Water rate hike on tap? - The Explorer: Pima Pinal

Water rate hike on tap?

Could raise cost of service; impact fee increase considered

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Posted: Tuesday, June 17, 2008 11:00 pm | Updated: 8:03 am, Thu Mar 24, 2011.

The Oro Valley Town Council last Wednesday discussed the possibility of an across-the-board water rate hike and an increase in the town water impact fees.

The discussion on water rates had been continued from an April meeting, when former council members expressed concerns that the proposed rate structure did not reward customers who conserved water.

Council members wanted Water Utility Director Philip Saletta to rework the rate proposal in a way that would reward conserving customers with lower bills, and penalize those who consume more.

Rewarding conservation, though, could prove to be a complex matrix because the majority of customers — 64 percent — use roughly the same amount of water each month. The average Oro Valley water customer uses about 9,000 gallons of water per month.

“The revenues received from the higher tiers are very low,” Saletta told the council.

With so many customers paying nearly the same amount for water, successfully promoting conservation — while desirable — could create a situation where the department’s revenue suffers.

That’s because the water utility’s operating expenses do not fluctuate proportionally with water consumption. Because the department does not receive tax dollars, nearly all of its funding comes from water sales.

Saletta presented the council three possible rate scenarios to consider, which included increasing base and per gallon rates, adding a fifth tier to the billing structure, raising the groundwater preservation fee and charging more for reclaimed water deliveries.

Water rates were changed last July, when the council approved the addition of a fourth tier to the billing structure. After the change, most residential customers in Oro Valley experienced a $3.69 increase on their monthly water bills, according to figures from the department.

The water director will return to the council in September with a more in-depth rate analysis and a notice of intent to raise rates. If the council approves, the new rates would go into effect in November.

The matter of impact fees still looms.

Last summer, in a compromise with the Southern Arizona Home Builders Association, the council adopted a phased-in impact fee increase.

The plan was to annually boost water-related impact fees over the next five years. Since then, home builders and others in the construction industry have been busily working with members of the state legislature — including Senate President Tim Bee (R-Tucson) — to pass legislation that changes how cities and towns collect and implement impact fees.

“The bill as written makes it a little bit of a challenge when it comes to planning,” Oro Valley Mayor Paul Loomis said.

That’s because if the bill passes, it would make the town’s planned annual impact fee hikes impossible.

The bill says, in part, that municipalities have to wait two years before increasing impact fees, and must justify the hikes with revenue estimates.

“There are several cities and towns that have concerns and that group is growing,” Loomis said.

At least 14 cities and towns across the state have come out against the bill, including Gilbert, Peoria, Prescott, Flagstaff and others.

There are 90 cities and towns in Arizona, and 42 of those charge development impact fees of some kind.

Town officials in Oro Valley have been dubious of the bill, depicting it as favorable to the development community at the expense of taxpayers.

The likelihood that the bill will pass puts Oro Valley in race to pass new impact fees and have them implemented before the last day of 2008, when any impact fee legislation would take effect.

Representatives from the building community have in the past defended the bill, saying it would help stabilize home costs because impact fee-related costs would be fixed going in to a new projects.

Builders have complained that towns can raise impact fees before a project reaches completion, which in turn makes the home more expensive to build.

A Southern Arizona Home Builders Association analysis estimates Oro Valley’s impact fees, building permits and taxes add $29,067 to the cost of a new house. Home buyers would almost certainly have to bear the extra costs.

If the town council approves the new impact fee resolution, the price for a new water meter on a typical house — essentially a hook-up fee — would jump from $4,283 to $7,749.

The majority of water customers in town are residential and more than 80 percent have a 5/8-inch meter.

A public meeting is scheduled for July, when the council could approve a notice of intent. If so, a vote could take place in September and the new fee structure implemented in early December.

New Rate Structure

Oro Valley Water Utility Director Philip Saletta presented options to the town council at last week’s meeting.

The council could vote on a new rate structure in September. If approved, the new rate would go into effect in November.

First option

• Keep four-tier rate structure

• Raise base and commodity rates for potable and reclaimed water 5 percent.

• Increase potable water rate for construction customers from $6 to $6.25 per 1,000 gallons.

Groundwater preservation fees:

• Raise fees for potable customers from 40 cents to 55 cents per 1,000 gallons

• Raise fees for reclaimed water customers from 25 cents to 30 cents per 1,000 gallons

Second option

• Introduce fifth tier to rate structure.

• No base rate increase.

• Raise potable water rate for construction customers from $6 to $7.50 per 1,000 gallons.

Groundwater Preservation Fees:

• Raise rate for potable water customers from 40 cents to 55 cents per 1,000 gallons.

• Raise rate for reclaimed water customers from 25 cents to 30 cents per 1,000 gallons

Third option

• Add fifth tier to billing structure.

• Decrease base water rates.

• Increase potable water rate for construction customers from $6 to $7.50 per 1,000 gallons.

Groundwater Preservation Fees:

• Raise rate for potable water customers from 40 cents to 55 cents per 1,000 gallons.

• Raise rate for reclaimed water customers from 25 cents to 30 cents per 1,000 gallons

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