Sunday Commentary: Has Council Put Water to Rest?

On Tuesday, council approved a Prop 218 rate process to (A) notify the ratepayers of the plan to implement the city’s latest 87-13 water rates, and (B) solicit formal written protests from the ratepayers if they have objections to the rates. That was quickly followed at the end of the week by the UC Davis announcement that they were exercising their option and plopping their $20 million down.

Neither the content nor the timing of the UCD announcement comes as a surprise. Back in February of 2013, UC Davis released a statement to the Yes on Measure I campaign stating, “UC Davis has been actively involved with the Davis-Woodland Water Supply Project since its inception in 1994, when the application for a permit to appropriate Sacramento River water was filed with the State. Since then, the University has participated continuously in project activities to bring Sacramento River water to the region.

“Since 2010, UC Davis has had a contractual agreement with the Woodland-Davis Clean Water Agency that (1) assigned the campus’ rights to Sacramento River water to the Agency and (2) provides an option for the campus to contract with the Agency for project water.

“The University has until 6 months after the start of water delivery to exercise the option. If the University exercises the option the agreement calls for the campus to reimburse the cities of Davis and Woodland for its share of capital construction costs and to pay its share ongoing operational costs.”

Someone commented to me “that they [UCD] are in for pennies,” but the numbers don’t support that position.  UCD is paying its proportionate share of the project, and what they pay will undoubtedly save the city money. A much bigger money savings will come if the city gets access to the state revolving funds for low interest loans.  That could save the city as much as $50 to $100 million in interest payments.

But all is not necessarily well with the water project. The issue has been one of creating greater equity in the system. The Vanguard has argued that, despite people’s discomfort for CBFR, it greatly moved the ball forward to that effect and 87-13 created even great equity.

However, former Mayor Sue Greenwald this week argued briefly for greater equity. She told the council, “We’re making progress (on the equity issue), but we’re not there yet.”

She noted that the main concern mentioned by the Measure P supporters was that the owners of the median sized apartment complex are paying less per gallon than the median house owner. “This is going to increase with time because the percentage is going to stay the same, so as our rates go up, this difference is going to be more significant.”

Ms. Greenwald argued it would only take some small “tweaking” to accept the rates that Donna Lemongello and Matt Williams “worked out that do much better in the equity department.”

“The Lemongello and Williams rates are far more equitable than the Bartle Wells 87-13 rates,” she continued. Under Bartle Wells, she argued, single family homeowners pay 17% more per gallon than the apartment landlords. The Lemongello-Williams rates “lowers this difference to only six percent.”

There is no doubt that we can hold out for greater equity, but is this differential of 17% versus 6% enough to continue to hold out?   In dollars and cents terms, how much of a difference does that 11 percent differential amount to?  Matt Williams provided me with a calculation that tells me that in 2015 a ratepayer who uses 4 ccf of water per month would pay 32 cents per month less at 6% than they will pay at 17%.  For two-thirds of single family homes the difference will be less than one dollar per month. Is someone going to sue and attempt to hold up the water project for as small a difference as a 17 percent versus 6 percent differential? We are not sure.

Back to that issue in a moment.

Last year during the Measure I campaign, Bob Dunning pounded on the issue of fairness and equity on the water issue. Where does he stand now?  On the one hand, he has been appreciative of the effort by council, writing, for example, this morning that “the City Council has done its level best recently to finally simplify our water rates to avoid both confusion and class warfare…”

At the same time, on Friday, he inexplicably returned to previous form, writing that “by 2019, when water rates reach a whopping five bucks per ccf, Davis is likely to look more like a town in the Mojave Desert than a once-green town that cherished its beautiful lawns and mature trees … there is justifiable concern that those rates will drive some folks out of business, or at least out of town … safe to say, had the Davis City Council had the courage to put those specific rates on the ballot along with the surface water project in March of 2013, both the rates and the project would have failed …”

Clearly, Mr. Dunning likes to engage in humorous sarcasm and satire, but is the humorous rhetoric here helpful? More important than Davis’ water rates in 2019 will be the state of the drought in five years.

He cannot help injecting some personal opinion, noting his opinion that had council put those rates on the ballot last year, both the rates and the project would have failed.

That remains a somewhat interesting question. At the time, the Vanguard argued along with others that the city should put the rates to a vote, along with the water project. They could have passed the Prop 218 and then put the water project to a vote in May 2013, for example.

Legal staff argued against that plan. They argued it would not be legal, given California’s Prop. 218 law. I do not have the legal expertise to know whether they were right, but I do have the political expertise to suggest that this is part of what led to Measure P’s passage.

It does raise the point that critics of the city’s approach argued in the winter of 2013 that the voters will not have known the precise water rates when they voted to approve the project. That being said, ultimately, I disagree with Bob Dunning – the voters in Measure I had physical documents available in their hands that allowed them to know what the water rates would be once the Prop 218 process was finalized.  That information mailed to their homes clearly showed that the rates would be doubling over the five-year period from May 2013 through December 2018.

While equity has been a big issue, to me the bigger issue should have been the impact of the magnitude of the water rate increases on low interest residents.

Newly-elected Mayor Pro Tem Robb Davis raised this point last week when he stated, “I’ve been thinking a lot about the equity issue.” He added, “At some point we reach a limit on using rates to do something that rates are really not best suited to do.”

He argued that the kind of fine tuning needed for social equity “may not be possible.” The mayor pro tem stated, “The issue is that there is concern in the community about some community members not being able to pay the increased rates. Maybe not by next year but by 2018.”

“If that’s the issue,” he said, then staff needs to work with council to talk about expanding the lifeline program. He spoke about the need to cover renters. Harriet Steiner pointed out under some conditions it could apply to renters. But the council agreed to take up that issue within the main motion.

I have found it interesting how much focus has been on equity and how little has been on mitigating against the impact of higher rates on low income people.

In the end, however, if we truly want to reduce the impact on low income water users, the best way to do it is by reducing the overall cost of the water project. UC Davis’ reemergence as a partner saves some money, and getting low interest rate loans from the SRF (State Revolving Fund) would save huge money.

The question is whether the city can actually get the SRF rates.  Dennis Diemer, General Manager of the Woodland-Davis Clean Water Agency, told the agency board that Davis could qualify this fall if rates are in place.

Mr. Diemer’s pronouncement has been greeted with skepticism. Some believe that the city has engaged in hyperbolic rhetoric on the impact of delay – and I tend to agree with that criticism. At the same time, while delay has helped for a better and more equitable project, that does not indefinitely apply.

At this point, the critics of the water project have gotten a scaled back project with more equitable rates, and now it is time to remove the barriers and allow the project to move forward, hoping that SRF’s promise was not misguided and that by lowering the interest on the payback for the loans, we can reduce the increase in the magnitude of water rates.

—David M. Greenwald reporting

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