By E. Roberts Musser –
“Water rates are proposed to increase 28% next year to evenly ramp up to a target average single family residential rate of nearly $110 per month. This target rate is the currently project average amount of revenue needed from single family residents to provide the cash flow to maintain current levels of operations and maintenance on our existing water system and to provide sufficient revenue to pay for the bonds necessary to build the surface water project by 2016…
As you can see, the projected rate of increase over current rates between now and the fiscal year 2016/2017 will be a whopping and catastrophic 312%. Yes, you read that correctly: 312% This is because the percentages imposed will be compounded every year. By that I mean that the 28% increase the second year is an increase on not only the current rate the first year, but also an increase on the 28% increase for the current rate! So in effect the increase the second year is really 35.6% over the current rate this year (fiscal 2010/2011), and so forth. In six years, the net result is an increase over current rates of an astronomical 312%!
Sewer and sanitation rates will go up too, by a more modest 6.5% a year. But that also will be compounded. Which, if my calculations are correct, will increase your sewer and sanitation rates in the fiscal year 2016/2017 by about 47%.
What this means, in effect, is your combined water and sewer bill will increase by a monstrous 359% by the fiscal year 2016/2017.
However, the exact calculation is very tricky, but I made a modest stab at it. Let’s take a look at an actual bimonthly city services bill, based on a tier 1 conservation rate, i.e. no “wasted” water. (The more water used above the base rate and Tier 1, the higher your water and sewer rate will be, because rates are based on the amount of water consumed over the base rate.) Here is a breakout of a typical monthly bill on a 3 bedroom family home:
By my calculations, this is what a present value bimonthly city services bill (with no “wasted” water) will look like in the year 2016/2017:
However, here is the problem with this overly conservative evaluation. There is talk by City Council members of a huge jump in the storm sewer rate, because of possible new regulations coming down the pike. And of course this is assuming the municipal tax and other fees remain static – which is highly unlikely. Additionally, city staff has indicated it cannot really promise the proposed increases will be enough. It largely depends on what bids come in to complete the surface water project and upgrades to the wastewater treatment plant. And water conservation won’t dig the city out of its fiscal hole or help individual homeowners out of financial trouble. This is because there will be fixed capital costs that must be paid for these projects, regardless of whether water is conserved or not.
I stated to the City Council I found these numbers shocking. If city staff and City Council don’t really know what the numbers will be, how are citizens supposed to know? With such large increases in the offing, average homeowners must prepare themselves for the huge economic hit that is coming from such steep rate increases. For many, particularly seniors on fixed incomes and young families with children, it may be what tips them over the edge to insolvency, resulting in possible foreclosures on many more homes. Less houses to pay these increases, the more the rest of the city must fork over dollarwise to pick up the slack.
Everyone should be very worried about this enormous rate escalation. I strongly urge you to attend the May 17, 2010 hearing (beginning at 6:30 pm) before the City Council and voice your concerns. You have the right to lodge a written protest to the City Council against these horrendous rate increases. If enough folks turn in written protests (51% of homeowners), the city will be unable to impose the proposed assessment increases. Even if you completely agree with the city’s position that the surface water project should move forward, it is important to make it clear to the Joint Powers Authority via the Davis City Council they should look at every way possible to save money going forward. The less costly the surface water project, the lower our ultimate rate increases will be.
Make no mistake – these water and sewer rate increases are going to come at our residents hard and fast. Landlords are sure to pass the cost along to renters in the form of rent hikes. Many citizens are still unaware of the rate increase tsunami that is coming their way. Only when it viciously hits the pocketbook will homeowners and renters sit up and take notice. But by then it will be too late to do anything to head things off. Look for the Prop 218 notice that is coming via snail mail. Don’t hesitate to lodge a written protest, even if just to advise the Davis City Council to keep the costs of the surface water project as low as possible.
Lesson to be learned: It is critical to pay attention to local issues, and voice your concerns when it counts. Failure to heed warning signals can result in ugly, unwelcome surprises.
Elaine Roberts Musser is an attorney who concentrates her efforts on elder law and aging issues, especially in regard to consumer affairs. If you have a comment or particular question or topic you would like to see addressed in this column, please make your observations at the end of this article in the comment section.
Assuming these numbers are accurate this is indeed scary. I can afford it but I know many people who will have a hard time. I have never been convinced that the City looked at all of the options with enough care.
