Forecast: Surging Water Rates

Forecast: Surging water rates conservation,supply needs signal.long-term trend of higher costs BY ELLIOTT BLACKBURN AVALANCHE-JOURNAL

For customers shocked by water rate increases the Lubbock City Council will consider this Thursday, the numbers offer a

simple, blunt message. It gets worse. Years spent buying water un-. der the spectre of rationing and shortfalls have come due. The city has committed almost half a billion dollars to secure, retrieve and treat a far-flung water supply for its residents. Early forecasts show continued, at times sharp, rate increases over the next six years to pay for improvements to the water system.

Staff worked last week for Story at a glance state loans or federal stimulus The Lubbock City Council on Thursday will take up a five-year package of water money to trim future increases. rate increases intended to ensure sufficient cash flow to pay off bonds sold to Council members searched pay for water and sewer system expansion and upgrades. for alternatives to this year's Among the elements of the plan: increase. IAn immediate increase in the meter fee totaling more than $160 for homeswith older meters and more than $270 for homes with larger meters in newer partsof thecity. But no known program would completely swallow the increas- Customers whose use reaches the second and third tiers would also see an immediate 16 percent increase in rates in each tier. es. The collision of two major I In 2011, the meter rate would increase again, by $97 a year for older homes, and city water efforts - conserva$162 per year for newer homes. tion and new supplies - had I All water use rates would increase by 10 percent per year from 2012 through 2015. created a "perfect storm," one Part of what triggered the situation was a highly successful conservation SEE WATER, PAGE A7

campaign that started in 2007, which has city officials concernedthat there wouldn't be enough income tooperate the water utility and repay the debt.

NEWS

LUBBOCK AVALANCHE-JOURNAL SUNDAY, FEBRUARY 22,2009

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WATER: Some council members not yet sold on proposal for higher rates FROM PAGE A1 observer said. And only one council member ruled out pursuing additional water rights or other projects if the right opportunity arose. "We're not talking about building a visitors center here," Mayor Tom Martin said. "We're talking about the vital service of water for our city." City water advisers recommended Thursday Mart~n more than doubling the flat monthly meter rate all customers pay before they have used a drop of water. They also recommended 16 percent increases to water rates designed to cover irrigation and highvolume use. The proposal immediately adds more than $160 to annual residential budgets in older sections of Lubbock, and more than $270 for homes using larger meters more common in newer sections of the city. Projections show costs climbing even more in 2011. Older homes add another $97 through the year- newer homes add another $162. Prices customers pay for the water they use begin to climb in 2012, too, by 10 percent for all three of the city's water tiers, according to projections. The 10 percent yearly increases continue through 2015. Larger meters set for commercial customers increase on a similar schedule. Sewer rates, billed separately, jump and fall over the same period. The rates pay for projects retrieving water from tens or hundreds of miles away.

This year's increases follow the addition of debt on $19 million committed to final design of a pipeline from Lake Alan Henry, $3.8 million to purchase rights on the land it will cross and another $20.5 million on 13 water projects around the city. Lubbock also pays debt on water supply and infrastructure projects through the Canadian River Municipal Water Authority, still its main source of drinking water, totaling $38 million. Those figures will climb. Lubbock estimates total Lake Alan Henry pipeline efforts to cost roughly $240 million. The 'city's commitments through the river authority for new water and pipelines to deliver them total $78 million. A new wastewater treatment facility, billed through the sewer rates but also part of long-term water supply plans, will cost $133 million. Still more millions will pay for repairing, replacing or shuffling aging water pipes out of the way of other construction or improvements. Grim forecasts of a water shortfall inspired the investments. Lake Meredith, once the primary source of water for Lubbock and 10 other Panhandle communities, has withered to levels not seen since cities filled the lake more than 40 years ago. Population forecasts when the projects were planned concluded that Lubbock could be facing a water shortfall by 2012. But officials had hoped for a more capitalist means of paying for all the construction. New water rate tiers introduced in 2007 imposed higher rates on the customers that used the most water. At the same time, the city - wary of its withering water supply and hoping

to avoid forced water rationing - promoted conservation efforts. Weather, prices and other factors can push water consumption up and down. But from a cash flow perspective, the conservation effort appears to have worked too well. Water consumption dropped 17 percent in 2007, one of the 20 wettest years in the last century and the first year of the tiered water rate system. In 2008, when construction problems forced summer water rationing, the city sold more water but still not as much as in 2006. "The citizens of Lubbock took it seriously, and of course they did that," Councilman Floyd Price said of the conservation campaign. "All the sudden, now they're paying a high price for what the city of Lubbock asked them to do." Lubbock's focus on monthly meter rates allows the city to take some uncertainty out of its budget, and keeps customers from dodging the cost by further curbing their water use. Based on current trends, the water department would fall millions of dollars short on its debt obligations if it relied on water sales alone. The difference in money would need to come out of the general fund from property taxes, Chief Financial Officer Andy Burcham said. When Lubbock faced a similar situation with its electric company years ago, the transfers damaged city bond ratings and cost more than 100jobs. Staff hoped for some outside help this time. Lubbock had worked with the Texas Water Development Board to improve the city's chances at low-interest 0

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loans on the improvements, Deputy City Manager Tom Adams said. Though Congress trimmed much of the water funding from the massive stimulus bill passed last week, some money remained, and the city hoped for better federal grant opportunities, he said. That could save Lubbock millions on interest, though Burcham cautioned against expecting enormous rate benefits from that help. "The interest rates don't drive things as much as you'd think," Burcham said. "A lower interest rate certainly helps, but a lot of it is the outright cost of the projects." The new plan had mixed support from council members last week, who worried about fixed- and low-income households. Councilman Paul Beane would support the plan if KLeln it included exemptions for hundreds of homes. Councilman Todd Klein was hunting for alternatives, too. "I have some great reservations about the current situation and the consequences that's going to present the ratepayers, many of who are on tight incomes," Klein said. "I think there are some viable options out there. The bottom line is whether the City Council is prepared to take those on." Councilman John Leonard, who told staff during last week's meeting he was "shocked" and "disgusted" by the need for the increases, did not know how he would vote this week. "I'm not sure what I'm going to do," Leonard said. "I'm getting bombarded with comments, e-mails, customers saying they can't believe this is happening. Too much, can't afford it. It's hard to

respond to those because the ball was dropped." Reluctant supporters said the proposal : accurately charges the true cost of delivering water to city sinks and baths. Purchasing supplies and pipes to move the * water cost money, even if customers don't use much of the resource when it arrives. "My feelings all along have been that capital expenses are what base meter charges exist for," Martin said. "That was, I think, the flaw that existed in the. model that was enacted two years ago." The mayor, who left the council in 2006 after an unsuccessful run for his current job, said the significant increases were not a surprise. But the shortcomings of the city's rate plan were, he said. "Apparently, it didn't work," Martin said. "So DeLeon now we're going to go to a model,we believe will work." Councilmen Price and Jim Gilbreath did not see much of a choice on the new rates. "Failure is not an option and there's no alternatives," Gilbreath said. "Where do you start ahd where do you stop?" with exemptions, he asked. "I don't know." Councilwoman Linda DeLeon said the rates demonstrated continued neglect of routine maintenance and other tax demands. She would not support them, she said. "I just don't think it's the right thing to do," DeLeon said. "I know we need water, but we've got to find another plan." To comment on this story:

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