Yes/No: Water rate increase for Sonoma

Yes: Increase needed to maintain safe, reliable service

Water rates need to be sufficient to cover the total cost of service while at the same time, maintaining an adequate operating reserve. The water utility is self-funded, meaning that it requires that revenues equal expenditures. The rate increase is necessary so the utility is financially sustainable and does not fall into deficit spending.

The cost to supply the water, store it, and distribute it to the community continues to increase each year. There are also ongoing required maintenance and improvements of the water system to ensure stable and safe water to the community. Even with the ongoing improvements and efficiencies in operations, the costs to provide water to the community will continue to increase and require increases in water rates.

In addition, new State water regulations for distribution system water quality require a higher level of investment in operations, equipment and facilities to change the way water flows through the system. These changes are needed to maintain the quality of the water and protect the health and safety of the community.

The water rates were last studied in 2007, at which time the City Council imposed a five-year schedule of increasing water rates. The last water rate increase was actually implemented in 2012. Since 2007, costs have risen significantly. For example, the cost to purchase imported water from the Sonoma County Water Agency has risen approximately 60 percent in the last five years.

If rates are not raised, we will be forced to reduce our investment in necessary capital improvements in the distribution system and other areas. This will lead to increasing infrastructure failures, water service interruptions, water loss, street damage, and violation of State health and safety regulations. The end result will be higher operating costs, thereby reducing the funds now slated for infrastructure investments. While the water system currently has adequate operating reserves and a large capital improvement reserve, if the rates were not increased in small amounts each year, the water system will become financial unstable and require much larger increases in the future.

The ongoing day-to-day maintenance of the mains, services, and fire hydrants, reading water meters, paying bills, sampling water quality, filing reports and keeping the system within regulatory compliance all still need to happen even when water sales are low. Due to the decline in water use, the City’s current ratio of fixed to usage revenue has moved to about 19 percent fixed charges and 81 percent usage charges. The greater proportion of revenue from the water use rate leads to a more volatile income stream. The City Council directed a change in rates to achieve about 21 percent of revenue from the fixed service charges over a five-year period.

The rate increase is needed to maintain the current level of service for all City of Sonoma water customers and maintain reliable and safe water service to customers. Without these rate increases, the public could see reduced levels of service and decreased water reliability. The rate increases will also provide for greater water conservation incentives to residential and, for the first time, multi-family and commercial users.

New development pays a one-time connection fee based on the size of their water service to “buy in” to the existing system, and is required to pay for and install infrastructure required to serve their project. Most of the capital improvements funded by past and future rates and are needed to maintain and improve the water system for the benefit of the current users and do not add capacity to the water system for the benefit of new development.

If development was halted as of today, water rates would increase more in the long term, since one-time connection fee revenue would stop. Connection fees are designed to pay for both the cost of building out the system to accommodate for growth and to charge new users for existing available capacity in the current system. If growth stopped, ratepayers would need to cover some costs that are currently funded by connection fee revenue. Reliance on annual revenues or one-time development fees to replace, repair and improvement the water system is risky and not an effective way to manage a utility system.

A balanced combination of planned long term financing with grants, connection fees and annual rate revenues is the best way to insure adequate funding for capital improvements. The $7.6 million capital improvement projects over the next five years are designed primarily to improve the water mains, service lines and establish new wells. The rate increases are to adequately fund operations and maintenance to maintain existing services and to ensure a safe, affordable and reliable water supply for City of Sonoma water customers.

From letter sent by the City of Sonoma to all water customers.

No: Reject new water rate hikes

The proposed water rate structure should be sent back to whatever passes for the drawing board these days. It is discriminatory, does little to encourage water conservation and, without a restraint on development, continues to invite greater consumption of scarce water on which the Valley’s economy, character and way of life depends.

Rates should not require residential users to subsidize commercial users. From information sent to users, it appears that in 2015 commercial/business users would actually pay a lower per gallon rate for using more water ($355/mo for 61,000 gallons, or $.0058 per gallon) than residential users ($84/mo for only 13,000 gallons, or $.0064 per gallon).

Furthermore, the rates do not take into account that, unlike a business, homeowners can’t profit by using water and can’t write off the water bill as a business expense at tax time. For example, a carwash makes more money even as it uses more water to wash more cars, and its business expense write-off for water costs is even greater. A homeowner enjoys no such advantages.

If “we are all in this together,” there is no justification for favoring commerce over families. Indeed, if there is to be a differential – and there should be — it should put residents and families before commercial profits.

If conservation is an objective, the rate structure does not encourage it. Where water conservation is concerned, rates should recognize that “a gallon of water is a gallon of water.” Regardless of by whom or for what purpose it is used, every gallon consumed draws down the available water supply.

Sharply progressive rate structures are needed to incentivize conservation by all users, residential and business. At a minimum, the commercial rate per gallon should be much higher, and/or the accompanying progressive rate curve steeper, to offset the effective subsidy afforded commercial users by the tax code and the revenue benefits that water helps them generate.

A user’s price track should depend on whether the meter is attached to a residence or a business, irrespective of persons per household or the nature of the business being conducted. Thereafter, rates for all users on both tracks should increase progressively based on gallons used.

Rates should discourage new water-using development. Incredibly, in the midst of the worst drought on record neither the City nor County have declared a moratorium on new water-using development. Rate increases should of course fund projected system operation and maintenance expense, as well as new water-capture projects, but without a moratorium on additional water-using development it is unrealistic to expect the proposed rate increases to meaningfully restrain total consumption of a scarce and finite resource.

To illustrate: The current hope – not yet a mandate — is that all users will reduce consumption by 20 percent. If the proverbial average household is estimated to use 200,000 gallons/year, using 20 percent less water suggests a 40,000 gallon/year reduction per household. Yet every new home added to the City’s housing inventory consumes all the water “saved” by five existing households. Homes under construction or permitted by the City Planning Commission in the last 2 years alone will nullify all the water saved by hundreds of existing households for every year going forward.

New commercial development likewise makes additional, and permanent, water demands on a shrinking water supply. Example: 95 hotel rooms (plus associated pools, bars, restaurants, etc.) in two proposed hotels will soon come online. While existing residents will be asked to both save water and pay more for the water they use, their saved water will then be used by out-of-towners staying at the new hotels, which will pocket the profits.

Be it hotels or housing units, new development increases pressure on existing residents to save even more so developers can profit. In the interest of community cohesion and to prevent a conservation backlash, water rate policy should not exacerbate the growing hostility toward tourism-related commerce evidenced in other on-going civic debates, e.g., those regarding tasting rooms, traffic, Measure B, Plaza uses and leaf-blowers, to name a few.

Absent a development moratorium, a next-best alternative may be a sharply higher water rate structure for all new taps into the water system made after 1/1/15, one sufficiently draconian as to discourage all but the most parsimonious new water-using projects.

To the extent that this and other water-conserving rate measures may require changes in laws and regulations, those changes should be pursued. As proposed, the new rates are little more than whistling past the graveyard.

Bob Edwards