Update on City Water Rate- insufficient report from city

Posted: November 18, 2013 in Uncategorized
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Richmond Water Rate Reformers Respond to Utility Report

Richmond water rate reformers had been eagerly anticipating the Sept. 17th City of Richmond Department of Public Utilities Report to Council (pursuant to City ordinances 2013-58-77 and 2013-61-79, study performed by DPU with consultant Ratfelis Financial Consultants). A copy of the study was finally earlier this month and is attached to this press release. Disturbingly, the report has not been worth the wait. It lacks substance and appears to be written to support the existing rate structure. At this point, City Council has asked it’s staff to review and make some comments and recommendations for next steps, which suggests that it will consider the issue further in the next budget cycle.
Citizens are urged to contact the press and their City Council representative and ask why the base charges cannot be further reduced and why the PILOT for federal tax is still part of their bills. 

Report lacks substance:
Pages    Topics
00-01    Table of contents
02-03    Executive summary
04-05    Purpose
06-09    Concepts
10-12    Reconciliation
13-13    Expenses
14-15    PILOT cost
16-20    Affordability measures
21-26    Low Income assistance

The only things new are some subsidy ideas, which are arguably not the purpose of DPU. There is no consideration for the relatively high base charges of $26.11 (which Mayor Jones only partially addressed last year) or the unlawfulness or appropriateness of the federal PILOT (payment in lieu of federal taxes, which, again, no private business pays to the City). In the report chart (page 3) showing how rates would change if this PILOT payment in lieu of federal income tax was eliminated, instead of showing a reduction in the base service charge, the report shows only a reduction in the volumetric charge. It does not justify the allocation of the charges to the base service charge vs. the volumetric charge. 

Here is why this is important:  since we know the number of residential and commercial customers, we can compute that the base water/sewer service charge for each customer can be reduced $7.62/month just by removing the (probably illegal) payment in lieu of Federal income tax. 
Here are the figures:  According the water rate study, in 2014 PILOT payment in lieu of FEDERAL INCOME TAXES for the water and wastewater will be $5,442,575.
There are 51,825 residential and 7683 commercial water customers, or 59,508 total water customers.   $5,442,575 divided by 59,508 customers equals $91.45 per customer.  $91.45 divided by 12 months equals $7.62 each month that each customer’s base water/sewer bill could be reduced just by removing the PILOT payment in lieu of FEDERAL income tax.

We note the American Water Works Assoc. Policy on Financing, Accounting and Rules, which state among other rules, ” Reasonable taxes, payments in lieu of taxes, and/or payments for services rendered to the water utility by local government or other divisions of the owning entity may be included in water utility’s revenue requirements after taking into account the contribution for fire protection and other services furnished by the utility to the local government or to other divisions of the owning entity.” Federal taxes do not meet the reasonable critera.
Does the City subtract the services provided by the utility from the charges to the utility? What about fire hydrants service, street light services. Also, do public buildings pay for water and sewer?

In the report’s discussion of affordability it does not address the fundamental idea of lowering the base rate further to provide an incentive for conservation, as well as a means to lower the residential bill. Where is the Anti-Poverty Commission on this matter? In the big picture, conserving water reduces the need for more infrastructure, chemicals, etc.

This report also ignores the effect of the potential savings to water and waste water operations from the creation of the storm water utility and the offloading of part of the common service functions costs to the storm water utility budget. Upon examining the DPU’s organizational charts for all three utilities, it is not clear what if any accounting procedure is used to allocate time and charges for each utility. Most of the storm water employees were DPU employees prior to the creation of the storm water utility in 2009. 

Water rate reformers are reserving their comments for now on the reformatted water bills being sent to customers. We hope to collect more feedback. But we also note that there have been recent complaints about erroneous billing due to faulty water meters, that have been reported on by WTVR television news.

Background information:

http://www.change.org/petitions/reform-richmond-s-water-rates/

http://bg-us.org/2013/05/01/informational-video-examines-city-of-richmond-utility-charges-and-rates/#more-126

Contact:

Scott Burger
804 714 5444
scottburger@mac.com

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