Water Rate Freeze Gets the Big Chill
12/23/14 - Editorial by Renee Wilkins
The water rate freeze is getting the big chill. If you weren’t paying close attention, you probably missed the shot across the bow made by Senator Craig Brandt at the recent Capital Outlay Forum. The meaning was clear – If Rio Rancho freezes the water rate increases, don’t expect any state funds for water infrastructure. Does he think even though we have the second highest water rates in the state, Rio Rancho residents aren’t paying their fair share? Let’s take a closer look at those pesky details surrounding our water rates and infrastructure improvement.
First, let’s turn to the Red Oak Study done in 2012. This study made certain assumptions:
Assumption 1: Water usage per household account would stay the same.
The city’s water usage has decreased by 23% since 2012. Peak demand decreased from 88% to less than 50% peak demand this year. This is significant because it gives more time to address the city’s water problems. This reduction in demand equates to less expenses in pumping and treating water. This doesn’t even include the likely benefit we’ll see from the estimated 2600 leaking service lines that will have been replaced by summer 2015.
Assumption 2: The City would build a capital reserve equal to 1% of assets.
The Study’s projected goal was to have $3 million in capital reserve by 2017; we have already reached $4 million. It further recommended to have $2.09 million a year toward the water rights fund; the city is already ahead at $2.7 million a year. The Study also said the city should have $46 million in total rate revenue by 2017. If the city were pumping at the 2012 levels, we would already be at $49 million total rate revenue now, not including miscellaneous revenue that adds up to another $1.9 million.
Assumption 3: The City would add $45 million in debt for capital projects and would be paying 15.4 million in annual debt service.
The Study anticipated the City would borrow this amount in debt to help fund capital projects. However, the current projects staff is planning would only require $31.5 Million in loans; the remainder are being paid for with existing cash. The City has reduced the debt by $16 million in the last two years. The utilities ending fund balance is also at a robust $10.5 million.
The City implemented the water rate increases based on the above study. One big change that was not factored into this study and has had a positive effect was the change in volume charge, making those who use more pay more. We are ahead of the study's projections and have room to give the citizens a break from the 5 scheduled consecutive water rate increases. The Utilities Commission voted in favor 5-2 for the proposed rate freeze. They determined that foregoing the July 2015 rate increase would not significantly impact utilities projects and would give water users much needed relief.
We all know that once bureaucrats have their hands in our pockets, it’s hard for them to let go. And if the Tax Collectors 4 (Brandt, Harper, Lewis and Pacheco) start issuing ultimatums; what is next? Will they hold hostage any support for public safety and road projects if our city doesn’t increase sales or property taxes? I guess we don’t have enough skin in the game to suit them.