Water costs – 2018 – all that pork!

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water-rate-iconBy Paul Brady

Davis water rates doubled from 2002/3 to 2012, and consumption fell about 30% from above 200 to around 150 gallons-per-capita-per-day.  Depending on use-patterns, the new rates imposed will increase user water costs in 2018 by a factor around 3.0.  The increase is 3.5 for our property-use !

Present City-water revenues are about $13 million/yr.   With the City-estimated 20% conservation, a 2018 rate-increase-factor of 3.0 will generate about $31.4 million/yr – an additional $18.4 million/yr.   This is much more than needed to finance Davis’s cost-share of the WDCWA river-water project [106 million] and the City-system-infrastructure upgrades [52 million]. Financing these via muni-bonds or special low-interest State loans over 25 years costs about 10.2  million/yr.

To have river water available in the summer [less of it in dry years]  Conaway-Ranch water is being purchased at ~1.8 million/yr.   On average, almost 50% of summer water will come from existing wells into the large, deep Tehama aquifer whose water is relatively soft and low in Nitrates and Selenium, and is replenished annually via rain-fall and run-off into the formation’s exposure in Tehama County and north and west from the coastal range.  Call it highly-filtered surface water!

Most of the 15 high-nitrate Intermediate wells will be phased out, with an estimated saving of 1-2 million/yr in pumping,  water-treatment, etc., costs.  Also, some infrastructure can be reused.

So the total net cost to the City of all the above is about $ 10-11 million/yr, as compared to the additional 2018 revenue  of 18.3 million/yr!  That is a lot of pork  ~ $ 200 million over 25 years!

This huge excess revenue [8 million/yr] violates Prop.218 which makes it very clear that revenues derived from fees or charges  shall not exceed the funds required to provide the service.  A second violation is that the charge to individual properties ” shall not exceed the proportional cost of the service attributable to the parcel”:  The cost per gallon of water must be the same for all properties.  The inclining rate and CBFR rate structure both violate the latter, with larger users paying more per gallon.

Actually, larger users subsidize smaller.  The former require a larger system which reduces the cost of a gallon of water due to economies of scale.  Eg., a two-foot-diameter pipe to Woodland carries four-times the water of a one-foot,  but the increased-cost of pipe, trenching, right-of-way, etc., of the former is much less than a factor-of-four!

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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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35 thoughts on “Water costs – 2018 – all that pork!”

  1. Matt Williams

    Paul Brady said . . .

    [i]”Actually, larger users subsidize smaller. The former require a larger system which reduces the cost of a gallon of water due to economies of scale. Eg., a two-foot-diameter pipe to Woodland carries four-times the water of a one-foot, but the increased-cost of pipe, trenching, right-of-way, etc., of the former is much less than a factor-of-four!”[/i]

    The logic failure in the above comment is monumental. Capacity decisions regarding water systems (are almost always) never impacted in any meaningful way by any individual customer’s usage. The reason is simple, each individual customer is one of over 16,000 in the case of Davis, so the difference between a customer with average water usage and a customer with twice the average is the difference between 1/16000 and 2/16000.

    Capacity decisions are made based on aggregate usage patterns across all customers and costs are incurred based on those aggregate decisions.

    JMHO

    1. Frankly

      I think a better way to look at this is that the group of water rate payers with larger families and/or larger yards are subsidizing those with smaller families and/or smaller yards.

        1. Frankly

          The subsidization, IMO, is from the incremental cost difference resulting from tiered rates. It is supposed to a brilliant concept that matches our other brilliant idea for progressive taxation. The problem is that people with larger families and larger yards are not necessarily the most well off.

          Also, apartment dwellers are subsidized.

          1. B. Nice

            If it cost the city more per gallon then why shouldn’t those who use more absorb this cost. Don’t agree that this translate into a subsidy. Not doing so would though, and in that case apartment dwellers would be subsidizing those with large yards.

          2. Frankly

            Nice icon!

            No – if we allocated all fixed and variable costs on a fixed per unit cost, then nobody would be subsidizing anybody.

            When you go to In -and-Out to feed your family of four, do you expect the family of 5 or more to pay more per hamburger?

          3. B. Nice

            I’m not sure that the In-and-Out analogy applies in this scenario. As I understand it the water delivery system is going to cost more in order to meet the demands of those using a lot of water, since they are responsible for this increase in price it seems fair that they should pay for the cost related to it. If it were not for the demands they put on the system the cost would not be as great. Why should those not driving these increased cost have to help pay them and thus subsidize those using the most water.

          4. Matt Williams

            The In-and-Out analogy works for the first sandwich. If your appetite is large enough that you choose to buy two sandwiches, then the second one will be a the tier two price because it is a discretionary purchase.

