It is perhaps one of the biggest questions of the Measure I campaign. The Yes on Measure I side has argued that, even absent the water project, “the days of cheap water are over” and there will be considerable water rate hikes, regardless of whether voters approve Measure I.
Elaine Roberts Musser told the Vanguard during an interview two weeks ago, that “there’s a cost to not doing the project. If you don’t do the project and the wells start to fail… there’s a cost there too. If we can’t come into compliance, we get fined by the state. And the state has told us that they’re not going to allow a community to benefit from not coming into compliance.”
“I think you have to understand, if you don’t do the project there’s a cost as well. It’s not a freebie,” she added.
What the representatives from Measure I campaign could not address in specifics was the costs, and therefore the rate increase, in the absence of a project – data that the Vanguard has been seeking for nearly a month.
In the city’s sample Prop. 218 notice it stated under the “Fees without the water project: If the Surface Water Project is not approved by the voters at the March 5 election, the City will not proceed with the project, but water service fees will still need to be increased by about 50%; increasing the average bill from about $34 to $50/month by 2018. The water utility is currently running at a deficit due to the deferral of rate increases scheduled for 2011. Also, without an alternative surface water supply, the City must still invest in additional groundwater production facilities and infrastructure as well as demand management tools to meet consumer demands.”
However, our information made it clear that the 50% figure was too low – far too low. On Wednesday, City Manager Steve Pinkerton finally provided the critical data that showed this to be the case.
The chart shows a comparison between the current revenue of $9,978,000 – which as we know is about $3 million below what we actually need at this time.
The second line of the chart shows the revenue that the adopted rates by the council would generate if voters approve both the surface water project and the Prop 218.
The third line, shows what revenue would be needed, outside of the project. The chart shows that the city would need to increase water revenue from the present amount of just under $10 million to $18 million by 2017-2018. That constitutes about an 80% increase falling just shy of doubling of the necessary revenue.
With the rate smoothing that the council did at their January 15, 2013 meeting, the project by 2017-18 would require $23.6 million in revenue. That constitutes a 136% increase, well over double but falling far short of the initial rate increase that would see rates nearly triple over the first five years of the project.
Under the original scenario, the revenue would hit its peak around 2017 and then flat line for nearly a decade before needed upgrades would drive the revenue up to nearly $40 million.
Under the all-debt financed project, the revenue needs will continue to go up slowly but steadily for another nearly 20 years.
The City’s General Manager Herb Niederberger argued against that option in the long term on January 15, telling the council, “We did not think this was the most prudent way to establish rates.”
“If you finance all of the projects through a conventional debt scenario, the first five years of rate increases is lower than what we have proposed, by about 15%,” he said. “If you look at the long term… you see that over time, we have to collect a lot more revenue from the customers in order to pay back the financing, the addition debt incurred by the local projects.”
The critical question turns to what happens to the rates under these revenue scenarios.
According to information from Dianna Jensen, the City’s Principal Civil Engineer, “If the Surface Water Project is not approved by the voters at the March 5 election, the City will not proceed with the project, but water service fees will still need to be increased by about 97%.”
This means that the average water bill will go up from $34 per month to $67 per month by 2018.
She explained as we did previously, “The water utility is currently running at a deficit due to the deferral of rate increases scheduled for 2011. Also, without an alternative surface water supply, the City must still invest in additional groundwater production facilities and infrastructure as well as demand management tools to meet consumer demands.”
“The rate increases will cover the cost of operations and maintenance, repayment of the line of credit that was obtained to continue operating without rate increases over the past 18 months, meter replacement fees, debt payment on two of our existing wells and the new 4 million gallon tank, automated meter reading, and other capital improvement projects,” Ms. Jensen said.
What we still do not know is how much the rates would continue to go up after 2018. However, in the short-term there is very little difference between the $23.6 million in revenue needed for the all-debt financed option of the surface water project in 2018 versus the $18 million needed without.
As we noted last week, over the next 30 years, with a surface water project, we will see rate increases will produce $937 million in revenue, $461 more than the inflation-adjusted baseline revenue.
Matt Williams attempted to explain what was driving those figures, using the original model that had pay as you go aspects in addition to debt financing.
“If one looks at the $28.2 million revenue requirement in 2018 in the “blue line” rate scenario, the $12.9 million base costs for the existing system when a 4% CPI is applied to them rise to $15.7 million,” he explained.