I doubt 51% of homeowners will turn in complaints but if enough do it will at least have some impact. It might be worth organizing a campaign. This makes Measure A look like chump change.
FYI – The SFPUC just announced a 47% immediate increase for water consumers outside of San Francisco – the reason given was that ongoing Peninsula conservation efforts are too effective and there is a resulting revenue shortfall. According to the SFPUC Asst Genenal Manager there is good news in all of this – water is still much cheaper than Starbucks coffee.
A: “According to the SFPUC Asst Genenal Manager there is good news in all of this – water is still much cheaper than Starbucks coffee.”
LOL, crying on the inside. This comment is indicative of how callous our leaders are to what may be the straw that breaks the back of many lower/middle income folks.
To Dr. Wu: Yes, if anyone can show me where my math is wrong, please feel free to correct it. But if you take the current water rate of $35.50 given in the city’s chart, and multipy it by 312%, you get slightly less than the $111.10 projected by city staff. Please note that first table is the CITY STAFF’s projections, not mine. I just added the last row of compounded rates to the city staff’s charts to show what the REAL PERCENTAGES ARE.
I think what is a deep concern for me is how much the city staff and JPA don’t know. They have no idea what the bid will be that will come in to do the surface water project. Ditto for the wastewater treatment plant upgrade. The talk of various schemes the JPA/city staff could try to save money were all pure speculation. City staff talked about this being a “conservative estimate” and that they hoped to come in “under budget”. Since when has any city project come in UNDER BUDGET?
I think we are in for a rough ride, folks…
“According to the SFPUC Asst Genenal Manager there is good news in all of this – water is still much cheaper than Starbucks coffee.”
ERM,
“Rydstrom said the rates aren’t that high if considered on a per-gallon basis.
“We’re talking about a third of a penny. That’s one of the best deals you’re going to find in the Bay Area,” said Rydstrom. “This is a fraction of a fraction of what someone would pay for a cup of coffee at a Starbucks.”
Can you believe this guy?
People need to learn how to use percentage increase calculations correctly, and to differentiate between describing “increases” and how much the new rate will be in relationship to the old or original rate. (Hint: They are not the same.) The last line of the original table that ERM shows for the annual increase in water rates, labeled “% increase compounded” makes no sense. It is not a compounded annual growth rate and it is not a cummulative growth from the original rate, so I don’t know what it is supposed to represent. Poorly written staff report if that is the source of this information and it was copied correctly, not leaving out any other notes or further explanation.
ERM: The 2016/17 rate is not a 312% increase from the current rate. It is 312% of that rate, but only a 212% increase from the current. Unfortunately, you aren’t the only one who does this. It is an all to frequent error made by folks that aren’t used to dealing with percentages and increase in things over time.
Without your excellent article Elaine, the phrase, “no price is too high if it is known in advance” could not have been applied here. Perhaps the true (official) cost of the water project will not be known until after the results of the Measure A election are certified. Water certainly is a vital component in Davis politics so that one hand can “whitewash” the other!
To rusty49: Yes, I can believe this guy. It’s called “spin”! Just to put it in perspective, I had a case in which a man and wife were about to lose their house to foreclosure. The highly misleading bank loan papers had listed their interest rate by the month, so it didn’t sound so bad. After all, if it reads in huge numbers 1%, with “per month compounded” in tiny, tiny letters next to it a fifteenth the size, the homeowner may not notice the loan is about 19% per year – option pay variable rate by the way. The trick is for shysters to break the cost into the smallest possible amount so it doesn’t sound so bad. But then the ones doing the “spinning” are making mega-bucks and can afford the costs, while the rest of us are going to be hit hard. This sort of “spin” should not be permitted.
dlemongello
04/21/11 – 08:57 AM
…
First of all, this looks like a Bimonthly bill to me.
Second of all, yes, it’s bad. But whatever part of the bill is determined by using less water, each of us can derail some of this charge. First of all KILL YOUR LAWN, it’s painful, but it’s time! Next, get plants that actually can live on what they get naturally here in the valley, many nurseries don’t carry them. I won’t name names but I was at a nursery the other day asking for native plants. The had what they called “drought tolerant’ plants. I was told how much water they needed, a joke, I kept a lawn alive on that much. Then I was told “nothing really grows here naturally but weeds”. Not true, find a nursery who knows, it can look great. And in the house, conserve, conserve conserve.
