Loading...
HomeMy WebLinkAbout06-12-2013 PH4 Mattingly 06-06=E11 aft;4council MCMORAnbum city of san Luis oBispo, utilities aepaRtment AGENDA DATE: June 6, 2013 CORRESPONDENCE Date P Z i ItemkEELf- TO: Mayor and City Council VIA: Katie Lichtig, City Manager FROM: Carrie Mattingly, Utilities Director SUBJECT: Response to Correspondence from Richard Schmidt I received a request by a Council Member to provide information related to correspondence written by Richard Schmidt. We did our best to identify the key points from the correspondence. If I missed the mark, don't hesitate to send me an email requesting additional information you need to answer questions related to this issue. Or, feel free to send any community member to the Utilities Department — we'd be happy to provide them factual information from which they can draw their own conclusion. Many of the percentages and dollar amounts cited in the correspondence are not accurate. Rather than rebut every point, the following information is provided to give you a factual summary of the main issues we drew out of the correspondence. Issue: Rate increases related to the Nacimiento Pipeline Project Information: Council has a long history of supporting incremental rate increases over time instead of large increases all at once. In February 2004, staff presented information to the City Council that stated rate increases of at least seven percent were going to be needed for six years to support the revenue requirements of the Nacimiento Pipeline Project. This was an estimate based on the best information at the time (design and construction costs were estimates) and did not include other CIP expenses (example: water treatment plant upgrade) that would occur during this period of time. The 2013 water rate projections show that rates are stabilizing and any additional increases after the next two years will be moderate. Issue: Commitment to water conservation Information: The City Council and staff continue to support water conservation and offers many tools on the city website to assist water customers to effectively and efficiently use this precious resource. Staff also assists customers in person. Our community does a great job conserving water. Promoting water conservation, while an important component of the water rate structure, is not the sole purpose of a water rate structure. As we learned from the study sessions conducted in 2012, the guiding principles behind water rate structure design take into account a Council Memorandum June 6, 2013 Page 2 variety of factors. Additionally, the structure must meet the legal requirements of Proposition 218. Water conservation is one of the top five goals Council decided were important for a rate structure. Here are all of the goals you agreed upon for a rate structure: 1. Revenue stability and predictability 2. Stability and predictability of the rates 3. Easy to understand and administer 4. Fair allocation of costs 5. Water Conservation Issue: Proposed water rate structure perceived inequity: changes to tier pricing, elimination of three tier pricing, and fixed base fee Information: Up until 2007, the water rate structure had two tiers for all customer classes (i.e. single family residential, multi- family, and commercial). The proposed rate structure returns to this two tier composition in order to meet all five of the Council goals for a rate structure. The current structure's third tier only applies to single family customers. Separating out a specific class of customers for an added charge or tier creates issues with the fair and equitable allocation of cost. The proposed rate structure is aligned with Proposition 218 requirements. During the water rate structure study (five public study sessions and one business meeting) we learned that during our peak irrigation month, 413 out of 14,800 customers were in the third tier. We also learned that the assumptions we were making related to lower income households (that they used the lowest amounts of water) were not supported by the data. We verified we had programs in place that offer assistance to lower income households. We did understand the change to a structure that included a monthly $5.00 base fee (regardless of amount of water used) would impact the lowest water users the most during the first year of the new water rate structure and also learned that about 80% of the cost to run the water utility was fixed. Council had spirited discussion regarding these points and worked hard toward balancing all five goals. We also acknowledged, from the first study session, in any rate structure change there would be "some winners and some losers ". On the wastewater side, the rate structure already includes a fixed base fee plus a volume charge. Issue: Lack of information on water bills Information: There used to be no information concerning the pricing tiers on the water bill. When the City moved to a new utility billing system at the beginning of 2011, a complete breakdown of the water charges by tier were included on the bill. Also included on the bill is up to twelve months water use history