There were a couple of interesting letters to the editor on Measure P this morning. Sue Greenwald, the former Mayor and three-term city councilmember writing that Measure P is nearly cost-free, while Ed Schroeder, the UC Davis Professor writes in to defend CBFR, an irony given that it was Sue Greenwald who once brought Professor Schroeder to the table.
Sue Greenwald writes, “I am grateful that The Davis Enterprise editorial board took the time to talk with both sides of the Measure P issue, and that they agree that we should either dispense with the new water rate structure (the consumption-based fixed rates), or at a minimum switch from a summer month to a 12-month basis.”
She adds, “However, I don’t understand why The Enterprise has repeated the city’s over-the-top scare tactics as fact. None of them has validity.”
“I can say categorically: The water project will not fall through simply because we roll back the rates to last year’s levels for a few months, and that is all that would happen if Measure P passes. It would take only a few months to complete a new Proposition 218 process,” she writes.
It is an interesting tactic going on by the pro-side of the Measure P debate. It follows the comment by John Munn in the last debate, “Measure P is not about stopping the water project. We voted on that in Measure I.”
There has been an evolution in the thinking on Measure P. Originally, the opposition discounted Measure P, arguing we would simply pass new rates. That calculus changed drastically when a city-analysis forecasted more dire consequences if Measure P passed. That forced the opposition to take the threat of Measure P more seriously and has now put the pro-side on the defense.
Sue Greenwald now is taken to the position that if Measure P passes, it only changes the rate structure. The problem that the pro-side now has, is that any new rate structure would still have to produce the same revenue.
Ms. Greenwald argues, “The City Council could promptly give firm instructions to a professional rate consultant (not yet another citizens’ advisory committee) to come up with a new rate structure that approximates an equal cost per gallon both between individuals and across classes of users.”
She continues, “Any small resulting shortfall in revenue that might result from reverting to 2013 rates for a few months would be easily covered by our large water fund reserve. In the unlikely scenario that a bridge loan were necessary, the costs wouldn’t even show up as noise given the magnitude of the expenses of this project. Hence, the project wouldn’t fall through and there would be no associated costs or penalties.”
The city estimates that it would take 75 to 90 days to adopt new water rates. They argue, “Davis will not be able to proceed with financing of the DWWSP and will not have funds to proceed with the remainder of the Davis Water improvement projects.” The city would then “likely miss the opportunity to finance the DWWSP and other Water improvements at the lowest interest rates. This has the potential to cost Davis residents over $100 million in long term project costs.”
“The statement that Measure P could cause us to lose low-interest state loan opportunities is also false,” Sue Greenwald writes. “The city likely has lost its low-interest state loan possibility because the City Council made a poor choice by opting for a no-bid contract with a multinational company and the associated privatization of the operations. State law prohibits giving low-interest state loans to projects with privatized operations.”
However, here as well, her argument gets caught up with some problems. First, the city did not opt for a no-bid contract, though the process did end with a single bidder. Second, the operations are not being privatized so much as outsourced as the city still owns the surface water plant jointly, it has simply contracted to a private party to run it.
She concludes, “So yes, we have probably lost our low-interest state loans, and yes, that could cost the city more than $100 million if The Enterprise’s cost information is correct. Does it have any bearing whatsoever on Measure P? Absolutely not. The council and staff have known about this loan problem for some time. Not to have shared this knowledge with the public is bad, but it is unconscionable for City Hall to have used this problem of its own making as a campaign weapon against Measure P.”
If we take these arguments at face value, that the supporters of Measure P really do not believe its passage will kill the project, then the alternative is that they oppose CBFR. That puts them in an interesting place because the alternative to CBFR is a Bartle Wells fashioned rate structure which puts heavy emphasis on meter size which means that low end water users pay a disproportionate share of the new costs.
Given the water project, there is no avoidance of higher rates. The only question is who that burden should fall on. If you follow through the yes on Measure P arguments, it becomes clear that burden in their view should fall on low end users. In a companion article to this one entitled Who bears the burden of a Yes vote on Measure P? the Vanguard compares the relative burden on different groups of ratepayers under Bartle Wells and under CBFR.
