While the Vanguard has pushed hard against the tripling of water rates by the city, the city is looking for ways to avoid pricing people out of their homes with the rate hikes.
Due to the cost of constructing the surface water project through the Woodland and Davis Joint Powers Act, Davis water rates will rise each of the next five years and eventually triple to over 1300 dollars per year.
The staff is looking at program qualifications such as income levels, ownership of homes and water use levels. They are looking to phase in the program and grow it with five-year rate adjustments.
One key question will be the funding source. The city could use general fund money or it could look at CDBG (Community Development Block Grant) grants or other such sources.
One potential plan would be a 20% water rate subsidy which would cost the city, in 2012, about $54,000 for 500 accounts, with the subsidy rising to $115,000 by 2016. Obviously, such a policy would not have a huge impact even on the general fund, but could prevent the worst impacts to residents.
City staff is looking at two examples of low income subsidy programs: the City’s Parks and Open Space reimbursement and PG&E/San Luis Obispo utility rate programs.
The City of Davis currently offers residents a program that reimburses low income households for the Park Maintenance Tax and the Open Space Fee. For calendar year 2009, the following refunds were processed.
The City is in the process of soliciting applications for 2010. To qualify, applicants must be the property owner and the income qualifications are:
The city’s general fund is the source of this low income assistance program.
The PG&E and City of San Luis Obispo plan is a bit different.
There are specific requirements:
Must be the property owner; Must live at the address where the discount will be received; May not be claimed as dependent on another person’s income tax return other than your spouse; Your household income must meet the program guidelines. Qualified customers, could document eligibility by showing participation in one of the following programs: Aid for Families with Children (AFDC), Supplemental Social Security Income (SSI), Food Stamps, participation in either electric, phone or gas companies program (CARE). Eligible customers are those whose total household income is at or below the income limits indicated below.
Qualified customers would receive credit for their water and sewer rates equal to a 15% reduction on the average rate.
Does the creation of a low income subsidy solve the problems with the water rate hikes? No. But it does specifically address a concern as to whether the rate hikes will price people out of their homes.
My biggest concern however is the impact of the rate hikes on the ability of the school district to pass parcel taxes in order to subsidize the decline of state funding.
Councilmember Sue Greenwald made a similar point in a comment on the Vanguard yesterday, “The estimated 2016 annual water water/sewer/garbage bill could make it difficult to pass the supplementary city and school taxes that we need to get us through these difficult times.”
That is the portion of this that the low income subsidy does not address.
The other question is what is the needed amount for the subsidy in order to not stress those on fixed or otherwise limited incomes.
—David M. Greenwald reporting
A subsidy for low income homeowners does not prevent landlords, who do not qualify as low income (and probably most people who own more than one house do not, but perhaps that is quite a generalization), from passing the rate increase on to tenants.
Good point and those tenants would not be eligible for subsidies due to lack of ownership.
“One key question will be the funding source. The city could use GENERAL FUND MONEY (caps mine) or it could look at CDBG (Community Development Block Grant) grants or other such sources.”
Let me be sure I understand this: I’m not rich, but I do manage (barely) to make ends meet because I have a job. I don’t qualify as being low income. So the idea is that, in addition to tripling my water rates, I get to chip in for my section 8 neighbor down the street? Uh, let me give that one some thought.
[quote]My biggest concern however is the impact of the rate hikes on the ability of the school district to pass parcel taxes in order to subsidize the decline of state funding.[/quote]
So you don’t want the surface water project approved because the increase in rates might jeopardize the school’s ability to get a school parcel tax increase passed? Really?
[quote]Councilmember Sue Greenwald made a similar point in a comment on the Vanguard yesterday, “The estimated 2016 annual water water/sewer/garbage bill could make it difficult to pass the supplementary city and school taxes that we need to get us through these difficult times.”
That is the portion of this that the low income subsidy does not address.[/quote]
A low income subsidy to assist with the increased water/sewer rates is not meant to address the issue of making it easy to pass school parcel tax increases.
The city/citizens of Davis have many competing needs – water, schools, parks, roads, etc. Clearly your top priority is money towards schools, it seems to the exclusion of all else. Others may have a different set of priorities or feel that a number of concerns must be addressed at the same time w/o exclusively favoring one issue over another…
Without suggesting that ultimately there is a better option–unless of course our negotiators could have struck a more favorable deal on water rates–one result of this tripling of water costs is a deadweight loss in home values.
The increase of roughly $900 per year makes each home worth $18,000 less to a future buyer (assuming a 5% discount rate).
Rich Rifkin: I was just talking with Paul Navazio last night about the potential impacts on our property tax revenues. Buyers will be paying less per square foot because of the water/sewer rates. We don’t know exactly how they will calculate it, but calculate it they will.
To give a similar example, Karl Moore did a study many years ago concerning Mello-Roos payments and found that the buyers did in fact pay proportionately less per square foot for homes in the new subdivisions where the homeowner payed the infrastructure costs through annual Mello-Roos taxes than they did in the subdivisions where the developer paid for the infrastructure costs up front.
Per unit, the estimate costs of the new water and sewer infrastructure will run about $11,000. The water bills will be higher for single family units than for apartments, so we could guess maybe $14,000 or $15,000 per single family . I don’t know how Rich came to his figure, but mine is similar.
I suspect that house prices will decrease by about that amount (total monthly payments for the new home owner remaining constant). I kicked around the idea with Paul that we should start calculating the expected effect on property tax revenue into our long-range budget forecast.
In five years, our average annual water/sewer/garbage rate is estimated to be about $2,300 a year for a single-family unit. Under your scenario, a family of 4 making $36,000 a year would get $264 off the $2,300 a year bill, which would leave them paying over $2,000 a year. To do this would cost the city $113,000 a year, which would come out of either our general fund, or the already modest and ever decreasing social service grants that we now give, such as homeless services, etc.
And it wouldn’t bring significant relief to even the small number of the very lowest income folks, because they would still have to come up with over $2,000 a year (in five years when rates for the infrastructure payments stabilize).
Further, it is difficult to see how this program could be administered to low-income tenants since apartments usually have just one meter.
It seems almost cruel to pretend that we can institute a meaningful low-income water/sewer subsidy.
Under the proposed structure, this will be very impactful to the low income residents of Rancho Yolo.
David Thompson, Neighborhood Partners, LLC.
[quote]It seems almost cruel to pretend that we can institute a meaningful low-income water/sewer subsidy.[/quote]
A 15% reduction in a low income family’s water/sewer bill is better than no reduction in their water/sewer bill…