          5. Matt Williams

            That is why Water Budget rates were invented. It gave people an equal allocation of indoor water per resident.

            The perfect water rate structure IMHO is CBFR for the fixed fee portion and an indoor water budget per resident allocation tiered system for the variable fee portion.

          6. Matt Williams

            Frankly, I can agree with your argument about larger families. The size of one’s family does not contribute to the value of one’s house. Bob Dunning’s argument that each resident of a house should get a reasonable monthly allocation of indoor water is one that I can support.

            However, the choice of how large a yard one has is a discretionary choice, and it typically does add to the resale value of the house. Further there are lots of discretionary options available that can make water consumption of a value-adding large yard very low. Establishing a baseline allocation of outdoor water that applies to large yards and small yards alike. Consumption above that baseline outdoor allocation would be priced so that there is an incentive to use water wisely, since water is a limited resource.

          7. Don Shor

            I don’t recall Bob Dunning making that argument. He’s been consistent, if I recall after all this time, that everyone should pay the same amount per gallon. Every gallon should be treated the same. He usually makes the analogy to a gallon of milk or a gallon of gasoline always costing the same.

          8. Matt Williams

            He made that argument early on Don. Effectively arguing for per-person water budget allocations. He backed off from that when he was told that water budgets would be too complex to implement in any kind of short timeframe. That is when he shifted to the per gallon argument.

          9. Frankly

            Matt – the argument that higher water users are the basis for greater fixed infrastructure cost is erroneous, classist and is an argument lacking the typical nuance of your fine mind.

            First, you can make the argument that without all these apartment dwellers the city could suffice with a smaller system. So why not increase the rates that apartments pay?

            Second, there are many reasons that a family might use more water in their landscaping/gardening.

            My first house in Davis was next to a family of eight (six children.) The family did not have a lot of money and attempted to use every square yard of yard to grow edible landscaping. They even farmed the private drive our homes were situated on.

            The tiered water rates will be punitive to them and their way of life.

            A fixed rate per gallon would suffice. Just like the same for gas or milk. Consumers will pay for their differential of use without this tiered-rate mechanism that punishes and rewards to deliver social, environmental or economic justice from a central planning apparatus.

          10. Matt Williams

            The apartment dwellers (for the most part) have only indoor usage which is generally the same or lower than the indoor usage of Single Family Residence dwellers, beacuse most homes have a washing machine, and many apartments don’t. Further, a substantial portion of apartment dwellers are only consuming water 9-10 months out of the year, while homeowners consume water all 12 months.

            So the incremental size that a single apartment unit adds to the overall capacity demand of the City is a fraction of the incremental size that a single family residence adds. The ratio is in the vicinity of 65 gpcd to 165 gpcd, which works out to 2.5 to 1.0.

            You are far too good a financil analyst to believe your own “second” example. The choice to grow edible landscaping is one that introduces the concept of “opportunity costs” into the equation. It is easy to argue that the principal reason that the family you cite made the water consumption use decision they did is that they were displacing far more expensive food purchases in their budget. It is true that more expensive water will be a challenge for them and their way of life, but the truth is that their decision to consume more water creates a burden of increased capacity costs and operational costs on the water system, and it is only fair that the fees that they pay should proportionally cover those increased costs.

            Once we go to AMI meters, customers like the one you describe will be able to demonstrate that by wise timing of their watering in off-peak periods reduces the incremental cost burden that their incremental water usage generates. In the meantime the amount that they save in their Nugget Market purchases will more than defray their additional costs for water.

          11. paul brady

            What is AMI? I presume it has to do with timing. Maybe each irrigator could be allotted an hourly range and days to water?
            With a more uniform demand spread system peak demands could be reduced. Last night the CC blamed rising water rates for up to 3 million of the structural deficit. Paul

          12. Tia Will

            What both of you and Bob Dunning are ignoring with the arguments about family size, is that with the sole exception of families that are composed of the rescued children of other parenting challenged family members, families with large numbers of children are “discretionary”. With today’s widespread availability of affordable, effective contraception in our area, family size is a choice. If one chooses to have more children, one should accept the full responsibility for the cost of raising them. If having more people in a family causes increased infrastructure costs, they should be willing to pay more to fund those costs since they are creating the need for more expenditures.

          13. Matt Williams

            Tia/medwoman, I don’t disagree with you at all; however, Mr. Dunning’s argument when he and I engaged that issue in 2012 was that the US Constitution provides “equal protection under the law” and as a result each human being should have equal access to a basic allocation of water at the same price as any and every other human being.

            As a result, and knowing that many people believe that procreation is not only a God-given right, but a moral and social obligation, I have chosen not to make population growth part of the water cost proportionality dialogue.