In his letter to the editor in the Enterprise, retired UC Davis professor and consultant to the City of Davis on the wastewater treatment plant upgrade, Ed Shroeder lays out arguments that he believes refute some of the Yes On Measure P argument by defending the CBFR structure.
He writes, “Proponents of Measure P have raised four objections consistently to the consumption-based fixed rate water rate structure: 1) increased cost, 2) fairness to homeowners, 3) conservation will not lower cost and 4) the CBFR is too complicated. Consideration of each of these objections should be made in deciding whether to vote yes or no on P.”
“Since 1990, there have been several studies of our water supply, including one by the National Water Research Institute. The uniform recommendation has been that Davis needed to invest in a surface water source,” he writes and identifies, “Our individual bills will increase in coming years regardless of the rate structure used. The surface water project is a significant capital investment, wells need to be replaced and the overall system requires maintenance.”
“Fairness is always a matter of viewpoint,” he continues. “If the cost per gallon was constant, people living in condominiums might feel that subsidizing homeowners with lawns was unfair. The size of our water supply system is based on summer demand. A reasonable approach is to ask those most responsible for the size required to pay more for water.”
Professor Schroeder writes, “The tier system used by most communities addresses that issue by increasing the unit cost of water as use increases. Some communities, such as Santa Cruz, add a surcharge for out-of-city users as well. The Water Advisory Committee, after a long study ,determined that the CBFR structure was a more equitable approach to making the water rates fair.”
“Conservation will not significantly lower our bill under any rate structure. If we buy a car and leave it in the garage, our gas bill will be zero but we still must make the monthly payments. The same is true for our water system,” he continues.
Finally he adds, “The objection that the CBFR is too complicated is surprising. The calculations are quite simple; there is an example in our most recent utility bill and on the city’s website and there are only three numbers involved. For a community with the education level of Davis, this should not be an issue.”
—David M. Greenwald reporting
I’m new to this, so please excuse my naievete. But I have a couple of questions.
1) “That puts them in an interesting place because the alternative to CBFR is a Bartle Wells fashioned rate structure”. Are those the only two allowed rate structures, or would something like $X per gallon + $Y per gallon surcharge for the water plant be allowed? (Bartle-Wells, as I understand it, has a tiered system; my question is whether such a system, or CBFR, is legally mandated, or could something else like a fixed price per gallon/ccf be legally used.)
2) Prof. Schroeder is quoted as writing: “If the cost per gallon was constant, people living in condominiums might feel that subsidizing homeowners with lawns was unfair”. I don’t understand this. I would think that if the cost per gallon were fixed, people would be paying for what they use (plus a system maintenance/provisioning fee based on what they use). How does that subsidize others? Can someone clue me in?
Good questions Polly. Regarding your question 1) there are lots of different possible rate structures that can be used. None are legally mandated. The problem is one of timing. If Measure P passes then the rates automatically revert back to the old rates that were in effect at the beginning of 2013 (and all through 2012, 2011 and 2010), which is a rate structure very much like Bartle Wells. There would need to be a new rate structure in place ASAP because of the fiscal risks associated.
What are those fiscal risks? Right now the approved rate structure generates the following revenue stream … $12 million of revenue in 2013, $16 million in 2014, $18.5 million in 2015, $21 Million in 2016, $22 Million in 2017, and $25 million in 2018. Those six numbers add up to a $114.5 million revenue requirement over the six year period. If Measure P passes we revert back to the old rate structure and the revenue stream is reduced to $10 million of revenue in 2013, $10 million in 2014, $10 million in 2015, $10 Million in 2016, $10 Million in 2017, and $10 million in 2018. The $114.5 million revenue requirement matches the $114.5 million in aggregate costs that the water district will incur after issuing debt (at an assumed interest rate of 4%) to pay the capital costs of the surface water plant construction. The aggregate revenue stream of the old rates that become active if Measure P passes is only $60 million. That leaves a $54.5 million shortfall. With that kind of shortfall, no lending institution is going to lend the City the money it needs to build the plant. Absent the money to pay for the plant construction, how will the as-designed plant construction proceed.
