The Austin Chronicle

Water Use Sinking, Rates Rising

By Amy Smith, April 11, 2014, News

Austin Water customers may see up to a 16.6% rate increase in 2015 as the utility grapples with continued income losses.

Last week, David Anders, Austin Water's assistant director of finance and business services, laid out several budget scenarios and rate design options for members of the Joint Committee on Austin Water Utility's Financial Plan. His presentation was a lot to digest in one sitting, but some members agreed that a rate hike – paradoxical as it seems given customers' drop in usage – appeared to be the most viable option for keeping the utility afloat. The major increase of 16.6% would be followed by 3% hikes each year from 2016 to 2018, and 2.5% in 2019.

The joint committee – formed from the Water & Wastewater Commission, Resource Management Commission, and Impact Fee Advisory Committee – has spent the last couple of months mulling the prospect of a rate hike, potential belt-tightening measures, and the possibility of a downgraded bond rating if the utility fails to meet its financial benchmark. Utility officials report revenue being down $130 million between 2007 and 2013, and project a $364 million drop between 2014 and 2019. They attribute the income slide to the drought and mandatory and voluntary water conservation restrictions, but critics of the utility say the drain on finances isn't so simple, and point to the city's nearly $1 billion Water Treatment Plant 4 as the main source of financial woes. The controversial plant under construction in Northwest Austin is expected to go online this year.

In a March 5 letter to City Council, local environmental and consumer activists – Bill Bunch, Roy Waley, Paul Robbins, and Brian Rodgers (a committee member) – asked that the city delay starting WTP4 for five to 10 years. Citing Austin's peak demand of only 173 million gallons per day in fiscal 2013, along with other factors, they say the plant won't be needed for at least 17 years, and that the city could realize a net savings of about $2 million a year with a delayed commissioning of WTP4.

"How badly is [WTP4] needed today?" committee Vice Chair Kris Bailey asked officials during last week's discussion on infrastructure projects.

AW Director Greg Meszaros acknowledged that while usage is "significantly lower" than initial projections, the plant offers functional reliability – it'll be able, for example, to reliably move water through the plant's Jollyville transmission line to the north, home to about a million people. That's been a struggle with the utility's older infrastructure, Meszaros said. "So Jollyville, from a transmission main capacity, is badly needed." And mothballing the plant? "From an operating perspective ... it would be, in my opinion, an incredibly short-sighted mistake to say we're not going to run Plant 4 to try to save a million dollars or two ... you would risk all your warranties ... the system would start to deteriorate, the bond rating agency would downgrade us immediately."

"And you'd get a lot of angry people," Bailey added. "I don't know about that," Mes­zaros said. "Some people might be happy."

But something's got to give somewhere, committee members agreed, and they asked utility staff to return to the next meeting, April 23, with more belt-tightening options, including ideas for curtailing capital projects, halting cash spending on these projects, and dipping into reserves to cover expenses.

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