Energy, water utility rates top Council concerns over 2015 budget

The Austin City Council took on next year’s budget in earnest Thursday. Of the $3.5 billion budget, members’ biggest concerns continued to rest with the city’s water and energy utilities.

A proposal from Austin Energy to increase the fuel charge customers pay had Council particularly on edge. That increase will add $4.67 to the average customer’s monthly energy bill. This is not the same as a “rate increase,” which Council has thoroughly debated and approved.

Mayor Lee Leffingwell expressed disappointment with immediately exceeding affordability goals set during the last budget cycle at this, the “very next” budget cycle. Those goals limited rate increases to 2 percent. The rate increase proposed this budget cycle is 3.4 percent, but the bulk of that rate hike comes from “uncontrollable” pass-through costs, such as costs imposed by the state and the price of natural gas.

City Manager Marc Ott expressed his own concerns about the rate hike, but called the issue “complex.” Ott explained that it was unclear whether that 2 percent goal included all of the utilities costs or not, and said that interpretation should be part of future conversations about the rates.

He asked City Council to hold off on convening a task force to look at additional cost-saving measures for Austin Energy. The Council Austin Energy Committee meets Aug. 14.

“This does not feel or look appropriate to our citizens,” said Martinez. “We are putting $44 million in reserves and raising the rates.”

Austin Water Utility Director Greg Meszaros explained that his department had taken a much closer look at the budget than in years past, cutting over a thousand of different line items.

“The city manager made it clear that we had to do everything we could to work through this financial crisis,” said Meszaros.

In total, AWU cut their budget by $29.9 million since April’s financial forecast. That forecast predicted that monthly water fees would increase by $4, which has been reduced to a $2.62 monthly increase. That’s due, at least in part, to the utility’s implementation of most of the recommendations to come out of a hard-working task force formed to address the potential increases.

It is worth noting that the typical water customer in Austin is now expected to use 7,000 gallons of water per month. In 2014, calculations were based on the average customer using 8,000 gallons per month.

Deputy Chief Financial Officer Ed Van Eenoo said that he believed the utility implemented all of the recommendations to come out of the task force except for a suggestion to reduce the General Fund transfer.

Leffingwell said he believes more can be done in regards to the utility departments. “

“The proposed Austin Energy increase is above the previously adopted goals of 2 percent a year.” he said on his Facebook page. “I will be strongly advocating that we make the adjustments necessary to restrict that rate increase to 2 percent. Also, while our utilities have taken important steps to eliminate non-related expenditures, I believe more can and should be done.”

The Mayor put his stamp of approval on plans to eliminate costs to the utility that did not have anything to do with the operation of the city’s water service. Moving those expenses — including $5.5 million for the city’s Sustainability Fund, $1.1 million for the Balcones Canyonlands Preserve, and $1.2 million toward Homeland Security – will free up $7.5 million in total for the utility.

Combined with shifts from other departments, it will add $10.9 million in costs to the city’s General Fund.

Leffingwell did point out that figure could be higher, and reiterated his belief that the city also shift the Green Choice program that costs the utility about $5 million. Leffingwell called that program an “unfunded mandate on the water utility” that should be moved to the General Fund.

“This would be another way to hold the water utility rate increase down to a reasonable and, frankly, rational number,” said Leffingwell. “The point is, the water utility is carrying a lot of costs that don’t have anything to do with their mission that have been added on over the years.”

In all, the city is currently planning to raise monthly energy, water, trash and recycling, clean community, transportation and drainage fees. Combined with the $1.19 monthly increase in property taxes on a median priced home, Austinites on average will pay $145.56 more next year.

“It’s a bit of a tug of war. In my mind, the rates are somewhat regressive, compared to property taxes,” said Council Member Laura Morrison. “As much as possible, I would like to see us minimize the rate increases, if it becomes an either/or kind of thing.”

Despite two consecutive years of sales tax growth that was just over 7 percent, the budget office predicted 5 percent in sales tax growth next year. Each percentage point of growth equates to about $1.9 million in revenue for the city. Council Member Mike Martinez noted that he could not recall the last time the budget office had predicted that much growth. Van Eenoo explained that, while they liked to remain conservative, it would be hard to defend a prediction of 3 percent, in light of the strength of Austin’s economy.

The City Council also discussed the proposed 60-cent Drainage Fee increase, which does not take into account a recent court ruling that found the fee is not applied fairly. City Attorney Karen Kennard said the city is working on getting advice from the court on how to restructure the fee. For the purpose of the budget, however, Van Eenoo explained that they had not considered those.

“What we should be doing is developing a way to determine that fee that would not be illegal,” said Leffingwell.

Finally, in what has become an annual tradition, Council Member Bill Spelman questioned the Austin Police Department budget, which comprises just about 42 percent of what the city spends annually in the General Fund.

Spelman focused on the proposed staff increases for the department, at a time where they city was working on eliminating vacant positions to increase affordability. He noted that 97 of the proposed 134 new General Fund positions were for APD. “I don’t see the justification for 59 new patrol officers in the Police Department …but I’m looking forward to that justification,” he said.

“Actually, we were hoping for more positions, but this is what we came up with,” said Police Chief Art Acevedo. “We feel like we had enough work for about 102 new sworn (officers.) But we whittled it down to about 59.”

APD will also be adding 38 civilian positions to its ranks. That includes 21 9-1-1 call center positions that are funded through reallocation of existing resources.

Editor Jo Clifton contributed to this story