Interesting Coalition Emerging Against the Water Rate Hikes

water-rate-iconFor the first five years I have worked on the Vanguard, the opposition to the water project and expected rate hikes has come from the left.  On the previous council, it was Sue Greenwald and Lamar Heystek who questioned the need for the project and pushed back against costs.  Had the council majority had their way, this thing would have been rammed through with even less consideration to costs than was done eventually.

So it was not surprising on Tuesday to hear Sue Greenwald pushing for additional measures to seek to contain costs.  What is perhaps surprising is that the emerging coalition that is at least hoping to slow down the rate of water hikes looks very different from the environmental community that had fought the water issue the previous four years.

As Randy Yakzan, a business owner and developer who is increasingly concerned about the water rate hikes, put it on Monday, “The shocking part of the story is the impact on the commercial and business rates because of the way that the proposed model is set up, it will transfer the savings, if there is a savings, to the commercial rates.”

He said that they ran their numbers and found that “our numbers are not 28% percent, they could be up to 50% which would be implemented in December 2011.”

“The businesses that can’t conserve immediately – the breweries, the restaurants in town will be impacted tremendously,” Mr. Yakzan added.

When I met with Mr. Yackzan last week, he told me that he had long known that there were going to be rate increases in the water project.

He also told me that he supports the water project and understands that we need to do it.  Two things floored him, however.  First, he could not believe how much the rates were going to go up under this plan.

Second, he told me he asked Public Works if they had looked into what the impact on business would be, and to his utter amazement they had not.

Mr. Yackzan then showed me his number, simple numbers that showed what he was paying now for his commercial properties versus what he will pay in five years.

Those who somehow believe that these increases will not be passed on to renters are fooling themselves.  But even there it is problematic, with the housing downturn and the building of new units in West Village.

The bigger problem is what happens to restaurants like Sudwerk, that uses water for all sorts of purposes.  Mr. Yackzan asked me not to disclose the numbers, but the viability of some of these restaurants that operate on margins as small as one percent, particularly during an economic downturn, should give everyone pause.

The council is clearly now understanding the magnitude of the problem they face, but it is not clear what they can do about it.

At the same time we see letters, like that from Jim Snyder, in the Davis Enterprise.

“The Woodland-Davis project that will “eliminate” dependence on ground water seems to be speculation supporting continued local development,” he writes.

“Our water resources are not unlimited, as ground water depletion and frequent drought periods demonstrate,” he continues.

Mr. Snyder raises some of our initial concerns about the water project that have not been well-addressed and have been pushed aside, given the urgency of the water rates hikes the city is faced.  But these concerns have not disappeared.

“Like our ground water, river water in California is also overdrafted. There is not enough for all the uses assigned to it,” he writes.  “With permitted private and public diversions, flows through the Sacramento-San Joaquin Delta have fallen to about half of natural flows even as flood control and other Sacramento River projects have confined river and tributary channels to prevent the widespread natural flooding that once recharged groundwater aquifers.”

While many have pushed the water project as a solution to our water discharge problems, the continued removal of water from the river has its own consequences.

He writes, “These reductions have brought intrusions of salt water farther into the delta at the same time that urban and agricultural wastewater increase salinity and pollution from upstream, affecting fish, wildlife and vegetation.”

“Let’s face it: There isn’t enough river water to go around,” he adds.

He notes, “The Woodland-Davis water agency has not examined the effects of its project on any of these things. Sen. Lois Wolk is working to require those receiving water from the delta watershed to demonstrate how their water management plans reduce rather than increase reliance on that watershed. The Woodland-Davis water agency ignores this looming environmental problem.”

At the same time, business owners now find themselves threatened by the magnitude of the proposed rate hikes.

But it is not just the rate hikes, and the rate hikes alone during a time of economic prosperity would probably be surmountable.  But times are not good and they may get worse again.  Businesses operate on thin margins anyway, and passing on the increased costs to their customers will reduce their profits.

Experts are now concerned about the US economy.  The phrase “double-dip recession” has been used by some experts, though that seems a worst-case scenario.

In the meantime, projections are that the region and state’s unemployment rate could linger at current levels well into 2013, if they do not get worse.

The economy of this region is in peril, and the city may be about to inflict a huge and self-inflicted wound on the local economy.

And so, unlikely allies forge alliances behind the scenes.

It is a movement that is growing fast behind the scenes.  How it emerges in the upcoming weeks will determine in part the future of this community.

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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13 Comments

  1. nprice

    It is just amazing to me that now the “business,” including developer community, have weighed in, that the economic impacts to ” local business” are being highlighted. In fact, all along the very high increased rates on homeowners, included passed on to apartment owners, had the potential similar pocketbook impact…that is less discretionary income to “buy” local. Before the “business” community weighed in, seems to me that homeowners were being seen as unwilling to step up and pay for what was needed….after all, this project has been discussed for years and years as we are all reminded. So, where was the business community? But since some of the critics of the rates were also critical of the project, the “business” community is getting a pass, because, on the whole, those who have been speaking out and “carrying the water” for the rest of the business community, are only questioning the rates, not the project. So, let’s keep an eye on how the rate structure gets developed so business can stay in business. But maybe home- and apartment owners will still not have the discretionary income. C’est la vie.

  2. rusty49

    nprice

    I’ve considered the same thing. Are they going to cater to business at the expense of homeowners? If businesses get a break it will mean that everyone else has to pay more because the overall costs will remain the same?

