It’s a lot easier to ask elected officials to support a 5.1% rate increase than a 13.5% increase, based on Wednesday’s City Council response to an in-depth briefing by SAWS President and CEO Robert Puente.
The final vote won’t come until late November, but the low-key, receptive mood displayed by Mayor Julián Castro and the 10 Council members seemed like a reliable indicator of eventual support.
The difference in the two proposed rate increases — 8.4% — was achieved by SAWS management with the help of a consultant, resulting in $8.3 million in projected payroll and expense reductions. That includes a reduction in force of 41 full-time positions so far, with a total of 58 positions targeted for elimination, mostly through attrition and some through early retirement. Some of the budget also has been bridged thanks to revised revenue numbers that reflect stronger growth than the original forecast.
The 5.1% rate increase, Puente said, would give SAWs an additional $20 million in revenue next year.
“SAWS is to be commended for this extensive review and cost cutting, finding $10 million-plus in order to lower the rate increase,” Mayor Julián Castro told Puente.
Puente told the Council that the utility is actually proposing increases for the next two years, 5.1% now and 5.3% in 2014.
“A two-year rate increase will lend some stability to our system and enable us to do the planning we need to do,” he said.
Puente put some strong numbers up as he made his case for the increase. Download the full PDF of Puente’s presentation to City Council here.
One, SAWS is achieving significant efficiencies in its budget, projected to be $546.3 million next year. From 2009-15, Puente told Council, SAWS will see a 9% increase in its customer base while operating with 13.1% fewer employees.
Two, even with a rate increase, SAWS will continue to offer substantially lower rates than Dallas, Houston, Fort Worth and Austin. Additionally, 10 different “affordability programs” are available to help ratepayers in need.
Three, all three major bond rating agencies now rate SAWS AA+, meaning the utility will enjoy lower interest rates on debt assumed to complete capital projects.
A consent decree signed by SAWS and the U.S. Environmental Protection Agency requires local officials to spend $492 million more than originally programmed to upgrade the utility’s sewer system, especially the thousands of miles of underground wastewater pipes that crisscross the Edwards Aquifer Recharge Zone. SAWS officials already had earmarked more than $500 million for the work before signing the agreement with the EPA.
“We’re going to spend more than $1 billion in the next 10 years on sewage control, spill prevention and living up to the consent order,” Puente said.
Two major projects to bring new water into the SAWS inventory also represent major capital investments now and in the coming years. By 2014, enough water to service 60,000 homes will flow from SAWS Carrizo Aquifer wells in Gonzalez County, carried to Bexar County via an existing pipeline that reaches from Gonzales through Guadalupe County and into northeast Bexar County near the Comal County line.
Excess water acquired from the Carrizo will be injected and stored in SAWS Aquifer Storage & Recovery wells located in south Bexar County. ASR supplies were pumped this summer to augment aquifer pumping and allowed the city to avert Stage III watering restrictions. Puente said SAWs stopped drawing on its water reserves in September and began restoring ASR inventories with excess water supplies.
A second, longer-term project set to be completed by 2026 involves the construction of a desalination plant near the ASR wells, and the laying of a pipe 5 feet in diameter 26 miles to the northwest where the water will meet the needs of 106,000 households.
Puente said the projected rate increase this year of 5.1% and 5.3% next year do not include funds to operate the desalination plant or to fund the purchase of 50,000 acre feet of water a year from one of three finalists who responded to the SAW RFP.
Puente said the three finalists will be interviewed in the next 10 days and SAWS and the selected winner will enter into negotiations in the spring of 2014.
One cost for SAWS is the continuing incorporation of the former BexarMet customers into the SAW system. The good new for former BexarMet ratepayers is that they will not see an increase this year in their water bills, but like SAWS customers, they will pay more for wastewater service.
The City Council on Thursday will turn its attention to CPS Energy and its requested 4.75% rate increase. CEO Doyle Beneby is scheduled to make his presentation in the morning, and Council has indicated it will vote on the measure Nov. 7.
You can read more about both rate increase requests in the story we posted Wednesday on the Rivard Report, and watch Friday for our coverage of the Thursday presentation.
Full disclosure: The Arsenal Group conducted a four-month review of CPS Energy communications for the utility starting in June 2012. Monika Maeckle, a former member of the The Arsenal Group and wife of Robert Rivard, now works at CPS as its Director of Integrated Communications.