So the City simply won’t have the time to explore a lot of rate structure options. They wll need to act quickly.
To address Polly’s 2nd question, which is addressed in the 6 month CBFR rate structure, the cost of a gallon of non peak use water (Nov.-April) is significantly less than the cost of a gallon of peak use water (May-Oct.), which are usually used for lawns and the like, once we build the new system. The reason the 6 month CBFR was adopted (so far, measure P might change that) is because the reason to build the new system was that at peak use is when we would most likely fall short of water supply, hence the supply fee that makes May-Oct. water more costly than Nov.-April. So if we all paid the same per gallon regardless of when it is used, we would be subsidizing those who use more during May-Oct.
Hmm . . . then why not simply increase the price of the gallon/ccf of the water during those months? Why use the scarcity of water in the peak time as a justification to add in last year’s peak water usage as a “supply fee” rather than just saying, “Water is more expensive during times of peak usage. So we will charge $X per gallon in the off-peak time, and $X + $Z during the peak times, and a fixed $Y for supplying the water?”
What bothers me is (1) using last year’s usage as a basis for a “supply fee” during this year — if I buy a house, either I will be changed for the previous owner’s usage, or the previous owner will have to pay the supply fee based on the previous year; otherwise, there may still be a fiscal crisis — and (2) calling it a “supply fee” rather than a cost of water. I’m not real good with word games.
Because in order to finance the water project, it has to have a fixed cost. The current system is to use meter size as a proxy for that fixed cost. The CBFR, actually uses consumption as the fixed cost in the system. The result is that you get a much more event distribution of costs.
David, I appreciate your note but it doesn’t answer my question. Why does CBFR use last year’s water consumption during the peak period rather than the current peak period’s consumption?
It’s a logistical issue. Either way is a proxy. By using the last period, you have a full six months to use as a proxy. Obviously the current period cannot be used prospectively.
“Either way is a proxy” — which is my problem. Why not charge for the actual usage? “By using the last period” — which may be someone else’s usage; seems to me a lot fairer to use the current period, and do it month by month, rather than a past aggregate. The current scheme also *dis*courages conservation, because I don’t feel the impact until 6 months *after* my usage. Month-to-month would let me correct much more quickly, solving the problem that (I guess) CBFR is to solve.
Polly, I have devised a way to maintain the revenue precisely as needed and bill for the water used when it is used through all seasons, not looking back. Matt and I will be presenting this method to the Utility Rate Advisory Commission ASAP.
As Ed Schroeder pointed out in his Enterprise letter, we are going to have to pay more in the future for our water no matter what projects ultimately are required to meet our needs.
The beauty of the CBFR is that it simultaneously allows us control over how much we pay for water and challenges all of us to consciously decide how much water we use. If the price paid for water is the very most important issue for a single family home owner, then the CBFR allows that homeowner to reduce their water use to a very low level equal to an apartment dweller. If a homeowner values gardening, or even expanses of lawn, he/she will know that it will have a price tag. The decision to garden as if one lives in southern England will and should have a high price tag for all of us who live here where the average annual rainfall is half of that.
It is a crying shame…A CRYING SHAME…that a town like Davis, with the educational demographic we enjoy, seems to have succumbed to taking the easy way out of facing this challenge and opportunity by sticking our heads in the sand and trying to convince each other that Measure P is about “fairness”. The CBFR is a bold and innovative plan to more fairly apportion costs for a basic public service.
Very well said. I too am appalled at people being unwilling to take a real look at and understand CBFR. Then if you disagree with it, give a constructive reason, and engage in the process, but saying it is too complicated is a real cop out.
Sue won, hands down.
BTW, anyone reading the drought news reports and hearing about California’s long term restrictions against using river water for urban areas ?
I call the new water plant a “straw to nowhere.” When they stick that straw in the Sacramento, we won’t have rights to the water.
The plant is the worst environmental, fiscal and political disaster this town has ever experienced.