  3. GreenandGolden

    Can David tell us what fraction of the salt that we dump into the Sacramento River is due to water softeners? Perhaps Davis could meet its environmental target less expensively by banning NaCl water softeners.

  4. davisite2

    Let’s begin to organize for the signature collection necessary for the impending citizen-initiated referendum to halt this surface water project for now by rejecting the obscene rate increases that it requires in these dire economic times. The prop 18 protest letters have little chance of garnering 50+% of the eligible voters since no response is considered an approval of the rate hikes… no need to wait for this inevitable prop 18 result and waste valuable time.

  5. E Roberts Musser

    [quote]He also told me that he supports the water project and understands that we need to do it. Two things floored him, however. First, he could not believe how much the rates were going to go up under this plan.[/quote]

    How does this translate to your headlines, or the conclusion at the end of your article:
    [quote]Interesting Coalition Emerging Against the Water Rate Hikes[/quote]

    [quote]And so, unlikely allies forge alliances behind the scenes.[/quote]

    Exactly what coalition are you referring to? One single businessman saying he supports the water project, but was surprised how steep the rate increases would be? Such a statement certainly does not bring him into any “emerging coalition against the water rate hikes”. No one wants to pay more for water if they don’t have to. It’s the question “do they have to” that is the $350 million dollar (or whatever the figure is) question (pun intended). What is the alternative and its rationale? Please explain…

  6. E Roberts Musser

    [quote]I’ve considered the same thing. Are they going to cater to business at the expense of homeowners? If businesses get a break it will mean that everyone else has to pay more because the overall costs will remain the same?[/quote]

    There should be a schedule of commercial rates – check the City of Davis website. There is no doubt in my mind businesses and landlords will pass their costs along to customers. To what degree that will eat into their profits bc less customers purchase goods/services remains to be seen. But from what I have seen, the business community does not seem to have stepped forward en masse against the surface water project. That is not a criticism in any way, just an observation. If businesses were truly concerned, I would assume they will fill out their Prop 218 protest forms, like everyone else, or join a referendum effort…

  7. highbeam

    I believe David meant an allegiance between the environmental community and business owners/developers, in that they are both questioning the water project, and they are not often on the same side.

  8. E Roberts Musser

    [quote]I believe David meant an allegiance between the environmental community and business owners/developers, in that they are both questioning the water project, and they are not often on the same side.[/quote]

    But where is the evidence the business community is questioning the water project? One business owner that comes forward to say he supports the project but doesn’t like the high rate increases? Not enough to make such a claim of “allegiance” to my mind… the business community seems to have remained essentially silent on the issue…

  9. Don Shor

    I am still waiting for David to find one business owner who opposes the water project. There may well be some, but he has yet to provide any evidence of a broad business opposition to the water project, or even to the increased water rates.
    Reduction of salinity in urban outflow is part of the Delta restoration plan. This project helps achieve that. It isn’t the only way to achieve that, but it is part of the answer to Delta salinity problems. I seriously doubt that Lois Wolk would work to put any impediment to a fresh water source for Davis and Woodland.

  10. Mr.Toad

    ” the opposition to the water project and expected rate hikes has come from the left. On the previous council, it was Sue Greenwald and Lamar Heystek who questioned the need for the project and pushed back against costs.”

    Are you dyslexic? Sue the left? Sue has been the most conservative member of the council for years, opposed to just about everything except property values, the rock bottom most conservative rich against the poor class warfare issue around. And of course her solution (although luckily, it turned out, not the final solution) to the poorest was to limit the number who could find sanctuary at the downtown church on the coldest nights of the year. If you really believe what you wrote please explain it to me because honestly I don’t get it. Huge building projects that employ people and cause taxes to increase for the social good is the left. Sue is anything but left. An outlier yes but left no.

    “I’ve considered the same thing. Are they going to cater to business at the expense of homeowners? If businesses get a break it will mean that everyone else has to pay more because the overall costs will remain the same?”

    Its the homeowners and the business owners subsidizing the future development of the periphery where the water will be used to allow growth. Or you might say its the existing users subsidizing the development for the future users. The solution is not delay the solution is to make development pay.

  11. E Roberts Musser

    [quote]The solution is not delay the solution is to make development pay.[/quote]

    Unfortunately the developers will not pay, but pass the cost along to new homebuyers… who will then not be able to afford to buy…

  12. Mr.Toad

    There is a concept from economics called elasticity of demand. It says you can’t always pass through your costs.

    I think the problem is you underestimate the developers margins. If you look at your home insurance you will see that the replacement value of your home is more or less around 50% of the value of your home. The other half is the value of the land. Local property tax bills often overestimate the value of the homes and underestimate the value of the land because the homes are so old that they are essentially tear downs. Ask any realtor about what they think the true value of the land and the house are around here and they will confirm this for you.

    I’m not sure who owns the cannery site now but Conagra probably owed nothing on the land where the cannery sat because they owned it for so long that they paid little for the land when they bought it. I will admit that there have been several different owners or entities that have had development proposals but I don’t know how the financing was structured. I believe Covell Village cost a few million. AKT bought PG&E’s property out of bankruptcy at a huge discount. Many of the frontier properties were bought long ago at much lower prices. When these properties are rezoned for development the land owners go from having land worth $10,000/acre to $500,000/ acre so squeezing development costs for water of !0-20 dollars a square foot out of the developers still leaves them huge profits. As I keep trying to explain it reduces their marginal profit. They might try to pass through their costs but price will be dictated by market conditions. Of course the more you build the harder it is to pass on your costs.

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