which helps the customer visually see their water use trends. Council Memorandum June 6, 2013 Page 3 Issue: Transparency related to Water Fund expenditures Information: There have been open houses after work hours offering one -on -one consultation with community members, ads in the Tribune, the fund review and budget is posted on the City's website, and information is shared in the Resource. The Utilities Department staff would be delighted to talk with any one and share information that will help answer people's questions related to where the money goes. Issue: High cost of wastewater treatment Information: The type of technology used for the City's treatment plant was chosen because it was the best option for complying with the state's water quality discharge requirement to San Luis Obispo Creek. Alternative technologies such as marsh -based final treatment were evaluated but deemed inadequate because of land requirements (lack of land available), soil types for percolation, and the inability to reclaim the water from this type of system for reuse within the community. The City continues to pursue sustainable technologies in its wastewater treatment process by incorporating energy efficient equipment and processes into the Water Reclamation Facility. An example is the most recent private /public partnership with PG &E to design and build nine energy measures including the use of methane gas produced during the treatment process to generate electricity. Again, don't hesitate to give me a call should you have any questions I can assist you with answering. Attachment Email correspondence from Richard Schmidt From: rschartidt@raiii.or, fe'se hsrtidt gt;r:ain.org) Sent: Wednesday, June 05, 2013 11:45 AM Pacific Standard Time To: Marx, Jan; dcar en @slocit .or ; Ashbaugh, John; Smith, Kathy Subject: Water Rate Increase Council Members, I am deeply disturbed and dumbfounded by the proposed rate restructuring for water, and the "increases" for water and sewer service. They are a major shift in city policy, regressive, mean, and totally unnecessary. What they do is shift the cost of water service off the shoulders of big users and developers and onto the shoulders of we resident schmucks who are trying to do what you've asked us to do: conserve water. This is fundamentally unfair. 1 hope you will rethink. I object to both the water and sewer increases. My thinking is laid out in the letter below. For your possible convenience, I've also appended the letter below as a word file, which will make its formatting easier to read. Richard Schmidt Dear Council Members: How a city assesses fees to its residents tells a lot about a city's values. Your plans to raise fees for residential water and sewer says a lot about our city's declining values of fairness and equity, as well as its actions towards the environment. To assess what the increased water fees meant, I cracked some numbers, figuring out base water bills (minus city utility tax) for four different hypothetical users. Here's what I found. For simplicity, I've rounded to the dollar. (Water is sold by the "unit," 100 cubic feet, about 750 gallons.) • For a seriously conserving consumer, using 5 units per month, the bill goes from $31 to $38, $7 more, about a 21 % increase. • For a conserving household using 8 units, the bill goes from $47 to $58, $11 more, about a 23% increase. • For a non - conserving household using 25 units, the bill goes from $189 to $192, a mere $3 more, less than a 2% increase. • For a waterhog using 100 units, the bill decreases from $915 to $807, a whopping $108 less, a 12% decrease. A number of observations can be made- - Despite the city's claim, this is NOT conservation -based pricing. One doesn't have a SALE for large users and claim this encourages "conservation." • The new pricing is an effort to hit the small guy where it hurts, and to curry favor with water wasters. It represents a fundamental shift of fairness in billing by shifting the costs for our water system downwards, which is unfair, undemocratic, and disrespectful of most residents. How can a reduction for top users mean they're actually paying their fair share? • A good city doesn't make such regressive unfairness a matter of policy. • A good city doesn't proclaim it stands for conservation, yet practice the opposite. This perverse water pricing is what the city calls "rate restructuring." There are three moves the city plans to effect this change: • First is increasing the cost for the lowest tier of water usage, what's commonly called the lifeline tier, by about 4 %, while decreasing the top tier, the profligate user's top rate, by 16 %. • Second is eliminating the current three -tier pricing schedule, by which the unit cost of water increases significantly the more one uses. In its place will be a two -tier system that catches almost every household in its top tier. Why this bizarre regressive, anti - conservation move? • Third is the imposition, on top of rate increases for some and rate reductions for others, of a regressive "fixed" monthly fee which hits the poor hardest, and would be