[i]Next, get plants that actually can live on what they get naturally here in the valley, many nurseries don’t carry them. I won’t name names but I was at a nursery the other day asking for native plants. The had what they called “drought tolerant’ plants. I was told how much water they needed, a joke, I kept a lawn alive on that much. Then I was told “nothing really grows here naturally but weeds”. Not true, find a nursery who knows, it can look great.[/i]
Drought-tolerant plants, and native plants, need regular watering during the first season to get established. After that, many can tolerate much less or even zero summer water. Some tolerate drought, others require it. California natives from ecotypes similar to ours can be easily killed by watering too often. California natives from coastal ecotypes are likely to need more water.
Plants from regions of the world with similar Mediterranean rainfall patterns can be planted with our native plants to achieve very attractive, low-water landscapes. You will find that those areas are not as comfortable to sit or play in as areas with shade trees and lawns, so it is best to zone your yard by water use and group the high-water areas where they will be used. If your lifestyle doesn’t require a cool sitting area or a play yard for the kids and dogs, you may be able to entirely landscape with low-water plants and hardscape.
Here’s an article with a table linked at the bottom: http://redwoodbarn.com/DE_lesswater.htm
I believe most people could achieve 20% or so water use reduction simply by watering their existing landscapes correctly, even with lawns. Further reductions can be achieved by reducing lawn area and replacing it with more drought-tolerant ground covers or mixed plantings. Sprinkler systems set incorrectly waste a great deal of water.
Yes we can all conserve and use less water and try and lower our bills but to what end result? We will still have huge bonds to pay back so will we end up like the SFPUC district and have our rates further raised because of the lack of revenue due to conservation?
Rhinochaser: “People need to learn how to use percentage increase calculations correctly, and to differentiate between describing “increases” and how much the new rate will be in relationship to the old or original rate. (Hint: They are not the same.) The last line of the original table that ERM shows for the annual increase in water rates, labeled “% increase compounded” makes no sense. It is not a compounded annual growth rate and it is not a cummulative growth from the original rate, so I don’t know what it is supposed to represent. Poorly written staff report if that is the source of this information and it was copied correctly, not leaving out any other notes or further explanation.
ERM: The 2016/17 rate is not a 312% increase from the current rate. It is 312% of that rate, but only a 212% increase from the current. Unfortunately, you aren’t the only one who does this. It is an all to frequent error made by folks that aren’t used to dealing with percentages and increase in things over time.”
The last row of the table is mine, not city staff’s. I felt the row before mine given by city staff was misleading, bc it did not show the compounding effect of the rate – the city staff row that gave the % increase in rates as 28%, 28%, 28%, 28%, 16%, 2%. Since you seem to be knowledgeable, how would you show the table correctly, and to reflect the rate increases and the compounding nature of the rate increases? All I did was take what city staff had, and at least show the compounding nature of the rate increase. I am going to assume your only quibble is with the language “&#xin;crease”? Or are you objecting to the entire table?
As for the “rate of increase” issue, the correct wording I assume would be “312% times the rate you are paying now”. Semantics and precise language issues aside, the point is still very much the same – this is a whopping INCREASE in your water/sewer bill, and for many may be unsustainable.
I truly appreciate your technical corrections and would love your insight into how to come up with a better table that truly reflects the compounding nature of this rate increase that was not reflected in the city staff’s table in so far as I am concerned…
correction: …only quibble is w the language “% increase”…
ERM: “I truly appreciate your technical corrections and would love your insight into how to come up with a better table that truly reflects the compounding nature of this rate increase that was not reflected in the city staff’s table in so far as I am concerned… “
First, to make sure we have the right numbers, I think you or staff made an error for FY 14/15. I’m guessing that you got the projected rate wrong, because the increase for that year is a bit more than 28%. I suspect it should have been $94.74, rather than $96.74.
The third row that you have added might better be replaced by a row that shows compound annual growth rate from the current rate to the year in question, as I think that this is what you were trying to show, and this is a common calculation when people look at increases or decreases in numbers over time. It is sometimes referred to as a Compounded Annual Growth Rate (CAGR) and is regularly used by economists. It reflects that average annual rate of increase (or decrease) during a period of time. In our case, and assuming that the FY 14/15 figure should be $94.74, the CAGR’s beginning with 2011/12 would be 27.7%, 27.8%, 27.8%, 27.8%, 25.2% and 20.9%. So, by 2016/17 the annual rate of increase from current rates is 20.9% a year, which makes sense since it is 28% in the early years, but drops off signficantly in the last couple of years.
