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Arizona Daily Star
Tucson, Arizona | Published: 01.13.2008
Tucson Water says water rates should go up 10 percent, starting in summer.
That means the new Democratic City Council will face its first challenge in the coming month — trying to decide how much it can reasonably raise the rates.
Tucson Water had a rate increase of 5 percent this year built into its budget to pay for an expansion of its underground storage facility in Avra Valley, but slow water sales and a lack of new construction activity have the utility's budget in the red.
To compensate, the utility proposes raising its revenue by another 5 percent, pushing the total increase to 10 percent next fiscal year, which begins July 1.
Tucson Water Director David Modeer is adamant that all water users wouldn't get hit with the same 10 percent increase. Some categories of users could see higher or lower increases, to average out at 10 percent.
However, that message didn't soothe the concerns at City Hall, as City Manager Mike Hein ordered Tucson Water to shave the increase to 8 percent.
Modeer was set to present recommendations on his budget to the Citizens' Water Advisory Committee on Wednesday, but that meeting was canceled after Hein's directive.
"That's pretty close to the way it happened," Modeer said. "We got direction on the financial plan out of the manager's office to make modifications."
Hein said he believes there are ways that Tucson Water can lower the rate increase by tweaking how money is spent on construction projects and holding back on salaries and travel.
He said Tucson Water has put in for full cost-of-living and merit increases for the entire department, and that's "much higher than is warranted, given the economy."
Council members said they need to take a hard look at the rate increases to see whether they are warranted before approving steep rate hikes.
But some members, including Councilwoman Regina Romero, are concerned about the effect of rising rates on the city's working poor.
"I'm very worried about low-income people," Romero said. "I want the budget as tight as possible so residents of Tucson don't get the burden of something that's not completely necessary."
Conservation and no growth
It may seem paradoxical that conserving water and a slowdown in growth would hurt Tucson Water — as many environmentalists say conservation and curbing of sprawl are the keys to long-term water sustainability.
But when talking about budgets, that's exactly what's happened to Tucson Water.
This fiscal year's budget is $4.6 million in the red, forcing the utility to tap into its $11 million reserve fund. That nearly cut the reserve fund in half to $6.3 million.
Since the budget was set, Modeer said Tucson Water has had to cut another $800,000 out of this year's budget.
Now the water utility needs $14 million to balance next year's budget.
The budget troubles are the result of costs rising from power and gasoline price increases, coupled with lower revenues because of lower water sales because of conservation. In addition, there is a shortfall because growth has slowed, reducing impact fees from construction.
"That's down substantially," Modeer said. "It's well below the past two years."
In summer 2006, Tucson Water won approval for a 4.6 percent increase, followed by a annual increases of 5 percent every year until 2011. The rate increase in 2007 was actually 6.4 percent, although much of it came from water-connection fee increases and a new fee to buy Central Arizona Project water.
At the time, city officials said the increases were needed so the city could expand its new underground storage facility in Avra Valley and start taking its entire CAP allocation of Colorado River water by 2009 instead of 2015.
Taking the full allocation is key, officials said, because if a water shortage is ever declared, Tucson risks losing access to its full allocation of CAP water for decades at a time if it's not using the entire amount at the time the shortage occurs.
Kurt Deibel, the owner of a mortgage company and a critic of government waste, said he gives Tucson Water more leeway than any other department because the utility deals with Tucson's most precious asset: the water supply.
But that is not carte blanche to raise rates, Deibel said. He said he wants unwarranted expenses and spending cut before rates are increased.
"It's a never-ending cycle," Deibel said. "As soon as there is a rate increase, then they will want more money."
Hot water
This is the first tough issue to arise for the current council, which got two new members in December, said Romero, one of those newcomers.
One of the reasons it's hard, Romero said, is that the sewer and water bills come on the same city bill, even though the sewer rates are controlled by the county.
County officials increased sewer rates four times in the last two years — two 6 percent increases followed by two 9 percent increases. In two years, that has jumped the average sewer bill 35 percent, to $23.61 a month from $17.52.
"People feel it's the city of Tucson charging us," Romero said, referring to the sewer increases. "It's really tough."
Mayor Bob Walkup said he had no opinion on future rate increases, but he said the city manager is doing the right thing.
Councilwoman Nina Trasoff, meanwhile, said the increases will be scrutinized by the council. "I don't take it as a given that rates will go up that much," Trasoff said.
Modeer said he doesn't know what he will recommend to the council, because he might not be able to get down to an 8 percent increase.
The city will get to a rate increase that can be justified, Hein said.
"When fully examined, there will be a rate increase that people will understand," he said.
● Contact reporter Rob O'Dell at 573-4240 or rodell@azstarnet.com.
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