The great Port Orchard water rate debateAugust 16th, 2011 by Chris Henry
Discussion of a proposed water rate hike in Port Orchard continued last week (Aug. 9) with a public hearing and sometimes testy testimony.
The council was to have continued discussion of the water rate increase at its Tuesday (today/Aug. 16) study session. But Public Works Director Mark Dorsey said that the deluge of public comment led the city’s utility committee to take a step back and recommend deferral of a vote on the rate hike until September.
Among those who commented on Aug. 9, city council meeting regular Gerry Harmon spoke on her proposal to charge by the gallon instead of the city’s current method of charging a base rate and adding a per gallon consumption charge above 5,000 gallons.
The city has 7 rate tiers. Each tier adds a higher consumption charge per gallon for the amount of water used above the tier threshold. That charge is added to base rate plus the maximum charge for the previous tier.
City officials say the utility must charge a base rate (currently $22.50 per month), because of the cost just to have the system up and running (no pun intended). In other words, it costs the city $22.50 to deliver even one gallon of water.
Harmon’s calculations were hypothetical, as if the city were to impose the rate increase. The city, in its response to Harmon, used current rates and its most recently audited data back to 2009. Treasurer Allan Martin said the city by law must deal in absolute numbers, not hypotheticals when making projections.
Both parties showed that indeed the price per gallon goes down the more water that’s used. Harmon’s calculations show the price per gallon leveling out at about 144,000 gallons. The city’s price per gallon leveled out after 133,000 gallons and increased slightly at 150,001+ gallons before leveling out again.
City officials, including Martin, met with Harmon before the public hearing to show their calculations and conclusions in response to Harmon’s question, “Wouldn’t it be more fair to charge a straight per gallon on cost?”
Harmon contends that the current system rewards high volume users, but there is no incentive for people like herself, who actively conserve water.
Of high volume users, she said, “Even though they have a higher water bill, they’re getting their water for less per gallon than the other people. To me it says use it right up to your limit.”
The propose rate hike does offer a discount to people who use less than 3,000 gallons per month. But there is no conservation incentive throughout the 7 tiers.
Martin, in a memo to Harmon and the city’s utility committee,
outlines three possible methods for promoting conservation:
-> An increasing block rate, with the users in the first block charged at one rate, the users in the second block charged more and so on
-> High use surcharges, essentially a punishment for higher than average water use
-> Seasonal rates, in which prices rise and fall according to water demand and weather conditions
But Martin said any city must be careful with conservation incentive programs. Generally, the higher volume users have more ways and more leeway to conserve water, while residential users’ needs — based on number of people in the household and other relatively fixed factors — don’t have a lot of wiggle room. Conservation programs actually could have the unintended consequence of placing more of the burden on residential users, Martin said.
Utilities, like water, sewer and stormwater, by law must be run as separate funds from the city’s (or county’s) general fund, and they must be self-sustaining. Revenue from the utility must support delivery of the service without subsidy. So the city is limited in how much it can alter rates without running in the red, Martin said. The city’s water service has been running in the red, utility committee members say, and the purpose of the rate hike is to get back in the black.
The city has a rate formula designed so that each group of users (residential, commercial, city, other government, churches and irrigation) bears its proportionate share of the cost to run the whole utility. The percentages fluctuate a few points either way, from year to year, Martin said, but generally the formula works out.
In 2010, residential users, who as a group consumed just more than 67 percent of the water, paid nearly 69.5 per cent of the total cost. In 2009, however, the group used nearly 69.6 percent of the water and paid just more than 59 percent of the total revenue to the water fund.
In 2010, commercial users consumed 19.72 percent of the water and paid 18.82 percent of the revenue; in 2009, they consumed 18.90 and paid 21.07.
Harmon said she was frustrated that it took this long to get the city to actually run the numbers, and she doesn’t buy the thing about the hypotheticals. She’d like to see the city’s calculations using figures proposed by the utility committee.
Those figures could change, and if the committee’s move back-to-the drawing board is any indication, they are likely to do so.