Whether a motion can be passed in theory or not may be open to debate, but the question came up at Wednesday night’s city council meeting when a motion that councilmembers thought was unpalatable but necessary came before them.
The council voted to approve a revised proposal, which takes out the specific rate increases and ties them to inflation and other factors. It was also changed to state that multi-family units will be charged at the same rate as single-family units and that billing will remain bi-monthly in 2013.
The original proposal concerned the raising of water rates by 18 percent in 2013 and 2014, and 4 percent in 2015 to bring revenues up to the cost of debt service. The council agreed with Finance Director Chu Thai and consultant Sudhir Pardiwala that a rate hike was needed, but questioned the amount.
With these significant revisions being considered and deadline to get the matter before residents in time for a public hearing on the proposal on Dec. 15, one councilmember asked, “Can we approve it in theory?”
A 45-day notice period is required between passing a water rate increase and the date of the public hearing to allow residents time to petition.
Would raising rates bring in excess funds?
The hottest issue discussed was the way the percentage was decided and whether the proposed rates would create an unnecessary surplus, with charging multiple-family dwellings at the commercial rate instead of the single-family rate coming in a distant second. Also discussed were whether the approval should be for one year or three years, and changing from bimonthly to monthly billing.
The raises were based on assumptions by Public Works that some councilmembers and public commenters did not believe were reasonable, justified, or accurate.
Mayor Pro Tem Philip Putnam noted that with previous rate hikes over the past four years, the proposed hikes would add up to a 300 percent increase over seven years. He and other councilmembers questioned the need for such drastic increases, noting that in absolute dollars, water was bringing in $8 million per year and spending $5 million, a difference of $3 million which should cover the debt.
Pardiwala explained covering the debt required revenues of the amount of the debt plus 20 percent. The 20 percent could not be paid from reserves from previous years; it has to be covered in annual revenues according to a city covenant. The reserve can be used for capital expenses.
Putnam observed, “So in essence, we are doing two things. In the last hundred years, no one set aside money so we have to do it, and we have to set aside money for capital expenses.”
Mitigating the hit for consumers
Councilmember Robert Joe asked if instead of 18-18-4, the raises could be leveled out a bit, suggesting 15-15-10. Thai responded that he was very concerned about falling below the debt coverage in 2014, and that it would result in a lower credit score for the city.
Councilmember Richard Schneider said that the rate was being raised to 18 percent now because last year it was only raised 16 percent. “As unpleasant as it is, I think we should go ahead with this 18-18-4 plan,” he said.
Pardiwala responded, “You can always implement lower rates.”
Another concern was that for the purposes of data gathering, the proposal would charge multi-family units at a higher rate. Diana Mahmud, in the public comments, said that she thinks doing so would leave the city vulnerable to a legal challenge, because they would be treated differently than single-family homes.
Putnam stated, “I wouldn’t vote for anything but treating them the same.”
In the end, the council voted approve the revised proposal, which takes out the specific rate increases and ties them to inflation and other factors. It was also was changed to state that multi-family units will be charged at the same rate as single-family units and that billing will remain bi-monthly in 2013.
For highlights of other issues discussed at the meeting, read “City Council Highlights for Oct. 4.”