While the city council has taken additional steps to ensure full transparency in the propsed water rate hike and the Proposition 218 process, going well above and beyond the statutory requirements, we remain concerned that the council has not fully assessed the impact of those rate hikes.
Last week, among other instances, we noted the disconnect in the business park land strategy versus the desire to convert Cannery Park into residential and mixed uses. In particular, we noted that the city’s one existing and reliable business park site of 100 acres would be converted to mostly residential uses, at the same time the council and city are moving toward a serious approach to economic development.
Similarly, we question the wisdom of raising water rates, in a time of great economic hardship where many businesses are still struggling at the bottom line, at a time when the city is struggling right now for sales tax revenue and hoping to expand its economic development.
There was a thought-provoking letter to the editor this past weekend in the Davis Enterprise asking about the impact of the water rate hikes on business.
It began by questioning the following, “I don’t know whether the Davis business community has thought through the likely effects if people end up paying $400 a month for water (as a result of tiered rates).”
In fact, strangely, the business community has been very quiet on this issue, outside of one laundromat that complained last year at the ten-percent rate hike. Since then, both they and the business community have been very quiet.
It was last May when Max Connor from Laundry Lounge spoke before council, frustrated that the City of Davis continues to put burdens on his business and raise his bottom line, which he finds more and more difficult to handle.
“I’m here to state my frustration as a small entrepreneur in Davis,” said Mr. Connor speaking before the Davis City Council. “It’s harder to survive in this economy the more our bottom line gets raised but two years ago the same rates were raised for essentially the same reasons.”
But now, facing a far larger rate hike, silence from the business community.
What happened?
Writes Shneor Sherman, “Restaurant business is likely to drop precipitously (and their prices will have to increase considerably). Other Davis businesses will also see lower volumes of sales. Swimming pool owners? They’ll have to fill the pools in with dirt when they can no longer afford the cost of water.”
They continue, “And if you try to conserve? Your rates will have to increase to pay the fixed costs of this unnecessary and foolish expenditure. In other words, if everyone conserves, rates will increase even more.”
It is an interesting point. What happens to businesses if their bottom line increases by threefold for water? Has anyone explored it?
But then again, wouldn’t the business community know best, shouldn’t we have expected more of an outcry, considering the recommendations of the Economic Development Strategy? This included suggestions such as “streamlining and simplifying the permit process” because the requirements are said to be too onerous, and yet this huge increased cost has come and gone with nary a murmur of protest.
Maybe they know something I do not. I know every time there is a tax increase, small business is the first to complain. But this is a large increase in costs, and yet nothing.
—David M. Greenwald reporting
Perhaps the businesses are wrestling w the same questions citizens have:
1) Will it be cheaper to put off the water project, or implement it now? In other words “pay me now, or pay me later”…
2) To what extent do we need the surface water project? What if the deep level aquifers don’t provide the necessary water?
3) Can our partner Woodland hold up its financial end of the bargain?
I’m sure others can add on more items to this list…
Everything is about perception, politics and emotional outrage in this town David. Not actual policy and effect. Duh! =p
[i]”I don’t know whether the Davis business community has thought through the likely effects if people end up paying $400 a month for water (as a result of tiered rates). … Restaurant business is likely to drop precipitously (and their prices will have to increase considerably).”[/i]
When I read that letter, I took it at face value. However, in thinking about it a little more, a few questions come to mind:
1. As a percentage of gross expenses, how much is a restaurant’s water bill?
2. Assuming that much of the water used by a restaurant is for washing dishes, might the rise in the cost of water incentize some restaurants to invest in dishwashing machines which use far less water? Do such machines exist?
3. If this added expense is crippling to the bottom line for restaurants in Davis, will the owners be able to pass along the costs? Or will a result be lower rents?
I really don’t know the answer to those questions. Yet I suspect restaurants in Davis (as well as most other types of businesses) will survive this tripling of the water rates.
I think those most likely to be harmed the worst will be lower income homeowners, particularly the elderly, who have relatively large yards which require irrigation. People with more money will try to adjust by taking out lawns and replacing them with xeriscaping.
[img]http://www.bhgrealestate.com/LibraryImages/Live/Articles/Landscapes/Hardscapes/xeriscaping400.jpg?n=1426[/img]
But people with less money will likely just stop watering their flora. Even renters in Davis with less money will be hurt by a tripling of the water rates, simply because it is inevitable that a lot of the cost of this change will be passed on to them.
Incidentally David, what’s your take on our wastewater discharge concerns? Both in terms of treatment costs and social responsibility? It seems pretty clear water costs would go up regardless. And people want the water quality fixed. It’s a priority to folks how bad our water is.
Seriously, one of the top reasons my significant other refuses to live in Davis is how awful the water is here. And who knows if it’s related, but over the 6 years I’ve been here, I’ve suddenly developed dry skin and eczema problems.
