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The Cost of Water and Other Tales

Water is a major concern when you live on the edge of a desert. It is not cheap, and the price keeps going up. The city council is getting ready to raise the rates again. The Standard times is reporting the story here.

So how do we compare to other cities in Texas? The Texas Municipal League surveys and compares water rates state wide every year. They publish the results here. This doesn't include all Texas towns and cities, but does have enough, including most of our benchmark cities to be a useful tool. So how are we doing? Well the 2004 average cost of 5,000 gallons of water in cities our size is $18.66 and we are at $14.68. At 10,000 it is $30.67 average and $26.61 for us. Midland costs $17.95 for 5,000 and $29.95 for 10,000. Odessa $16.79 and $30.79. Tyler is cheaper at $14.14 and $25.44. San Angelo's official rate is here in the code of ordinances. The rates on the city website haven't been updated since 2003, so don't use them.

After the proposed rate hike proposed by the council, we would be very much above average with $19.25 for 5,000 and $33.75 for 10,000 which leave Denton, Lewisville and Round Rock higher than we are. If we go with the competing plan from the Mayor, we pay $16.83 and $28.58, which still leaves us at just about even with our neighbors, and still less than average. Still, there is more that can be done.

An interesting part of the water fund goes to pay the city something called PILOT. This is Payment In Lieu of Taxes. Some years ago, (1996) the water departments funds were restructured to look like a privatized company. The pilot payment was supposed to reflect the property tax a private company would pay. With a total taxable property value of $81 million, the tax equivalent works out to about $704 thousand a year at the .8663 per hundred tax rate that is current. My question is this: The city has been liberal with tax abatements to many of the large companies here, especially when they are having financial problems. Why isn't the city giving itself an equivalent tax abatement? If it's good enough for Sitel and Bollman, why not the water department?

The water fund has to pay for the entire cost of supplying water to the city residents. One thing that might help, and that has not been looked at in enough detail, is using the 1/2 cent sales tax money to pay for some of the capital projects that are now being paid for by water fund. This might take putting the amendment to the sales tax before the voters, and it is too late to get it on the may ballot, but this was overlooked in the water rate planning.

Another concern that has been raised, but only partially addressed is the impact on our citizens that are on fixed incomes. In researching water rates in comparably sized citys, I have found a number of them have a special rate, called something like the senior rate, for water customers that are on fixed incomes. This rate is lower than the standard rate, and is used to lessen the impact of water costs on these citizens. Why has the city not considered adding a senior rate, which would stay at the current rate, as part of the new rate plan? That way, our citizens that would have the most trouble with a rate increase would be protected.

So what is my conclusion? The city got itself into this mess by not anticipating the effects of a very successful conservation campaign and a very wet summer. When they set the rates in 2003, no adjustment was made to the lowest base rate, so when water use was low, the revenues were too low. They set rates based on the same old pattern, with no looking at alternative rate structures or funding. Now that we are not in drought conditions, and we are anticipating a somewhat normal rainy season, we should be selling enough water to cover the expenses with the mayors proposal. If the city keeps growing, the increased sales and usage will help as well. There are factors, such as state and federal conservation goals, that will drive down our water use. All plans are a gamble but we can do better at hedging our bets