Wednesday, April 11, 2012

Council Gives “Direction” on Water Rates

Plan includes $12.9 million bond; rate increase to take effect July 1.

By Dan Schroeder

In a work session that ran until nearly 11:00 pm, the Ogden City Council informally agreed last night to the outline of a financial plan and rate structure for the city’s water utility.

Among the major capital improvements proposed for the water system, the council chose to proceed with replacement of the Ogden Canyon filter plant in 2014, at a cost of $13.1 million. However, the council chose to postpone several pipe replacement projects. This change to the administration’s schedule reduces the proposed bond from $20 million to $12.9 million.

The council did not consider any reductions in the Water Department’s operating costs, which have increased by more than $3 million since 2007. Nor did the council consider drawing on any of the water fund’s $6 million cash balance.

Under the tentative proposal, the Water Department’s revenue is supposed to increase by 29% over the next four years. After that there would be only cost-of-living increases, according to the plan.

The proposed rate structure, however, appears to incorporate larger first-year rate increases, for nearly all customers, than would be needed to generate the required revenue. For residential customers, the average additional increase would be about 5.3%. I pointed out this discrepancy in an email to all the decision makers over the weekend, but nobody brought it up during the work session.

Not all customers will see the same rate increase. The council chose to raise rates by a higher percentage for customers who use less water, and by a lower percentage for customers who use more water.

An ordinance to codify the rate increase will be drafted during the next two weeks and presented to the council at its meeting on May 1. A public hearing will then be held on May 15. It is difficult, though not impossible, for the council to amend the ordinance after the hearing.

The new water rates are scheduled to take effect on July 1.


Keisha said...

 "Not all customers will see the same rate increase. The council chose to raise rates by a higher percentage for customers who use less water,and by a lower percentage for customers who use more water."


This absolutely makes no sense at all!

Dan S. said...

The administration, with help from council member Hyer, has been arguing against conservation incentives throughout this process. They made a full-court press last night, led by assistant city attorney Mark Stratford, even bringing in a hired gun from consultant Sunrise Engineering (who did the water master plan).

rudizink said...

 So the Caldwell Administration isn't the least bit interested in promoting water conservation?

This brings up memories and other auhtoritaruian Ogden memes:

Meet the New Boss... same as the old boss:

Wont Get Fooled Again

well we got fooled again didn't we?

blackrulon said...

So it could be that a Ogden City water user is penalized by conserving?  Tell me agsain why I should conserve water if I am to be penalized for conserving?

Dan S. said...

Well, you do pay more if you use more.

Dan S. said...

Stratford also said that the administration may create a budget line item for water conservation initiatives--though probably not this year. He was really talking out of both sides of his mouth, but it was quite clear that he didn't want the council to adopt a rate structure that would encourage more conservation.

blackrulon said...

I still pay a certain amount whether I use only the monthly miminum allotment or conserve and use only 25% of my miminum amount allowed. conserving makes no financial sense if you are charged the same amount for water while using 35oo gallons or 500 gallons per month. Why not use up to the miminum amount you are being charged for because using less saves you no money.

Dan S. said...

There's no "monthly minimum allotment" in Ogden. You pay a base rate whether you use any water or not, plus a per-gallon rate that's billed in increments of 100 gallons.

good_reader1 said...

What about businesses or churches that pay a flat rate. How much dos Gold's gym use compared to a restaurant in the Junction? Seems like the residents are still subsidizing Ogdens business.
Sewer rates ahould be tied to water amounts consumed too.

Dan S. said...

I don't have much data on commercial water use in Ogden, and I certainly have no data on individual customers. However, the city's current rate schedules contain no provision for anyone getting a "flat rate" for water. At various times during the council meetings, staff have said that residential and commercial use each account for about half the city's total culinary water use. The new rates are supposed to divide the costs about 50/50 as well but I'm skeptical. I have a bunch of data on residential use and it appears to generate more than half the revenue at present. I strongly suspect that that will continue. Whether it's fair is another question. Because there are fewer commercial customers who use more water on average, the city incurs less cost per gallon maintaining the water lines to these customers, reading their meters, and sending them bills.

Dan S. said...