“Add to that figure the 2018 annual Debt Service number of $7.6 million and you are at $23.3 million. Add in your $1.65 million for the CPG water purchase and you are at $25.0 million (rounded). Now add the annual SWTP M&O of $2.75 million and you are at a $27.75 million total,” he said. “Again, the revenue requirement that the rates use is $28.2 million. Where is the pork? That 0.45 million difference exists because your interest rate assumption is less conservative than the City’s. Until we have actual rates we are all making some assumptions.”
So now we know that costs are going to go up substantially more than the 50% the city originally projected. We know that in the next five years, the costs will go up about 80% and the rates will go up about 97%.
What we do not know is how much they will go up from 2018 onward. As we again note, with the debt-financing option that the city has chosen, revenue needs to double again, going up from $23.6 million in 2018 to about $42 million by 2038.
The decision as to how to act on this data is left to the voters themselves.
—David M. Greenwald reporting
Still less than my cell phone bill. Then again I can’t live without my cell phone but water who needs it!
Or just 5 lattes a week, you know the one that the school measure backers always throw out there?
For some it will be the difference between eating hamburger or steak.
For some it will be the difference between eating and not eating.
David
So between the time of the sample 218 notice and now the city has a rise in rates going up from 50% to 100% for the existing system without the project. How did they get it so wrong in the first place and why are we now to believe the new numbers if not all that long ago they were saying differently?
So more confusion for me. If the amt for not doing the water project will double our rates and doing the project will ~ triple them, is the doubling a majority of the total cost OR as I am beginning to suspect, the doubling has nothing to do with JPA and will be additional??
Matt, ‘don’t fail me now”!
Rusty: Those are reasonable questions. I’m working on a fuller explanation as to what we need to do. Why did we get it wrong before? I can’t answer that, but I have believed for some time their estimate was actually too low.
Great question Soda, since we’re going to be using the old system in conjunction with the new one and now we’re just being told the old system will be expensive to fix and keep up what are the true costs of everything?
rusty49 said . . .
[i]”So between the time of the sample 218 notice and now the city has a rise in rates going up from 50% to 100% for the existing system without the project. How did they get it so wrong in the first place and why are we now to believe the new numbers if not all that long ago they were saying differently?”[/i]
Very good question rusty. The simple answer is that they didn’t include any of the [u]capital [/u] expenses associated with maintaining the existing system when they came up with the 50% estimate. That was a small $37 million omission.
For anyone who wants to better understand that $37 million, David’s Monday article does a good job of showing in detail what those costs are. Here’s a link to that story [url]https://davisvanguard.org/index.php?option=com_content&view=article&id=6028:further-examination-of-the-costs-to-maintaining-existing-water-system&catid=50:elections&Itemid=83[/url]
In the estimates proffered over the last week was included the cost for addition of piping to create a loop that would allow for mixing river water with well water.This is so people living far from the point where river water enters Davis are able to reap the benefits of the imported water that is tripling their water bill. When we now see the no import estimates I assume this considerable cost has been removed. Correct?
“That was a small $37 million omission.”
Really? So if they can make “small $37 million omission”‘ then why are we to now believe the numbers? Also Matt, what about Soda’s question? Is the cost of maintaining the old system and this $37 million omission included in the new project rate structure?
Question for Matt (lasked at the end of Monday’s thread):
Question for Matt; Does the export by U.C. Davis of water to the small city built west of 113 by them, to accommodate their growing student population, make them also an appropriative pumper?
Roger, I am no expert but am going to take a good guess at the answer to your question. The land West Village is built on was already UC Davis land, so it is still UC Davis pumping water for UC Davis.
If we don’t have the anticipated cleaner source water from the surface water plant, how much more will we have to spend on the waste water plant to come into compliance with the Clean Water Act? Is that amount included in this $37 million?
SODA said . . .
“So more confusion for me. If the amt for not doing the water project will double our rates and doing the project will ~ triple them, is the doubling a majority of the total cost OR as I am beginning to suspect, the doubling has nothing to do with JPA and will be additional??
Matt, ‘don’t fail me now”!”
I’ll try not to do so SODA.
1) The base costs for maintaining the existing system including capital repair and replacement and water main projects are currently $12.9 million and they rise to $21.8 million in both FY 2018/19 and FY 2019/20.
2) The annual costs for the CPG water right are currently $0 and they rise to $1.3 million in both FY 2018/19 and FY 2019/20.
3) The annual amount for A) reducing the current Wells Fargo line of credit balance and B) replenishing the Reserve Fund balances that have been depleted by the deficits over the past three years is just under $1 million per year.