Mike, I was thinking about that today. For this to have a chance of being worthwhile we need aquifer recharge during the months where flows in “normal” years allow water to be removed during the wetter months and stored for the drier ones. This year probably would not have been one of those years.
We are not going to be able to conserve our way out of high rates, but we are probably going to have to conserve ourselves out of the situation of simply not having enough water.
Well said Donna. Very well said!
dlemongello on May 11, 2014 at 6:24 pm said, “We are not going to be able to conserve our way out of high rates, but we are probably going to have to conserve ourselves out of the situation of simply not having enough water.”
That is a statement even Michael Harrington or Sue Greenwald should be able to understand and appreciate!
At times. But if we reduce our use of the shallower wells, those aquifers can recharge. And in a declared drought emergency, the governor can waive water quality regulations, allowing the city to return to those shallower wells. It would probably be a rare phenomenon; extreme droughts such as 1977 and 2014 are much less common than, say, the flooding of 1982 and 2015.
Ultimately, Davis and Woodland will be better positioned than most water districts to deal with episodic droughts.
NOAA is being cautious, but everyone else is seeing a possibly very strong El Niño for 2014 (winter 2015). http://www.wunderground.com/blog/JeffMasters/an-el-nio-coming-in-2014
Donna: Since when was the project EVER about a water shortage? It was always a project about improving water quality. And if we are worried about aquifers and water supply why are new developments not paying a significant chunk of the new project like the Cannery? They are going to opt out of the project and use well water. And why is the University staying on ground water? The project is ill conceived, but the rates don’t have to be.
There is no way that a homeowner can reduce their water use to that of an apartment if they want to irrigate trees, but that is O.K. if we use more we should pay more, but no 4 or 5 times more. Dr. Siegler has done some very good analysis showing the project costs are largely fixed and not driven by summer capacity.
It was about increasingly tight state water quality standards as well as about the insufficiency of the deep aquifer as a long-term supply.
The university will be buying water from the city. They also have the advantage of prior rights to the groundwater. Hence the EIR and agreement that limits the city’s total deep aquifer pumping.
To the contrary: every groundwater option that ‘solved’ one problem had its own set of subsequent problems. Only the surface water option solved all of the problems of water quality and supply.
Hi Pam, running wells 24/7 is not a secure supply. Dr. Siegler’s calculations have some very strong merit for advocating 12 month CBFR, but so do the calculations that advocate for 6 month CBFR. Frankly I think something in between would have real merit, but that would add a 4th component to the bills and people already are not understanding the 3 part approach.
As for the Cannary, my opinion is worthless, but I don’t think they should be allowed to opt out. They will be part of this city and should participate as such. Will building and running their own wells really cost less than using the new system?
Pam, if you check with the UC Davis Cooperative Extension Service or Don Shor at Redwood Barn or Rob Cain, the City’s Urban Forest Manager, you will find that Davis’ urban forest gets more than enough water from irrigation runoff from the lawn and garden irrigation water that Davisites currently use … probably too much water. In addition, given the very shallow ambient water table under Davis, during substantial portions of the year the roots of most mature urban forest trees are able to get any water they need from the underground water table.
So, unless you are talking about the discretionary decision to add fruit trees and ornamental trees to your yard for aesthetic and/or food producing reasons, trees are not major contributors to any lot’s irrigation needs regardless of whether the lot is a single family residence or a multi-family residence. Bottom-line, if any one of us makes a discretionary planting decision, whether lawn, plants, shrubs or trees, we should be responsible for the maintenance costs associated with that discretionary planting decision.
David; “Not so much as privatized as outsourced”? According to state law Davis has privatized the operation (non public employees).
Apparently the state felt strongly enough about this to make a law ; are you at odds with those who are trying to protect workers?
I’d like to see the wording of the state law you reference? Because in my mind outsourcing and privitization are different things.
Pam, can you provide us all with links to that (those?) state law(s). We would all benefit from being able to read about those laws.
BTW, are you saying that the workers for private companies are not workers? Said another way, are public agency employees the only employees who are workers?
David
“I’d like to see the wording of the state law you reference? Because in my mind outsourcing and privitization are different things.”
Can you explain the distinction that you are making ?