by Donna Lemongello
Matt Williams and I have been fully engaged in the URAC process for the past 2.5 weeks. On Thursday evening that process was dominated by a thorough discussion of ten criteria:
- Responsive to Voters/ Customers
- Simplicity/ Understandability
- Revenue Resilience/ Sustainability
- Incentivizes Conservation
- Reward for Efficient Use
- Acceptability by Financial Markets
- Proportional to Cost of Service
- Meets Prop 218 Provisions
- Susceptibility to Legal Challenge
For me personally, Fairness/Equity is the most important of those criteria, and I believe it is no coincidence that the clear message of both the Yes and No on Measure P campaigns was Fairness.
“Keep Rates Fair” – Vote No On P
“Establish a Fair Water Rate System” – Yes on Measure P
Of course I understand that a fair and equitable structure that does not pay the bills is not worth considering. To that end, as requested, we have provided our proposal to the URAC, joined the URAC discussions, and thoroughly studied the alternative proposals offered by Bartle Wells.
All five of the Bartle Wells rate structures are based on the same principle, a relatively high fixed fee to generate 40% of the revenue and a variety of variable fee options to generate 60% of the revenue based on consumption. What was crystal clear at the Thursday URAC meeting, from Staff’s statements, from Bartle Wells’ statements and from our analysis was that any revenue resilience generated by a 40% fixed fee comes with the disadvantage of substantially decreased fairness and equity.
Davis has put up with this type of structure for too long and it is time to change to a more equitable structure, especially since rates will be higher. People who are efficient and use little water simply should not be subsidizing those who use a lot of water. The only reason not to do so is if achieving fairness and equity means we don’t have revenue resilience and revenue sustainability.
Our proposal generates significantly more revenue resilience than any of the Bartle Wells proposed rates. The comments of Staff, Bartle Wells and the URAC members were universal in stating that all the rate structures proposed are vulnerable to loss of revenue with loss of consumption. The key is how to anticipate and respond to any loss of consumption.
Our proposal has calculated the per ccf rate based on a projection of heavy conservation with the revenue floor (where revenue does not cover costs) at a point that is 14% below any of the alternatives. At the point where our proposal is transitioning from surplus to break even, the other proposed rates are generating annual deficits that range between $840,000 and $1.5
Further, we propose a proactive “Drought” response provision built right into the structure and the 218 notice, that would kick in a preapproved “drought rate” surcharge in the event of consumption dropping due to a drought, to provide revenue resilience and revenue stability and clear rate predictability for the customers. The City of Roseville has just activated just such a “Drought Surcharge,” and our proposal incorporates all the lessons they have learned (both good and bad) from Roseville’s very recent experience.
Further, when consumption is above the revenue floor, our proposal generates a surplus that can self-fund the kind of rate stabilization reserve recommended in the March 2013 Bartle Wells Rate Study (attached pdf) and/or “a reserve fund to be used for future drought-related mitigation purposes” as recommended in Chapter V.3 of the AWWA’s M1 Rate Manual (attached pdf).
Given the revenue resilience and revenue stability coupled with demonstrably better fairness and equity in our proposal, I hope you will consider these concerns and community needs when deciding on a rate structure, we’re counting on you.
The above was a letter to Mayor Joe Krovoza describing the how the Lemongello-Williams rate structure deals with the issue of social equity