Council Watch

Buy Me a River: Questions Keep Pouring in on LCRA Water Deal

Bill Bunch
Bill Bunch (Photo By Alan Pogue)

The Austin City Council is getting ready to move on the proposed Lower Colorado River Authority water pact, and guess what: the deal that some people have said was too good to pass up has turned out to be too good to be true. A new set of alternative financing schemes circulating City Hall this week would still get us the water in question, but for many millions of dollars less than originally supposed. But although these new financing options may mitigate the sticker shock, they do little to address concerns that we may be paying for too much water too soon. Council insiders say that the need to buy the LCRA water has been more or less agreed upon by most of the council, and that the issue will rear its head again at the council's next meeting, Sept. 30, with execution of the contract to follow as soon as October 7. But the deal they approve may not be the LCRA-financed version, which, with interest payments factored in over 100 years, would have come to over $1.1 billion. Instead, the city would finance the $100 million base cost of the deal itself -- meaning a one-time, lump-sum payment to LCRA for purchase of the water. The reservation fees would be financed separately. As many as 12 alternative financing proposals are reportedly under city review, with their origins in the offices of Betty Dunkerley's financial staff and the consultants from KPMG hired by the city to scrutinize the deal, as well as suggestions from the community received in this month's round of public meetings.

The change in direction was "inevitable," according to one source, because the terms LCRA had offered were so outlandish. For example, the original financing proposal included a 25% annual "carryover" fee, equal to 1/4 of the total capital the city had left to pay. The source said that city financial director "Betty Dunkerley would have gotten involved," in order to protect the city coffers from a raid of that magnitude.

This is all likely to be fine and dandy with the LCRA, as they will get their money up front, all the better to pay off the debt from the recently purchased Garwood water rights near the Gulf Coast and the fearsome interest payments that came with it. LCRA Public Information Officer Bill McCann said the agency was aware that the city was considering alternative financing options, and was "always open to discussion [about] method of payment."

Despite the potential financial benefits, an up-front payment opens up the issue to the biggest philosophical sticking point among some members of the council -- the LCRA's plans to extend utility service to a Hill Country area that some city leaders are not anxious to see developed. The concern is that a bigger up-front payment just puts more fuel in the LCRA's kingdom-expanding engine. And regardless of the city's lame argument that the LCRA would swear not to use Austin's money for expanding utility service to the hinterlands, this is a zero sum game. The faster LCRA pays off its recently acquired Garwood water rights down south, the sooner it can get to that paving of the Hill Country we've all been hearing so much about.

Q & A Extravaganza

Conspicuous by his absence in the financing discussions, and at the Tuesday night public hearings on the deal, is SOS chief counsel Bill Bunch. (He's been on vacation in Virginia this month.) The main instigator of early opposition to the deal, Bunch was in large part responsible for fomenting demand for public scrutiny, which in turn put the brakes on long enough for someone to notice that the financing deal was bad for the city. The monster Bunch helped create lives on, as city staff continues to churn out massive amounts of data in response to questions from council members, the SOS Alliance, the Sierra Club, a Water and Wastewater commissioner, and other city boards and commissions. (For the detail freaks among you, this zesty dialog is being recorded and published on the city Web site, A few persistent critics are scrutinizing the answers to the questions and asking even more questions. The amount of information changing hands is staggering.

What have we learned from it all? That the city is able to thoroughly defend some of its positions in the water debate, but not others. And that the city's vision of population and water demand growth is not exactly what some environmental partisans would have it be. That vision, according to the city's own planning documents and answers to recent questions, goes a little something like this:

By 2050, the population of the city of Austin will be in the neighborhood of 1.6 million (this is on the high end of state and consultant-run studies showing estimates ranging from 1.43 million to 1.57 million). The demand for water within the city of Austin service area will more than double, to 375,000 acre feet per year. At least that's the city's story. And since the LCRA proposal only secures 325,000 acre feet per year, a 50,000 acre-foot per year shortfall, which will be made up by conservation, is built into the deal. But if demand turns out to be less than 375,000, then the conservation estimates go down. This issue illustrates how projections can be used to affect perceptions of how much water we need. Critics, including Bunch, say the demand could in fact be lower than the 375,000 estimate. (Indeed, until the LCRA deal came along, the city itself was estimating 2050 demand at only 358,000 acre feet.)

Back from vacation, Bunch calls the council's potential acceptance of the water purchase "ridiculous," due to unresolved questions on the city's conservation estimates.

