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PU - Water Rate Increases

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1. Why are the rates increasing?

The current revenues from rates are not enough to meet the requirements of the water system. Along with increases in operating, maintenance and capital costs, the City must also meet debt coverage requirements. This requires that a minimum level of cash reserves be maintained to ensure debt obligations are met.

2. What is the biggest component of the increase?

In addition to the Buckman Direct Diversion Project (BDD), inflation is also a factor in the cost increases. This is especially true for items such as gas and electricity, which have increased in cost above inflation.

3. Does the increase pay for costs associated with new growth?

The costs of new growth are offset, in part, by the Utility Expansion Charge (UEC). The UEC is a one-time charge to new connections and this revenue is used to pay for capital to expand capacity. Capital costs that cannot be funded by the UEC must be funded from a variety of other sources, including rates or alternatively through developer contributions to infrastructure.

4. Is there anything the City can do to lower the increase?

The Buckman Direct Diversion Project (BDD) makes up a large component of the financial plan capital requirements and we do not anticipate these costs going down. On the operating side, rising energy costs have put pressure on operating expenses. Given these facts and due to the need to maintain cash reserves, the water rate increase was adopted to be applied at an equal rate over 5 years to minimize a sudden, stressful spike in rates that could harm businesses and residents.

5. What would happen to the utility if the rates were not adjusted?

The Utility must maintain a minimum level of cash reserves, as required by outstanding debt obligations. If rates are not adjusted, the Utility could be at risk for not meeting its requirements and obligations.

6. Are there more increases anticipated?

The 2008 Financial Plan, based on assumptions regarding growth, inflation and projected capital improvements, shows that the Utility needs several large increases over the study period. The approved rates are spread out in an equal amount for five years to spread out the impact. Should the assumptions change, there is always the possibility that larger increases would be needed.

7. How will a typical customer's bill be affected?

Click on the following link to see an example of what rate increases will look like for the average residential bill, commercial bill, and larger commercial bill. Sample Bill

8. How will the rate increase affect customers on a fixed income?

Staff looked at the Housing Opportunity Program (HOP) which is run by the City's Office of Affordable Housing. As part of affordable development the Office of Affordable Housing will issue a notice to the Water Division stating whether an applicant qualifies for HOP. HOP allows for a discounted Utility Expansion Charge (UEC) for a 5/8" residential service from $2,013 to $800.
The City does offer a Low Income Credit (LIC) which is annual and quarterly depending what the person qualifies for. On the water portion, the monthly service fee is waived (meter charge), along with the storm water fee ($1.00) and the annual water conservation charge. Consumption and water quality fees are charged to the customer. Approval for LIC is based on annual income and we follow federal poverty guidelines. The difference between annual and quarterly is: Annual is more long term, such as the elderly and permanently disabled. Quarterly is for short term disability and unemployment.

9. Why does our region need the Buckman Direct Diversion (BDD) Project?

Our region needs the BDD project because the other sources we have do not provide a reliable supply of sufficient water. The City cannot pump water only from underground wells because they risk damaging the underground aquifer. The current City reservoirs can only provide around half of the water needed during a wet, rainy year and much less during a dry year.

10. Why does the City of Santa Fe need the BDD project now?

The City of Santa Fe does not have enough reliable drinking water. The supply we do have could be dramatically reduced by circumstances we cannot control, such as prolonged drought or a fire in the watershed. The longer we wait, the less certain we are of maintaining a sustainable supply of drinking water.

11. What other sustainable drinking water alternatives have been studied?

Many alternatives have been considered, but the BDD project is the best choice as an additional source of drinking water for the Santa Fe region for three main reasons:

• The Rio Grande is the only source of sustainable water in the vicinity of the Santa Fe region.
  
• The City and County already have rights to significant quantities of imported San Juan-Chama Project water that is available for diversion only from the Rio Grande.
  
• Diversion from the Rio Grande at alternative locations as evaluated in the BDD Environmental Impact Statement would be more difficult or impossible.