If you want to now the calculation, with “X” the current rate and “Y” the future rate and “Z” the number of years in between, it would be ((Y/X^(1/Z))-1), where “^” is “raised to the power of” and “/” is “divided by”, for those not dealing with math on a computer.
Hope that helps!
ERM,
ERM: “As for the “rate of increase” issue, the correct wording I assume would be “312% times the rate you are paying now”. Semantics and precise language issues aside, the point is still very much the same – this is a whopping INCREASE in your water/sewer bill, and for many may be unsustainable.”
I think my point was more than a question of minor semantics. An incorrect choice of words can be incredibly misleading. Using your choice of words and how you calculated things, you would have described no increase at all as being a 100% increase, had you been consistent. Going from $100 to $150 is a 50% increase or the new amount is 150% of the current amount would be a different way of saying it. The increase is not 150% in this instance, which is comparable to saying the water increase was 312%, when it was 212%. Because many people are careless with their choice of words in describing increases and decreases, I can never trust their characterizations unless I see the actual figures myself. As I indicted previously, this is a pet peeve of mine, so don’t take it personally. You unfortunately have much company.
Out of curiosity, how did you calculate your “% increase compounded”? I’m still quite puzzled by how you might have calculated your figures.
rc: “The third row that you have added might better be replaced by a row that shows compound annual growth rate from the current rate to the year in question, as I think that this is what you were trying to show, and this is a common calculation when people look at increases or decreases in numbers over time. It is sometimes referred to as a Compounded Annual Growth Rate (CAGR) and is regularly used by economists. It reflects that average annual rate of increase (or decrease) during a period of time. In our case, and assuming that the FY 14/15 figure should be $94.74, the CAGR’s beginning with 2011/12 would be 27.7%, 27.8%, 27.8%, 27.8%, 25.2% and 20.9%. So, by 2016/17 the annual rate of increase from current rates is 20.9% a year, which makes sense since it is 28% in the early years, but drops off signficantly in the last couple of years.
If you want to now the calculation, with “X” the current rate and “Y” the future rate and “Z” the number of years in between, it would be ((Y/X^(1/Z))-1), where “^” is “raised to the power of” and “/” is “divided by”, for those not dealing with math on a computer.”
Here is the problem w the way you want to list the rate “increases”. Most people will not grasp how that translates to what their bill will look like. See what you think of my logic, even if I perhaps did not use the correct terminology:
The current rate for FY 10/11 is $35.50. That amount is increased by 28%. $35.50 x ( = $9.94, which means that for FY 11/12 the rate will be $35.50 + $9.94 = $45.44 (looks like my arithmetic may have been off – I was doing this quickly by hand and not using tables). But in FY 12/13, the 28% increase will be on not only the $35.50 but also on the $9.94. So now we have 28% on $45.44, and so forth.
Now bear with me. If you add up the city staff’s row of 28%, 28%, 28%, 28%, 16%, 2% = 130%, which does not show the compounding nature of the increase. To me, it appears deceptive, even if technically correct. If I had labeled my third column “percentage times the current rate” instead of % increase, might that have helped do you think?
Or to put it another way, the way you get from $35.50 to $111.10 is to multiply $35.50 by 312%, which as you so correctly point out is a 212% “increase” (I’ve always have had difficulty w that arithmetic concept even tho I am a mathematician by profession (and an attorney too!)).
I don’t know if I am making much sense, as it is late at night and I am very, very tired. But please know I DO NOT TAKE THIS PERSONALLY, and am always willing to learn. If I am incorrect, then I am incorrect. I’m trying to explain the rate hikes in a way that the average person can understand.
Let me ask you this – do you have a problem with city staff’s second row and how it is laid out? Do you feel it is correctly labeled and segmented by the proper percentages?
I’m assuming you know understand how I was able to arrive at the third row?
correction: “That amount is increased by 28%. $35.50 x 28% = $9.94…”
ERM: The only quibble I might have with the City’s second row is that I might have labeled it more explicitly, which is “% increase from previous year”. Other than that, I think that it is fine. Most people will look at the actual $ amounts for each year, as that is the most meaningful number to them. Using the 312% or 212% is frankly in my mind more of a persuasive tool to try to convince folks not to support the proposal. I’m not saying that there is anything wrong with you doing this, as I don’t believe that there is, but it is a little less neutral than what I think the City has tried to present. – Just my two cents.