Council approves new water rates, for now

A last-ditch proposal to change the structure of Austin Water Utility rates didn’t gain enough traction to pass at City Council’s budget session Tuesday. But the proposal may have an impact soon.

Council members voted 6-1 to approve what they had already agreed upon earlier in budget discussions, with Council Member Kathie Tovo voting in opposition. But those new rates may not be long for this world.

That’s because in approving the new rates, Council also initiated the process of changing those rates by reconvening the Joint Committee on Austin Water Utility Financial Plan to take a look at the proposed changes and prepare recommendations.

The scramble was spurred by a last-minute proposal by Tovo that would change the water utility’s rate structure in order to shift costs to customers who use the most water. In response, AWU created an “alternative staff proposal” that incorporated some of the goals of Tovo’s proposal, but in a modified form. It is those two proposals that Council will now consider, with the aim of settling on any changes before Council changes hands next year.

Tovo said she was “very uncomfortable” with the rate changes Council approved on Wednesday.

“I think it really will impact our small users dramatically. I mean, a 22 percent increase is huge … those are huge bill impacts, and we really need to mitigate those,” said Tovo, who agreed that more conversation about the new rate proposals was probably warranted, and asked that her plan be included in that review.

Though he said he could certainly support the staff alternative proposal, Mayor Lee Leffingwell was adamantly opposed to Tovo’s plan, which would increase bills for the highest water users by almost $200 per month, compared to $120 under the alternate staff proposal.

“I think with water rates like that, you really run the risk of driving customers off forever,” said Leffingwell. “It provides an incentive for water wells. I think it doesn’t bear any relationship whatsoever to the cost of the service you are providing.”

Leffingwell noted that Tovo’s proposed changes raised a “fairness question,” particularly because the water utility does not currently pay for water.

“The cost to provide water to our customers, whether they buy 10 gallons a month or 100,000 gallons a month, is the same,” said Leffingwell. “You’ve still got to have the same infrastructure, you’ve still got to have the same pipes, meters, people who read the meters, and so on … It’s not dependent on how much they use. I have a fairness question if you stray so far away from that, it doesn’t make sense. Is that fair to customers?”

As explained by AWU Director Greg Meszaros, Tovo’s proposal would be revenue neutral overall, but would increase costs for larger water users and reduce costs for smaller water users. After reading through the proposal, AWU staff wrote an alternative plan that would achieve the same outcome by increasing the fixed minimum fee more than originally proposed, and leave the per-gallon rates as proposed.

Meszaros said that the staff alternative to Tovo’s plan was more in compliance with the recommendations of the joint subcommittee and best interests of the water utility’s finances.

“This whole year, every month, our water utility took in less revenue than we expended. That business model just won’t work,” said Meszaros, who said that the newly approved, tiered fixed fees would be less volatile. He recommended that, if Council wanted larger water users to pay more, it should be accomplished through the new, more stable structure, as proposed in the staff alternative to the Tovo plan.

AWU Assistant Director David Anders said the joint committee had already recommended a transition similar to the one in the alternate proposal, but suggested it should take place in 2016 and 2017. He said that the alternative staff proposal took that plan and, essentially, moved it up a year.

Anders explained that the joint subcommittee had wanted to avoid such a significant change in a year when a large rate increase was already proposed. Anders said that, in actuality, if the change were to take place earlier, it would have a “tendency” to reduce the rates for 2015, compared to the new rates just approved.

Both Mayor Pro Tem Sheryl Cole and Council Member Laura Morrison expressed discomfort about adopting Tovo’s proposal or the alternative staff proposal at such short notice, and without input from the joint subcommittee.

“I feel a little bit at sea here,” said Morrison.

The new rates, approved Tuesday, could go into effect in November. Meszaros said that adopting a different proposal on that same time line “might be difficult.” However, he thought a different structure could be adopted by the end of the year, before the transition to a new Council takes place.

Under the rates Council passed, 2,000-gallon-per-month water customers will see a 22 percent increase in their bills. Though the average customer will see an increase of about $2.62 monthly, that takes into account the fact that the average customer is using about 1,000 gallons less water per month than last year.