Water bill could be based on use

But some Bend officials worry about rates' effect on water project

By Hillary Borrud / The Bulletin / @hborrud

Published Oct 27, 2013 at 05:00AM

Bend Mayor Jim Clinton says the cost of the city’s major water supply and treatment project will undermine water conservation efforts.

Clinton and other city councilors want to change the structure of water rates, so rates are based more on the amount of water customers use. But Clinton said city employees have expressed concern that if they change the rate structure, customers might use less water and revenue will fall short of what the city needs to pay for its Bridge Creek water project. The project is estimated to cost $40.5 million to $59.6 million, depending upon the type of water treatment city councilors select.

“When we’ve talked about what I called (water) rate reform, they have expressed concern that if there’s any significant change in rates, they don’t have any way of predicting how much money they’ll bring in and, gosh, what if they don’t bring in what they need,” Clinton said. “That then leads to reluctance to do anything about the rates.”

City Manager Eric King said the reason he and other staff have suggested the city wait to change the rate structure is that water and sewer projects are in flux.

City councilors placed some major projects, such as a water filtration plant that is part of the Bridge Creek project, on hold while citizen committees and city councilors reevaluated the projects. The City Council is scheduled to decide on the treatment plant at its Nov. 6 meeting. King said it would be confusing to ratepayers if the city changed its water rate structure, at the same time it increased rates to pay for the Bridge Creek project.

“We want to make sure we’re thoughtful about changes we’re making that impact our ratepayers,” King said.

Residents have been paying for the Bridge Creek project with water rate increases since 2008 and, according to information provided by the city, current water rates are sufficient to pay for even the most expensive water treatment options officials are considering. The average monthly water bill in Bend is $24 during winter months and $48 during summer months, according to a city presentation. The city will likely need to sell $22.4 million to $41.5 million in bonds to finance the remainder of the water project, according to an analysis of city documents. Water customers currently pay rates sufficient to repay up to $42 million in debt, according to the Finance Department.

King said there is a good reason for the city to take on debt to pay for part of the water project. If the city paid for the entire project with cash, current water customers would shoulder the entire burden of a project that will benefit future generations. Water costs would be very high now, and potentially very low in the future.

“You issue revenue bonds so you have generational equity,” King said. City officials have been waiting to sell bonds until construction begins on the project.

There was another problem with the rate structure city officials considered nearly a year ago, King said. Some officials believed that people who used small amounts of water were subsidizing people who use more water, because the city currently charges a flat fee for the first 400 cubic feet of water that a household uses each month. However, the city Infrastructure Advisory Committee found people who do not use much water might actually pay more under a rate structure based more on water usage.

City Councilor Mark Capell, who also supports a rate structure based more on water usage, said he still supports the idea if the city can find a structure that will not increase bills for people who do not use much water.

“I think if there is an opportunity to encourage people to use less water, that would be a good thing,” Capell said. “Because the more we’re able to conserve, the less infrastructure down the road we have to build.”

“If we found a way we thought was more fair, I would still be in favor of that,” Capell said.

Bridge Creek water project

Estimated design and construction costs

$24 million New water pipeline and intake facility

$16.5 million to $35.6 million water treatment plant: either ultraviolet light, ultraviolet plus backup wells or membrane filtration. This includes $4.5 million the city already spent to design a membrane filtration plant because even if the city builds an ultraviolet plant at the lowest estimated cost of $12 million, Bend will still spend a total of $16.5 million on treatment plant design and construction.

$40.5 million to $59.6 million: Total estimated cost of surface water project

Where the money will come from

$11.1 million in cash spent so far

$7 million cash, in a reserve fund

$22.4 million to $41.5 million in new debt. The city can pay up to $42 million in debt with its current water rates. In order to cover additional debt, the city will have to raise water rates by 5 percent in order to generate each additional $7 million.

Treatment plant cost estimates

Ultraviolet light: $12 million to $14 million. A citizen committee tasked with providing input on treatment options provided the lower estimate; an engineer hired by the city to assist the committee provided the higher estimate.

Ultraviolet light, plus backup wells: $28.2 million to $35 million. The lower estimate is from the committee; the higher estimate is from the engineer who advised the committee.

Membrane filtration: $30 million to $30.5 million. The lower estimate is from the engineer who advised the committee; the slightly higher estimate is from the committee.

Membrane filtration, plus pre-treatment to remove more sediment: $35.6 million, according to the citizen committee.

Source: City of Bend