Council Divided Over “Water Rate Study”

“I think by authorizing this study, what we’re really doing is putting in for a rate increase. No study was ever requested that REDUCED water rates..” – Councilman Roy Byrnes

“We have to stop unnecessarily burdening our rate payers. The water plant does not work for a City of our size…We have to stop throwing good money after bad…” - Councilman Derek Reeve 

 “I don’t know if [the study] will result in cost reductions…[but] Metropolitan Water District rates are going up, so we need to keep pace.” - Councilman Larry Kramer
Councilman Sam Allevato pointed out that the money being spent on the water plant is part of a $5 million grant the City applied for to expand the water plant. "Yes, it’s taxpayer money but we got it, so I think it’s something we need to do,” said Allevato. 

Mayor Taylor expressed concern over Byrnes' suggestion that the water plant bond debt be refinanced to bring down costs… "Are we paying off debt too fast? Is it too aggressive?” Taylor asked. 

Over objections from Council members Roy Byrnes and Derek Reeve that a “Water Rate Study” may lead to yet another water rate increase that over-burdened residents can ill afford, Council members John Taylor, Sam Allevato and Larry Kramer voted 3-2 to approve conducting the study.

Larry Kramer defended it and commended staff for “doing things that keep costs down.” But watchdogs who track water plant expenditures wonder just what staff is doing to control costs. Councilman Byrnes for example, pointed out that there was an increase in total staff compensation last year of 9.3% - far outpacing inflation. In addition, the maintenance and repair costs resulting from our contaminated water and corrosive soil make the plant too expensive for a town of our size – as evidenced by our water bills. Replacement of filters alone (greensand, GAC and reverse osmosis membranes – all very expensive proprietary filters) is estimated at a cost of $500,000 annually. Then there is the cost of staff to run the plant, which increased from $2.488 million in 2011 to $2.596 million in 2012. Add to that the Principle & Interest of more than $2 million per year to build the plant; the electricity to run it estimated at around $900,000 per year and other costs. “The water plant just doesn’t work for our lack of economy of scale,” said Councilman Derek Reeve.

Byrnes pointed out that staff compensation increased 9.3% last year, far above the rate of inflation. But Kramer insisted, “we’re going in the right direction.”
Reeve expressed concern about the amount of money being spent on a plant that is not working, and that is inappropriate for a small town like San Juan. Reeve pointed to the evening’s agenda, which proposed additional expenditures on the Ground Water Recovery Plant. “Look at tonight’s agenda”, said Reeve. “Item D-12; expansion [of the water plant], for more than $1.5 million of taxpayer dollars; item D-14, over $54,000; item D-13, more than $22,000 and D-15; $8,377. In my opinion, we have to stop throwing good money after bad.”

Councilman Sam Allevato pointed out that the $1.5 million being spent on the water plant is part of a $5 million grant the City applied for and received, in order to expand the water plant. When Reeve pointed out that it’s taxpayer monies being wasted, Allevato replied, “Yes, it’s taxpayer money, but we got it, so I think it’s something we need to do.” 

Byrnes offered an alternative motion to defer the water rate study, proposing that staff instead “be directed to develop operational cost reductions” as opposed to rate increases.

“This reflex automatic cry of ‘we have to raise rates’ should be re-considered,” Byrnes stated. 

One item that several council members did agree on was Councilman Byrnes’ suggestion that staff investigate the potential of refinancing the construction bond to a lower interest rate. It is estimated that such a move could save the City $426,000 per year. Councilman Allevato agreed with Byrnes and Reeve that refinancing should be considered, but Councilman Kramer expressed concern about extending the term of the bond payments. Mayor John Taylor asked whether we should “slow down” in paying off the debt. “Are we paying off debt too fast; is it too aggressive?” he asked.

The Utilities Commission is set to address the potential of refinancing the construction bond. The CCS will report on the commission’s recommendation, and will report on the outcome of the Water Rate Study.

To watch the video of the City Council meeting click: City Council Meeting May 7, 2013 Use the scroll bar at the bottom of the screen to skip to the council’s discussion of this issue, beginning at 1:15:00.


Anonymous said...

I can't believe the council wants to raise our water bills again. What do they do with the money? All I hear is that we're going to make the water plant better and make more water and it will be cheaper etc etc. But every year my water bill just goes up. I don't see any benefits from whatever their doing with our money.It's getting to the point between the electricity bill & water, I'm going to have to move to someplace less expensive.

Thanks common sense, for bringing us this news (even if it isn't good news)..

Anonymous said...

City council(s) have for years made poor financial choices leading us to wonder about the possibility of self-serving motives. Recent compensation increases further raise the issue of motives. Why do we need a "water rate study" to determine if our rates are high enough? Our rates are already among the highest in the county, because of prior poor decisions. Voters need to be more aware of the Council's financial decisions. Council should be charged to keep our rates in line with other communities within the County, and not just to match their increases. The watch dog activities of CCS must be supported and continued.

Anonymous said...

Hey Council: It's time to shut down this money pit before it drains us all dry!

Anonymous said...

I'm sick of this. I've been living here for many years. There always seems to be a majority on council that is backed by special interests and they always vote against what is in the best interests of the residents. They are nothing more than lap dogs for their contributors who have special projects in town or even how about when they voted to give 5 mil to some car dealer....Geeesh!

Anonymous said...

I'm sick of it too.I've been living here for many years also. My water bills have doubled, and continue to go up every year. I can't afford it like these good old boy councilman who line their pockets with our money. I hope this wtaer study doesn't lead to another increase. I think theres gonna be a taxpayer revolt if that happens.

Tom Marantz said...

This study is happening too soon. The plant hasn't been producing as much as they have expected, Ironically, that should lower our rates, but it won't. It would be prudent to make this study after the grant projects are done and the effects of these grant improvements can be measured. Its probably the only chance left for this plant to make financial sense; its the last chance to right this ship.

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