I wholeheartedly agree that sewer rates should be tied to water use. (For those who irrigate with culinary water, sewer rates should be tied to winter water use.)

good_reader1 said...

I would suggest a call and ask what the water rate for a few businesses run per month, using their address from the water division. Gold's gym must use a lot of water, also wave runner and compare it to a restaurant,or a ward.

Dan S. said...

It would be a violation of privacy laws for the city to release billing information with customers' names attached.

good_reader1 said...

I have always inquired the water usage and cost before I purchased a property to see what utility rates are. Maybe the city is giving a deal to the Junction leasees, or any city property.
I was told by a realable source that they get a flat rate.

Bingoman said...

By punishing those that conserve water, they have convoluted any logical approach. Years ago in another state, they were pushing "a brick in the tank" to cut down on water usage.  The public did what the leaders wanted and cut back on usage and their reward was high rate increases because the water company lost revenue.  

The dumbells that thought that up belong in the Socialist hall of fame. 

Dan S. said...

Well, water departments can't operate without sufficient revenue. Earlier during the current study process, the consultants used anecdotes just like that one to argue against setting rates in a way that aggressively encourages conservation. 

I find it helpful to distinguish between long-term and short-term consequences. If everyone suddenly cuts water use and thereby saves on their bills, the city's revenue drops and either it can't pay its bills (or it was over-charging in the first place). In all likelihood, the city would then have to raise per-gallon rates. The people who conserve will still pay less than before, but not nearly as much less as they might have hoped.

On the other hand, if people gradually cut water use over the long term (while population grows), the city won't need to develop new water sources or expand its storage and delivery systems--and that saves money for everybody.

The challenge is to get bureaucrats and elected officials to understand the distinction between these scenarios--and then to adopt policies that encourage water conservation over the long term.

blackrulon said...

Reply to Dan S. below Ogden City bills resedential and coercial users on eter size. A base rate is charged onthly. The base rate does not decrease with less water useage. It does however increase if you exceed the base monthly rate. So agsain why conserve when i am still charged the base monthly rate despite conserving water?

Ogdenite said...

So in a sense, the city is run for the benefit of bureaucrats - to maximize the money they have to spend on themselves.  What else is new?  What else is ever new in Ogden?

rudizink said...

 One of the weirdest things in the wake of Mike Caldwell's 2011 election:  Weber County Forum page hits dropped of by at least 25%.  I've watched WCF web traffic with interest over the past 6-1/2 months, and I interpret the data as revealing that many people in Ogden, many of our erstwhile readers over the past seven years, believed that all problems would be solved, on Godfrey had been kicked to the curb.

That ain't happening, izzit.

Some people have firmly planted their heads in the sand.

Wake up, People.  The problem of  bureaucrats who maximize the money they have to spend on themselves is endemic, and built into the system.

Sadly, Mike Caldwell doesn't seem to be the guy to deliver us from this.  Mike doesn't even attend City Council meetings, ferchissakes, People.

Shirrell said...

Your  WCF traffic dropped off after you aligned your  personal blog to defend and lionize Matt Stewart.

People still care,  they just don't want their advertising pennies to go to someone who  defends a cop killer.

Your buddy MDS is going to fry.

rudizink said...

 Nonsense.  WCF is and remains a news discussion blog; and the Stewart case is an important local news story.  And unlike you, we're not taking sides in the matter.  All we'd like to see is a fair trial.

James said...

The Practice of a variable rate plan (based on usage) is a great way to control and to nudge people into doing something differently-- and if you recognize what it is, and you care about the governments proper role in your life-- you should run the other way--

--   Water is a service, and the costs associated with that service comes from taxes -- I understand that --

-- Parks and recreation would also fall within that category of services provided by a city-- so does that mean I should pay more if I use the parks more??

--What about the Police do I get charged more on my taxes by cause I am involved in more crimes than someone in another part of the city?

Personally -- I have a corner lot-- and I cringe every summer-- and theoretically I should be in favor of this rate plan(I use more water than some)-- but I know that if we allow a variable rate plan--  what happens when they want to apply this to something else -- like education-- what about the fire department  gives them a good argument to enforce more codes-- more regulation--

rudizink said...

