The New Era - All about Sweet Home since 1929

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By Sean C. Morgan
Of The New Era 

Council to mull water rate change on March 8

 

March 2, 2016



The Sweet Home City Council will take a look at several options for new sewer and water rates at a work session in April.

Among them, the council will consider reducing the total amount of water included by default for each residential account from 400 cubic feet to 300 cubic feet per month.

The work session is scheduled for 6:30 p.m. on April 13 in the council chambers behind City Hall.

Councilors met on Feb. 24 to discuss how to move forward with rates this year. Last fall, the council chose to hold off on rate increases until this year after taking some time to explore various options for structuring the rates.

Last week, the council’s discussion hinged on the 400 cubic feet of water nearly every residential water user in the city receives automatically.

Some 17 years ago, the council included the “default” feature in its price structure to help keep costs low for low-use customers over concerns about how rate increases would impact fixed-income seniors and low-income residents.

The feature operates as a subsidy from higher-usage customers through higher rates per 100 cubic feet. Removing the feature would roughly cut the rate per 100 cubic feet of water and sewer service in half, but residents would pay for every 100 cubic feet of water they use each month.

For now, water and sewer users pay a base rate and a commodity charge for each 100 cubic feet they use above 400 cubic feet. For example, a resident using 600 cubic feet would receive the first 400 cubic feet for no more than the base charge but would pay the “commodity charge” on 200 cubic feet. At the same time, a resident using just 100 cubic feet pays the same amount as a resident using 400 cubic feet.

The average residence uses about 600 cubic feet per month in Sweet Home, and some 77 percent of utility bills are for 700 cubic feet or less.

Removing the 400 cubic feet from the rate structure – at the current rate level – would result in higher bills for customers using 700 feet or less, with the largest percentage increase, 69 percent, on those using 400 cubic feet per month.

The council looked at several different levels of water rates based on whether the city collected depreciation, revenue to help replace infrastructure as it wears out, and what’s called a “debt ratio” – funds that represent planning for the future to potential lenders. But the council reached no consensus on what to include in its calculations for revenue requirements, focusing primarily on the 400 cubic feet.

Councilor Jeff Goodwin advocated removing the 400 cubic feet from the rate structure. It would make the cost of using more and more water less steep. The cost of each additional 100 cubic feet would be lower, meaning high-usage customers could use more water for the same price or even less than they pay now.

Last fall, Goodwin argued for decreasing the rates to encourage more consumption based on increased usage resulting from lower prices. Last week, he told the council his main focus is eliminating the 400 cubic feet from the rate structure.

“I don’t consider it (the 400-cubic-foot subsidy) a bad decision,” said Mayor Jim Gourley, who is the only councilor who was serving on the council when it created the subsidy.

Goodwin argues, though, that the high commodity charge for higher-usage residents has discouraged the use of water, forcing the city to keep increasing its rates in order to recover enough revenue to pay for the utility.

“I think we’ve made some bad decisions, and we’re paying for it now,” Goodwin said. “As consumption goes down, in order to generate more revenue, you have to increase the charge.”

Councilor Bruce Hobbs didn’t follow that line of reasoning.

“I’m not going to start watering my grass if water is suddenly cheaper,” he said, adding that water cost about $12 per month when he was a child, and “nobody watered their grass here.”

Many studies show that demand for municipal water is “elastic,” Goodwin said.

“Elasticity” is an economic term that describes the sensitivity of demand to changes in price.

Councilor Dave Trask said he went over 400 cubic feet “one time and one time only.” He stopped when he saw how big his bill was. He supports removing the 400 cubic feet from the rate structure because he doesn’t like paying for what he doesn’t use. He told the council he uses about 100 cubic feet per month.

The population of Sweet Home has grown by nearly 20 percent in the past 20 years while water usage has decreased, Goodwin said.

Gourley said that people are conserving water.

“People are conserving water because of the rate,” Goodwin said.

“I’m hearing the opposite from the people using 400 cubic feet,” Gourley said. “They can’t afford for their rates to go up. You’re killing low-end users.”

But the program doesn’t subsidize economically disadvantaged water users, Goodwin said. It subsidizes low-consumption users.

Hobbs told Goodwin: “Part of your assumption is flawed.”

While the population has grown on a steady trajectory, he said, the decrease in water consumption has come in irregularly. Around 2004, low-flow toilets and faucets helped decrease usage. Hobbs said he doesn’t use them because he likes to “blast” his face off when he takes a shower, but others do.

Low-flow is the default in new homes, Hobbs said, and unless someone goes in and changes them, they’re going to use less water.

Goodwin called the default policy “a ticking time bomb,” in that the longer it goes, the more painful it will be to correct when the city is forced to.

“The only thing I’m asking the council to do is get rid of the 400 cubic feet,” Goodwin said. “They’re going to see a one-time bounce, but the reality is they can go out and garden.”

Whatever else is part of the rate structure, “get rid of that, you’ve got my vote,” he said. “I believe that policy is a mistake.”

“I would love to water my grass,” Trask said, adding that he’s pretty sure that owners of brown lawns along Elm Street would like to as well.

“I would like to do that, and I would pay for it,” Trask said.

“You’re either going to generate it from the bottom 700 (cubic feet) or the higher people,” said Councilor Ryan Underwood. “I can’t use any more water. It’s not possible.”

Underwood is a high-capacity user, he said, and he would benefit substantially from removing the 400 cubic feet from the rate structure, he said, but it would “double” 77 percent of water bills.

He is concerned about the biggest impact to the biggest section of the population, he said. “If I pay a larger share, I guess that’s what it means.”

It’s one of those “damned-if-you-do, damned-if-you-don’t” situations, he said, but he opposes removing the 400 cubic feet.

The net effect of removing the 400 cubic feet is that for most people, the city would increase bills by a large amount. Underwood said he doesn’t want to “get beaten in the street,” so he would prefer to support the subsidy, although his opinion on the matter isn’t set.

Gourley asked the council for a consensus. Marybeth Angulo, Underwood and Greg Mahler said they would like to keep the 400 cubic feet. Hobbs said, maybe. Goodwin and Trask said they want to remove it.

Goodwin suggested a compromise, reducing the subsidy to 300 cubic feet to begin bringing down the price per 100 cubic feet.

Public Works Director Mike Adams said he would run numbers at that level to show how it would impact the rate structure and provide them to the council next week.

 
 

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