Council will look at short- and long-term utility rate solutions
Tuesday, January 15, 2013
Utility bills are the big issue in Washougal. They should be.
In 2012, the minimum bimonthly residential charge was $174.60. That base charge went up 20 percent ($37) to $211.13 this year. But the Council could take action on Jan. 22 that might keep the increase to less than $10. If the increase is kept that low, it will be the result of a creative Council, mayor, and staff. This would not have happened without hearing from our citizens.
The reduction comes from two potential changes. Most would come from a one-year utility tax cut paid for out of excess general fund reserves. Most of the cut will come in the form of a flat reduction for residential customers who pay a high minimum base rate. The remainder of the reduction will come from adjustments to the underlying rate accomplished by delaying some planned system improvements. The utility tax cut is Council-initiated. The rate cut is Mayor and staff-initiated.
The general fund excess reserves, which will pay for the cut, were built up over the past few years. The city has been carrying excess reserves well beyond that recommended by municipal finance experts. Using these funds will not put the city at any financial risk barring some unforeseen catastrophe.
When the draft budget was rolled out last fall, the first thing I noticed was that one of the highest increases in projected general fund revenue for the city was utility tax revenue. This is because the underlying utility rates were going up and utility tax revenue goes up right along with it. I had a problem with that because not only was the city government not sharing in the pain of these huge utility cost increases, it was actually benefiting from them.
This is a one-year fix and the biggest objection I’ve heard to this cut in taxes is what will we do next year? The financial practices of the current administration have been quite an improvement from the past. I believe rates can be lowered longer term by continuing those practices and excess general fund reserves will build up again. Or we just might have to cut elsewhere.
The city will also be exploring changes in its rate structure. Currently the minimum residential charge pays for 7,500 gallons of water every billing cycle. Many people do not use that much water yet they pay for it and are given no financial reason to conserve. Recently, I had a leak at my home. My usage doubled, yet my bill only went up 3 percent. There’s something wrong with a rate-structure like that.
That needs to change, and the city is working on that now.
Additionally, I have been looking at the water studies and plans the city has done to date. I have some background in municipal finance, but I find them difficult to follow. Webster’s defines “opaque” as “hard to understand or explain.” Opaque would certainly be a fit description of how our rates are calculated and what exactly they pay for.
Legally, the city must charge a minimum rate enough to cover operations costs plus debt service plus a 25 percent reserve to satisfy a bond rate covenant. The city is charging more than that, in part, to build up reserves to fund future improvements and incur less debt while doing so. This practice, called system reinvestment, is considered a best practice in the public utility management. And it is a good thing so long as our ratepayers can afford it.
Another force driving rates higher is planning for future growth. In light of the recent growth slowdown, it may be appropriate to reexamine how realistic the growth projections are and maybe we don’t need to spend that much money. And certainly growth should pay for itself and other financing methods exist to do that. Still, the right kind of growth is a good thing and I remain bullish on Washougal’s future economic development.
Regardless of system reinvestment practices and the need to plan for growth, in my mind there are maximum acceptable increases we can charge our ratepayers. This year’s increase crossed that maximum threshold. Some elderly people and others on fixed incomes are now paying close to 10 percent of their income just for city utilities. We must think about them too.
The Mayor and Council took a hard look at the relief that can be provided immediately and that’s what we will be considered on Jan. 22. Throughout 2013 we will continue to look at opportunities to mitigate future increases.
I was appointed to the Council last July and the decisions getting the city to this unfortunate position were made long before I got here and most of the decisions were made before any other council member got here. But I am not interested in pointing my finger at past city leadership. Nor am I going to throw up my hands and say there is nothing we can do. If the Council takes the action I hope they do on the 22nd, we will have done something. And we will do more.
Councilman Brent Boger can be reached at 910-5065 or email@example.com.