In fact, Bunch continues to question virtually every aspect of this deal. This is because there is a philosophical gap wide enough to drive a truck through between the worldviews of Bunch and the LCRA. And the city is, arguably, caught somewhere in the middle. The environmental establishment was therefore outraged to discover that the city had gotten together with LCRA's Mark Rose to plot the city's water future, especially when SOS has pinned so much hope in recent years on having the city's ear when long-term, planning-related decisions like these are at stake.

Indeed, within the next year, the city is going to undertake a water conservation plan, and complete a reuse plan for the Austin water supply. (The first portion of the reuse plan, compiled this year, implies that reuse could be a much bigger portion of the city's conservation strategy than originally thought.) And the fabled Senate Bill 1 planning process, which is designed to result in a workable water plan for the state as a whole, is just firing up for a 2001 completion date. City staff says the deal will complement -- and not undermine -- the various plans, though it's not clear what the incentive for long-term conservation gains will be with a 100-year water supply more or less sewn up.

Bunch, among others, thinks it's foolhardy to enter into what may be a 100-year water deal before, rather than after, these planning efforts are complete.

Reclaiming Our Water

When the LCRA plan had its second hearing before the Water and Wastewater Commission earlier this month, Commissioner Lanetta Cooper started thinking big about ways to shore up the conservation side of the equation. (The commission originally voted to support the plan, but Cooper said they weren't fully informed of some important details, so they took up the issue again, only to issue no recommendation). Though the suggestion that we should be spending every bit as much to address the demand side of the water equation (i.e., conservation and reuse) as the supply (i.e., buying raw water), isn't likely to have any legs, Cooper suggested some potentially viable ways to decrease our demand for water. The boldest of these is the creation of a water reclamation utility that would be all about water reuse and would facilitate it by, for example, outfitting new subdivisions with water reuse lines for lawn watering and the like.

Though city staff reportedly told Cooper that her idea was fiscally untenable, Cooper told the Chronicle, "The biggest component of water conservation is reuse. Our investment and commitment is just at the infancy." Cooper admitted that she didn't know how much such efforts would cost, but noted that others, including El Segundo, California, have succeeded, and called for the city to adopt incentives for water conservation. This year, she said, "only $6,000 was spent on water conservation via public information. [We] spent $200,000 for public info on [the 1997] annexation alone. [We're] not going to get people thinking about conservation unless we bring it out into the marketplace of ideas."

Commercial Conflict?

There's another aspect to this as well: The relationship between industrial and residential rate payers, which has proved tricky before. In his initial presentation to the council on Aug. 26, Bunch cited a memo from the Greater Austin Chamber of Commerce, issued on the same day the water pact was announced, which said that "existing water/wastewater rates unduly burden commercial and industrial customers" and called for redistributing the cost burden among commercial and residential customers. Bunch cited the memo as evidence that commercial users -- whose demand was an important factor in demand increases -- would shirk their responsibility to pay for the new water. City projects indicate that the increase in water demand will be driven in large part by commercial customers, whose proportion of total demand in the city will increase slowly but steadily throughout the planning period.

From the audience, the Chamber's interim president, Bill Renfro, fumed. "If my voice is quivering, it's because I'm very upset," he said upon assuming the microphone. He told the council that Bunch's "representations are ill-conceived" and misleading. Renfro said the memo was totally unrelated to the LCRA deal; the Chamber was unaware of the water proposal's existence when they issued it, and that chamber members were more than willing to pay their fair share of the cost of new water.

"If I were dying in the desert of thirst, and our friend Mr. Bunch were to find me," Renfro said, "what would I have to do before he'd give me a drink of water?" His comments led to one of the more dramatic moments of the evening, which transpired outside council chambers: SOS Board Chair Robin Rather, the diplomat who's had so much success recently building bridges with the city's business establishment, chased after Renfro after he stormed out of the chambers. The two talked privately for several minutes, with Renfro still visibly upset and Rather obviously trying to pacify him.

By the end of the intense but whispered conversation, Renfro was calm again. Afterward, recalling the political atmosphere of days gone by, he said he had made up with Rather and doesn't want the bad old days to return. "We've made a lot of progress. I don't want to see anything happen that would damage that," Renfro said.

This Week in Council: The Gotham condominium project proposed on the south shore of Town Lake is scheduled for council consideration at its next meeting on Sept. 30, and a public hearing on the LCRA water deal could be followed with council action on Oct. 7. end story

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Lower Colorado River Authority, Bill Bunch, SOS Alliance, Robin Rather, Bill Renfro, Mark Rose, Senate Bill 1, water planning, LCRA.

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