totally without purpose if true conservation pricing had large users subsidize lifeline usage in return for their water - wasting habits — which, by the way, is actually how city water rates worked till now. It appears this is a deliberately regressive move by the city's elite- focused power structure. The $60 annual "fixed" fee, on top of raising the lowest tier pricing, is plain meanness on the city's part. It is completely unnecessary; till now, all costs were recovered through water rates, which is how it should be in a fair system. Any fixed fee on top of paying for water use is regressive, not progressive. You call this fee "fixed," but it will go up every year, just like the regressive "fixed" sewer fee instituted several years ago. The sole purpose of the fixed fees is to shift the costs of providing water (and sewer) off the shoulders of those who demand the most and onto the shoulders of those who use the least. Water pricing doesn't have to be so mean and regressive. In a well -run city it wouldn't be. A small southern California water provider I'm familiar with has low -key talk about conservation, and a pricing system that produces conservation. Instead of SLO's two tiers, this provider has five. The lowest is lifeline - priced at $1.50 per 750 gallons (SLO's new equivalent: $6.56). Prices escalate through the tiers: 33% higher for tier 2, 80% higher for tier 3, 177% for tier 4, and a whopping 243% for tier 5. In SLO, under the new rates, the spread between bottom and top tier pricing is a piddling 25 %. The proposed rate restructuring indicates this city isn't interested in conservation pricing. Further evidence the city really doesn't care about conservation is the lack of information on water bills. The bills contain no way to understand the pricing of tiers, and the volume of water one is entitled to from each before prices jump up. (At the conservation- priced water provider I refer to above, everything's clearly explained on the bills.) The 2011 Grand Jury noted this deficiency, and asked the city to make its bills more informative. The city refused, and thus foregoes the most obvious method of creating conservation consciousness, something PG &E's known and done for decades. As I said, all indications are the city doesn't care about conservation. Seemingly, the city's answer to the Grand Jury is that you'll just dilute, and eventually do away with, tiered conservation pricing altogether. That certainly is the implied direction behind this "restructuring." As for sewer rate increases, this comes about as an unfortunate result of the city's refusal to use comparatively inexpensive state -of- the -art biologically based final stage sewage treatment rather than the engineers' preferred energy - guzzling chemical factory approach. With very little understanding of alternatives, the Council has given staff direction to continue unnecessarily on this misguided anti - consumer /anti - environmental path rather than undertaking system improvements that would be sustainable both for the earth and for rate payers. This is tragic, and it represents unimaginative "leadership" on the Council's part. You need to go back to the planning board for the sewer upgrades used to justify the proposed rate increase, at the same time unwinding some of the toxic and economic damage created by your existing high -tech engineered system, and come up with a more reasoned and reasonable approach. Heck, this isn't rocket science: the TVA developed these methods decades ago so that ratepayers wouldn't perpetually be in hock to equipment manufacturers, electric utilities and chemical companies. In conclusion, I'm asking: 1. That you not adopt the current proposals for water and sewer rate increases /restructuring. 2. That you develop instead a water rate regime that INCREASES CONSERVATION PRICING ABOVE THAT IN THE CURRENT 3 -TIER SYSTEM, 3. That you reject the very idea of having a regressive "fixed" fee on top of water use - based fees, and that instead you resolve that use -based rates will continue to support our water system. 4. That you carefully review what the water fee structure is used to pay for, and that you eliminate from the fee structure all costs associated with non - productive garbage, like the perennially annoying publication "Resource" which is paid for with our utility user fees. (I'll wager you could cut our bills by about $25 per year just by killing "Resource. ") 5. That you engage with competent conservation- minded, environmentally - conscious, sustainable -rate advisers to rethink how the city deals with its sewage treatment responsibilities prior to undertaking any tertiary treatment "improvements" that will lock us into more high- energy, high- impact, perennially- more - costly approaches to sewage treatment. 6. As part of the above, I'd hope you'd create a sewage fee structure more like conservation -based water fees rather than vice versa; i.e., use -based without any fixed fee (the latter, recall, was an interim step between a totally -fixed fee regimen and a use - based fee system). Thank you. Richard Schmidt