Also, linking the concerns about the permit process is a rather gigantic stretch. “streamlining and simplifying the permit process” is an incredibly broad statement. While costs are one part of that, frustration over permitting processes is often about a lack of certainty or arduously long process.
I do not believe that postponing the project will “cost more”. Phasing in projects is a typical way to keep costs down. Trying to pay off the wastewater project before we begin the surface water project should not be dismissed out of hand. I believe the regulatory risks are wildly exaggerated.
As I have written before, this issue is one of risk/benefit analysis. Many of our residents can afford to pay for softer water.
But average water/sewer/garbage bills of $2,300 a year could put our needed city and school supplementary taxes at risk. Remember, our last school tax passed by a hair. (It will also be an obvious risk for low and fixed-income residents.)
I’d recommend keeping an open mind and reviewing options, given the risks/benefits. There are middle ground measures that we might want to consider. For example, we might want to consider paying off our sewer bill more quickly and buying the easements for the surface water project, but attempt to postpone the bulk of the surface water project costs until the wastewater treatment plant is paid off. And if we go forward with the project now, we should take the most aggressive possible cost-cutting measures. (We already have our river water rights secured for at least forty years).
Before going forward with this project, we have to assure that Woodland is willing and able to do what we are doing. Has Woodland already raised its rates to fully cover their past water and sewer water upgrades? Will they be as forthcoming with their citizens as we are being with ours about Woodland’s expected annual yearly average single-house water bills when payments for sewer/water infrastructure and water purchase costs are finally reflected in their annual water bills?
The risk here is that the bonds will not be issued at one time, and citizen referendums can come at any point in the rate increase process. We could lose a huge amount of money if either Davis or Woodland issues bonds, and either faces a referendum on the rates which makes it impossible to finish the project, or if either cannot issue the second bond in the series. We definitely need more fiscal due diligence.
[i] I know every time there is a tax increase, small business is the first to complain. But this is a large increase in costs, and yet nothing.[/i]
I don’t know of local businesses that have complained about tax increases. In fact, I think local businesses have supported local tax measures.
Dr. Sherman’s letters are always entertaining, but in this case it is more notable for its hyperbole than for its accuracy.
[quote]I do not believe that postponing the project will “cost more”. Phasing in projects is a typical way to keep costs down. Trying to pay off the wastewater project before we begin the surface water project should not be dismissed out of hand. I believe the regulatory risks are wildly exaggerated.[/quote]
I believe the people in charge of this project have already said they will be attempting to do this project in phases to keep costs down…
[quote]Before going forward with this project, we have to assure that Woodland is willing and able to do what we are doing. Has Woodland already raised its rates to fully cover their past water and sewer water upgrades? Will they be as forthcoming with their citizens as we are being with ours about Woodland’s expected annual yearly average single-house water bills when payments for sewer/water infrastructure and water purchase costs are finally reflected in their annual water bills?
The risk here is that the bonds will not be issued at one time, and citizen referendums can come at any point in the rate increase process. We could lose a huge amount of money if either Davis or Woodland issues bonds, and either faces a referendum on the rates which makes it impossible to finish the project, or if either cannot issue the second bond in the series. We definitely need more fiscal due diligence. [/quote]
This is a fair point…
[quote]I believe the people in charge of this project have already said they will be attempting to do this project in phases to keep costs down… E. Roberts Musser[/quote]No, the project is currently slated “full steam ahead”.
When I say that the regulatory risks are exaggerated, I mean that we have many ways to approach meeting our requirements. We could drill more deep aquifer wells, we could replumb our intermediate wells for parks landscaping needs, we could introduce ordinances requiring water softeners which discharge less salt, and we are making progress on the surface water project with the environmental work we have done, buying easements, etc.
Sue: Doesn’t that just kick the can down the road though? Rather have a more permanent solution. Softeners also aren’t without problems of their own, as well.
Justin,
The problem is that we have to build a new wastewater treatment plant now, in the midst of the worst economy since the Great Depression. Building the surface water infrastructure and a new wastewater plant at the same time is extraordinarily onerous. Ideally, we would want to build the surface water infrastructure (plus acquire easements for the surface water project) after the wastewater plant is paid for (perhaps paying off the wastewater plant a bit earlier than otherwise). That would keep the utility bills high, but within reason over about two generations.
The surface water infrastructure is like the Roman aqueducts. For all practical purposes, it will last essentially forever. One cohort during a 30 or 40 year period will have a lot of trouble paying for both projects at once, especially during the worst economic period since the depression.
The potential fiscal effects on the city and school district can’t be overestimated. If feasible, phasing the projects would be wiser. Sometimes, picking up one up one can and kicking the other can down the road is the best fiscal policy, if it is part of a sustainable plan.