Thursday, February 12, 2009

Water Rates

I drafted this entry before Christmas, but chose to sit on it as emotions were running high at the time. I post it now so that the record will be complete.

While I was out in January, the Council voted -- wisely, in my opinion -- to flatten the culinary water fee structure and reduce the impact to the highest users. It did this by removing $375,000 of annual depreciation from the cost-recovery model, but leaving $425,000 for the same. (The original depreciation budget was $800,000.) This leaves the City vulnerable, insasmuch as additional revenues will need to be generated to maintain the culinary system as it wears out -- but if this keeps our business climate healthy, we will probably come out ahead.


Tahitian Noni. McDonalds. Wendy's. Durfey's Dry Cleaning. Parkers.

Many of our city's largest, best beloved, or longest established businesses are also among our 40 largest water users. This is not to suggest that they consume water wastefully, but they do supply water-intensive services to thousands of customers each month and so rack up a large bill.

The new water rates took effect in November, but will not be felt until the first meter reading in March. Most of these top 40 users will see increases as large as 600 percent. (I note parenthetically that American Fork issues 900 commercial business licenses annually; of these, only forty will see increases of this magnitude.)

Why did the City enact such punishing rates? Do the rates hurt businesses disproprotionately? Should more of the cost be shifted to residents (who already face a 300 percent increase in their household water bills)? Should the City consider a flat rate instead of the current structure which increases with usage? Does the present City Council just have it in for business?

No, it doesn't. But I can't comment further without first discussing the background.

When voters approved the pressurized irrigation bond in 2006, they also voted to triple their water bills. This increase came from two components: the addition of the pressurized system with its associated construction and delivery costs, and a simultaneous increase to culinary water rates. The new rates were made public in the voter information piece which was mailed to all households. This piece was also placed on the City Web site and published as an insert in the American Fork Citizen.

But for a minor tweak (fifteen cents per household per month), the rate schedule as it appeared in the voter information is the same as the structure now taking effect. It is a tiered schedule which charges a base rate of $14 for the first 6,000 gallons, then charges overage rates. Overage rates start at $2 per thousand gallons from 6,000 up to 8,000 gallons; tiers climb from there until the rate hits $6 per thousand gallons for usage above 200,000 gallons per month.

The purpose of the tiered structure is to promote conservation of culinary water, a commodity which has fallen short of need in American Fork since 2006.

In other words, the shortage is the reason for the rate increase. Because of the shortage, water became expensive in American Fork in 2006. By then, the City's water supply was maxxed out; it could no longer supply the city's needs without additional infrastructure and supply. The creation of the pressurized irrigation system meant that culinary water would be available once again in plentiful supply. Households and businesses could then continue to consume according to their customary patterns.

Absent the pressurized irrigation system, the City would have had to start denying building permits and many of the businesses named above may well have had to leave the community -- either for lack of water or for lack of rooftops and customer base.

The need had been discussed and debated since the 1980s. In 1988, the system was estimated to cost the City $4.6 million. That figure would have created the initial system for a much smaller community; expansion for growth would have been entirely paid by new development. By 1994, that initial cost had risen to $9 million. 2002 costs were estimated in the $20 millions. The City Council actually approved a backbone system in 2002, but never implemented it.

I did not join the Council until 2006, so I cannot comment on this or on any other forces which led the City to procrastinate until costs ran to the $48.95 million of the 2006 bond.

Nevertheless, these two facts together account for the high water rates taking effect this year: First, that American Fork procrastinated the decision for nearly two decades, and second, that voters approved the current system and rates in 2006.

Still, it came as a shock when the City warned the commercial water users what they could expect in their April bills. Their protests, and the backlash of public opinion that has followed the media coverage, suggest that many have forgotten what it felt like to be out of water in 2006. We seem to have forgotten how voters first clamored for action in the 2005 mayoral and city council elections, then, the next year, approved this very large and very bitter pill.

Background aside, American Fork's businesses do make a number of convincing arguments. They point out that we rely on their sales tax revenue. Touche. They point to the poor economy, and decry American Fork's woeful sense of timing. They won't be able to compete with their counterparts in neighboring cities, they say -- touche again.

Then there's Lillian Parker. She makes sure I remember how much we all like her burgers and shakes. And the head of the local restaurant association points out how many college educations our restaurants pay for, how they employ our teenagers and give them their work ethic. Another very good argument.

Overall, I find myself sympathetic to their pleas. I find myself in agreement with Mayor Thompson when he points out that our community cannot thrive if our businesses do not thrive. I do not know whether there is any remedy to be had. But if a way can be found to provide relief to businesses without further punishing the residents or reneging on what the voters approved, I will gladly support it.


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