UAC recommends 34 percent water rate reduction, and 2010 refund
August 23, 2011 · 11:48 PM
The members of the Utility Advisory Committee upped the ante of the water rate reduction discussion with a unanimous vote to recommend that the council implement an immediate 34 percent water rate reduction coupled with a refund in the order of $300,000 to be delivered to 2010 water utility ratepayers.
The motion was made after Tuesday's meeting in which UAC members met with city staff to discuss the rate reduction and future logistics of the city's water utility.
The $300,000 refund recommended by the UAC reflects the reduction in 2010 operating expenses after the city cut staff. Both the UAC and City Council have acknowledged that the water utility has accumulated a surplus of reserves, and at Tuesday's meeting the UAC flushed out how it wanted to provide an immediate respite to ratepayers who have been overcharged for the utility's needs.
The City Council asked the UAC to bring forward a recommendation to be made in the interim, while the city is still deliberating over the ultimate future of the utility. Both the UAC and council expressed the need to provide some sort of immediate relief to ratepayers, and then review rates again in a second approach once the city decides whether to spin-off the utility or retain ownership.
At last week's meeting the council voted to reduce water rates across the board by 25 percent, and directed staff to draft the ordinance to be discussed as a first touch item at Wednesday's council meeting. The UAC had previously stated it wanted to consider a rate reduction and/or a refund in conjunction. The council did not discuss the concept of a refund last week.
Initially the UAC expressed worry that a refund would be too complicated to be provided on an immediate basis. But after looking at the financial figures presented in the consultants initial report, the UAC decided that a refund focusing on 2010 excess charges would be a manageable task for city staff to implement.
City Manager Brenda Bauer, who was in attendance at the meeting said that a "time-limited refund would be a much easier task for city staff." Initially Bauer had warned that refunds were complex and the legal issues could become expensive and time-consuming for the city to implement. Bauer said she would still want to get advice on how the city were to carry-out such a measure.
UAC member Arlene Buetow recommended looking at 2010 alone as a way to make the process easier. Buetow said she was an advocate for a refund in addition to the rate reduction as a way to be equitable to the ratepayers who were charged to build the surplus reserve.
"The historic ratepayers are the people that created the [water utility] reserve," said Buetow. "It would really bother me if the only people who benefited from a change would be the future ratepayers."
Both the UAC and the council expressed their desire to select a conservative rate reduction. Bauer warned that a 34 percent reduction may risk the need for the city to adjust rates at the end of the year and ask customers to pay more or less money when the rate structure is reviewed as a whole.
In looking at the numbers the UAC concluded that operating revenue would still be in excess if the city does drop rates by 34 percent, and the reduction would just be reducing the size of the surplus. According to the figures generated by UAC member Bob Bosserman, the breakeven point between revenue and expenses is at a 47 percent rate reduction.
In its initial report the consulting team had also estimated that the city could drop rates by 34 percent without compromising its level of service.
The council will discuss the 25 percent water rate reduction ordinance at Wednesday's council meeting.