          14. Tia Will

            Agreed Matt. And I think that you were very wise to do so. I however believe that the concept that procreation is a “God given right” and or a “moral and social obligation” does not absolve the couple involved for taking full responsibility for the consequences of their beliefs and actions.

          15. Matt Williams

            Point well taken Tia. I suspect. Mr. Dunning’s argument back to you would be that he is indeed taking full responsibility for the consequences of his beliefs and actions, he just doesn’t want to take more than his fair share. When I pointed out to Mr. Dunning that the financial difference between Tier 1 and Tier 2 pricing for 55 gallons per person per day is a very, very small amount of money, his response was that anything other than “equal” was a violation of the Constitutional principles . . . and not equal protection for each and every child.

  2. donna lemngello

    No Paul, actually when fixed costs are added in the small user will always pay more per gallon even with tiered consumption based rates.
    As for the extra money you propose will be taken in, I don’t know why the discrepancy.

    1. paul brady

      Yes, Donna, but in 2018 the fixed charge drops to 13.67 while the other two rise. It will depend on how large summer use is compared to total annual use. On average the City says the Supply Charge will be close to 70% of total charge.

      Some of the extra money may arise because costs have fallen, but rates have not been reduced. It is illegal to use the water revenue funds in the general fund. But the City has a structural deficit of about 5 million – see today’s MTprise. More revenue is needed, but with the water costs eventually taking an extra 25 million out of the economy it will be more difficult for the City to raise funds.

  3. B. Nice

    Note, these questions are asked out of my ignorance:

    What is the city’s justification for “over-charging”. Are their cost calculations different then those used in this piece?

    My understanding is that cost per gallon will be the same for everyone, it just gets higher the more use, so people using the same amount of water pay the same price. How is this in violation.? Am I missing something?

    1. paul brady

      Be Nice – those using twice as much water pay much more than twice as much because of the inclining tier and eventually the CBFR rates.. They can pay more like three times as much if they have much of their use above 29 ccf [100 cu ft]. In the example below using this year’s rates User B who uses twice as much water as User A pays almost three times as much!

      Suppose User A uses 29 ccf and user B 58 ccf. User A’s cost is 37.20, calculated as follows: 0-18 ccf rate is 1.23/ccf this year and costs 22.10. 19-29 ccf at 1.37/ccf = 15.10, so total for 29 ccf is 37.20.

      User B uses twice as much – 58 ccf; the cost adds up to $104.80 Besides the above tier 1 and tier 2 cost totaling 37.20 there is the tier 3 cost for 29 ccf at $2.33/ccf equaling 67.60. Total water cost for User B is then 104.80, nearly three times what user A pays! To each of these you add 17.33 for the fixed “meter’ fee fpr 3/4″pipes.

      Economies of scale make it more unfair, because the larger system required by the larger users produces cheaper water per gallon or per ccf. Call it the Costco effect if you like – more on this below! Paul

      1. Matt Williams

        Wrong Paul. If your $37.20

        User A’s cost is $55.49 or $1.91 per ccf.

        User B’s cost is $123.06 or $2.12 per ccf (an 11% premium for contributing 100% additional costs to the system)

        In addition you are using an outlier to make your point. A customer using 58 ccf per month is using 405% of the average monthly usage of the 14, 736 Single Family Residential customers usage of 14.3 ccf per month.

        A much more realistic fiscal analysis would be to use 14 ccf per month (the average) and 28 ccf per month (2x the average)

        The 14 ccf customer’s monthly bill is $35.50 which equals $2.54 per ccf.

        The 28 ccf customer’s monthly bill is $54.12 which equals $1.93 per ccf.

        That tells a very different story that your selected outlier example tells.

        You can’t “cherry pick” only the numbers that tell the story you want to tell. Doing so is a failure of transparency on your part.

        ———————————————————————

        In a water system there are virtually no economies of scale because Variable Costs only comprise less than 20% of all costs. Further, very few of the fixed costs of capital construction benefit from economies of scale. Pipeline costs do, but that is only because the costs of digging the trenches a pipeline needs are essentially the same regardless of pipe size. But pipeline trenching costs are significantly less than 10% of the total capital cost expenditures, so the economies of scale are so miniscule that they are effectively non-existant.

        1. paul brady

          Matt – our numbers agree. I note later in the note that the meter charge of 17.33 has to be added to each. I was originally looking only at water, per ccf costs – not complete re the charge.

          I was using approximate average Willowbank household summer numbers for User B and near the average Davis household numbers for A, both from John Cooluris for a couple of years ago. Do the averages you use include apartments, etc.?

