of your home) then you buy the equivalent of a Lexus and again a somewhat bigger capital debt service payment. Want the green expanses of El Macero or Willowbank or North Davis Farms, you step up to the equivalent of a Mercedes and again a somewhat bigger capital debt service payment. If you are a brewery and water is your passion and your livelihood then your "car" choice is a Ferrari, and because lots of bricks and mortar are required to meet your peak demand, you get the highest capital debt service payment. _______________________________ All that says is that fixed costs in water are a lot like fixed costs in cars, and the decision about what car you buy has much more to do with the times you are out driving around, and much less to do with the times the car is sitting in the garage. Peak summer use, when irrigation demand is highest is the water equivalent of driving your car around town or on the highway. Low winter use is the equivalent of the times when your car is in your garage. Even though it is stationary and in the dark, you still have a car payment based on the value you receive when you are maximizing your pleasure while driving it

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