When you add 1) 2) and 3) together you get a FY 2018/19 and FY 2019/20 Revenue Requirement of $24 million ($21.8 plus $1.3 plus $0.9) [u]before[/u] you even consider the Surface Project costs.
So the simple answer is that going from $10 million to $30 million is a $20 million difference and more than half of that $20 million is due to maintenance of the existing system and less than half of it is due to the Surface Water Plant costs.
Thx Matt but when we cast our vote we are only casting our vote for JPA which is half of the total JPA plus maintenance of existing?
Can someone from No on I respond?
Sorry if typos. Micro print on iPhone!
roger bockrath said . . .
[i]”In the estimates proffered over the last week was included the cost for addition of piping to create a loop that would allow for mixing river water with well water.This is so people living far from the point where river water enters Davis are able to reap the benefits of the imported water that is tripling their water bill. When we now see the no import estimates I assume this considerable cost has been removed. Correct?”[/i]
No, that is incorrect. The costs for the infrastructure enhancement you are describing are included in the $14.66 million Local Costs portion of the $113.76 million Davis portion of the Total Costs of the Surface Water Project.
Kennedy-Jenks and Brown and Caldwell did not include those costs in their $44 million estimate because that $14.66 million is not needed if the Surface Water Project does not move forward.
rusty49 said . . .
[i]”Great question Soda, since we’re going to be using the old system in conjunction with the new one and now we’re just being told the old system will be expensive to fix and keep up what are the true costs of everything?”[/i]
We are not being told that rusty. In fact we are being told the exact opposite. The “old” system will indeed be expensive to [u]maintain[/u] and the costs of that maintenance [u]is[/u] built into the rates that have been presented to us.
rusty49 said . . .
[i]”Also Matt, what about Soda’s question? Is the cost of maintaining the old system and this $37 million omission included in the new project rate structure?”[/i]
Yes it is rusty.
roger bockrath said . . .
[i]”Question for Matt (lasked at the end of Monday’s thread): Does the export by U.C. Davis of water to the small city built west of 113 by them, to accommodate their growing student population, make them also an appropriative pumper?”[/i]
roger, that is a legal question, and I am not a lawyer, so you really should ask that question to a water rights lawyer.
With that said, I believe the answer would be that the west of 113 portion of UCD is no different than the rest of the campus. They own the land where the water is being used, and the use of the water is within the definitional boundaries of UCD’s primary reason for existing. They are therefore an overlying user.
Compare that to the City’s position as an appropriative user. With the exception of municipally owned properties (parks, etc.) the City does not own the land where the water is being used and the actual use of the water within the individual parcels is more often than not well outside the definitional boundaries of the City of Davis’ primary reason for existing. What in effect the City does is “appropriate” all of the individual overlying user water rights of the property owners within the boundaries of the water distribution system.
Mark West asked . . .
[i]”If we don’t have the anticipated cleaner source water from the surface water plant, how much more will we have to spend on the waste water plant to come into compliance with the Clean Water Act? Is that amount included in this $37 million?”[/i]
No that amount is not included in the $37 million.
“Why did we get it wrong before? I can’t answer that, but I have believed for some time their estimate was actually too low.”
And it’s still too low because as ERM states:
“If we can’t come into compliance, we get fined by the state. And the state has told us that they’re not going to allow a community to benefit from not coming into compliance.”
The 97% increase does not include the fines or the increased costs for the waste water plant in the absence of a surface water project. It is a mystery why city staff is not clearly spelling out the costs of NOT doing the project. The bigger mystery is why the No On I campaign and our beloved Bob Dunning are framing the vote as no rate increases vs 300% increases. Intentionally or unintentially the NOI and BD are misleading the voters. Rates do not stay flat under any scenario. There will be significant increases no matter what and any representation to the contrary is a misrepresentation.
-Michael Bisch
It seems that we [the City Council/staff] are trying to do too many things at once! We are now told that we need to do substantial repairs and upgrades to the present ground-water system; that we need to upgrade the waste-water plant, or ship some effluent to Woodland; and that we need to have river water to mix with our well water. Yikes!! Each of these projects costs a bundle! Should we not do them in some logical order whereby costs can be spread out, or, if necessary, overlap them in the most cost-effective way. In government costs never go down, even after jobs are finished – if they ever are; and one sees that in the plot of cost vs time. It never dips down, but just keeps going up!