          In 2018 the fixed charge becomes relatively small in our case – 13.67 vs a total cost close to $ 300/mo in summer months. As you say growing tomatoes will be a luxury in 2018 and on! Paul

          1. Matt Williams

            Paul, using Willowbank or/and El Macero almost immediately putws you into outlier territory with respect to water consumption volumes because of the conspicuously large lot sizes therein.

            But with that said, let’s drill down into the higher water costs for a Willowbank and/or El Macero homeowner. As noted above, the principal reason for the higher consumption is irrigation . . . of lawns, of shrubbery, of trees. Does having a larger yard add to the value of the typical Willowbank or El Macero home? Does having a larger complement of shrubbery and lawn and trees add to the value of the typical Willowbank or El Macero home? The clear answer to that question is “yes.” So the increased water costs to maintenance that increased value is not inappropriate.

            Further, from our past conversations I know that you and your wife grow vegetables and other edibles each year, which increases your water consumption even more. Those vegetables, et.al. have value for you and your wife. They also provide a modicum of cost avoidance at the local grocery store. The decision to obtain that value and avoid that cost is a discretionary one on your part. Water is part of your investment in order to produce that personal ROI.

          2. paul brady

            Matt – we just got an estimate from the City that our Jan 2018 water cost will be more than $300, and it will be larger in the summer due to the Variable charge. Clearly, as you point out, it will not be economical to grow veggies, and probably not citrus, figs cherries, roses, peaches, plums, etc., which we have. So we are getting an estimate for a separate irrigation well for Willowbank!

          3. Matt Williams

            Paul, let’s drill down into that $300. Your Distribution Charge will be $13.67 (assuming you have a 3/4″ meter. Your winter consumption for the two residents you have in your home should be 6 ccf which equals $7.92. That leaves just under $280 as your Supply Charge. At $0.54 per ccf that means your 6-month consumption is 516 ccf (86 ccf per month) Breaking that into indoor and outdoor usage 6 ccf is your indoor and 80 ccf is your outdoor. That is a 1:14 ratio. The typical Davis ratio in summer is 1:3. You are using over 4 times as much outdoor water as the average Davis single family residence does.

          4. Matt Williams

            Paul, the above numbers suggest you might have a leak. Have you ever had the City Public Works folks come on site and do one of their free leak audits for you?

          5. Don Shor

            I don’t really feel like arguing about this, but it is perfectly possible to have fruit trees and vegetables without using water at the rate you are. Edibles can be part of a low-water landscape. In fact, some require almost no water (figs, pomegranates).
            Just contact Alan Pryor for more information about how to do it, or read some of my dozen+ articles on the topic.

          6. Matt Williams

            I agree 100% Don. We have one full grown Persimmon tree, three full grown Fig Trees, two 30 year old Orange trees and two mature Lemon trees in our yard and we irrigate each once a month during the summer. It is a very deep watering when we do it, but only once a month.

            Paul, I suspect you are grossly over watering . . . and in the process actually harming your plants.

  4. paul brady

    Matt – Yes, we have the whole 1/2 acre irrigated. Our neighbors with gardens have similar costs. This year we did cut back 20% or so from the numbers we got from the City in the Prop. 218 paper on Rate and Fee Increases which were for 2012. Paul

    1. Matt Williams

      Paul, you may want to pay for an hour of Don Shor’s time to get expert irrigation advice. With that said, if you are cultivating a half acre, your fresh vegetables and fruit must be wonderful eating for the two of you. That’s a lot of veggies. You probably bedeck the surfaces of your home with cut flowers each day as well. That is a well deserved high quality of life for you and your wife.

      1. paul brady

        Mat and Don, I appreciate your advice, and we have cut back from the 2012 water usage the City sent us. One problem is the size of the area which is planted. The size of the lot is 22,000 sf. The house and deck consume 3000 sf ; the garage and drive about 2000, the pool and cabana and storage about 2000. There is a barked area and a compost area, but most of the remaining ~14,000 sf is planted. For example wife Katie has 52 roses and lots of other plants and flowers. All are on drip irrigation. We do follow the suggested once a month deep watering of a persimmon, 8 citrus, 2 cherries, one plum, peach, prune and a Black Jack fig recommended by Don which has been a prolific producer in its second year! Two large older redwoods, hackberries and birches are not watered – they may drink from the septic water, and from surface watering.

        As I said, our use is similar to that of other lots out here. The City cuts us no slack that we do not put waste water into the City system and the waste-water plant – which was the original rationale for needing the soft river water. We feel we have to revive our old water system with a new shallow well for irrigation water to all Willowbank – 122 homes? We have started down that road, paying for a feasibility study, now. Of course, we will still pay for City water, but much less of it!

        In any case thanks for the advice!

        Paul

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