 "The Practice of a variable rate plan (based on usage) is a great way to control
and to nudge people into doing something differently-- and if you recognize what
it is, and you care about the governments proper role in your life-- you should
run the other way--)

I believe you're wrong about this, James.  Water is a  commodity, which is in increasingly short supply in our high altitude Mountain Desert.

Just like all other commodities, users should be billed per each user's volume use, in my belief.

Sorry to hear you own a water hungry corner lot.  Given that, I'm astounded that you should suggest that some of us - Ogden water misers - should subsidize your bad choice of an Ogden residential property.

James said...

My apologies-- I meant to say that the infrastructure to get the water to you is the service -- I agree the water you use is a commodity, and should be charged as such.

--Not sure why the cost of the 12.9 million improvements are being passed on as usage cost rather than going through the standard process of increasing taxes though. (seems like we had one just a few years ago when)

" according to unit fair market price"
-- I totally agree- and I take that to mean that everyone should pay the same per unit  -- Regardless of USE. 

After all when I go to the store to buy one "commodity", I am not charged more because I only buy one.

My issue was with the pricing structure as described in the article-- We should all pay the same $ amount per unit.

I  never asked anyone to subsidize me -- and I take no issue if you use less water.  -- but you also should not be charged more because you use less. Nor I charged less cause I use more.


Dan S. said...

Well, the city does charge for many uses of the park system, such as swimming and golf and reserved use of fields for team sports.

There are excellent reasons why we don't charge people for police services. I've heard of places where if you didn't donate to the volunteer fire department, they wouldn't put out your house if it caught fire--but again there are excellent reasons not to do it that way.

By the same token, there are excellent reasons not to go to the other extreme in which taxes pay for all goods and services and people use as much as they want of everything, at no additional charge. That would be a pure form of socialism or communism. The principal argument against it is that there would then be no check on greedy peoples' consumption, which would outpace production and lead to shortages. Nor would there be any material incentive to work and contribute to production.

And so Americans have settled on a hybrid system in which food and housing and entertainment are mostly controlled by private markets, public safety is handled by tax-supported government agencies, and transportation and education and utilities are somewhere in between.

With utilities, there's generally a big investment in the infrastructure so it's natural to have a monopoly rather than competing private providers. The monopoly doesn't have to be the government, although many cities in Utah still have government-owned electrical utilities. Whether the utility is public or private, the challenge is then to keep revenue and consumption in balance, so the utility doesn't go bankrupt but customers can still afford the services they need.

For water specifically, many of us do have a secondary water system which is effectively funded through a property tax (technically an acreage-based fee that appears on our tax bill), with no additional fee based on use. Thus, there's no incentive to limit consumption and some people use huge amounts of secondary water. This is a problem in drought years, when local water supplies have been running dangerously low. It also means there are times when everyone's sprinklers are running full blast and the pressure in the system drops to almost zero. You wouldn't want to use a system like that for fire suppression.

If Ogden operated its culinary water system in the same way, inadequate fire flows wouldn't be the only consequence. We would have to obtain additional water rights, dig more wells, expand (rather than merely replace) the filter plant near Pineview Dam, and up-size many of the reservoirs and distribution pipelines. Everyone would have to pay for these infrastructure upgrades, and those who use very little water would justifiably complain that they're paying to subsidize waste.

The current situation is similar but less extreme. Only about half the water department's revenue (at least from residential customers) comes from use-based fees, while the other half is a flat fee that you pay whether you use any water or not. There's some financial disincentive to wasting water, but not very much.

I, for one, would like to see a little less socialism and a little more financial accountability in our water fee structure. It would be more fair and more sustainable.

Dan S. said...

As I said in my recent long-winded reply, much of the infrastructure would have to be up-sized if everyone used more water. By the same token, if everyone used less, we wouldn't even need a filter plant at Pineview, or a second pipeline coming down the canyon. So it makes perfect sense to pay for much of this infrastructure with use-based fees rather than flat fees or taxes.

As for the tiered rate structure (which charges higher per-gallon rates at higher use levels), the argument is similar. Excessive use levels would force the city to build even more infrastructure and, in the end, cost everyone more. A tiered rate structure discourages excessive use and lessens the likelihood that the system will have to be expanded.

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