I enjoyed reading the Rosenberg recent post “water log” to the BBQ, and greatly appreciate the fact based approach. I have comments on two aspects of the post.
1. The post states: “All see the value of monthly billing to prevent water loss by identifying leaks and faulty meters sooner than later”
At a city coffee session it was stated that it takes only a couple hours, maybe half a day, to read all water meters with Manzanita’s current method of reading water meters. So, frequent meter reading is no big deal.
The current water billing software is limited because it will only trigger a meter reading during the billing process. That is a software limitation that should be able to be solved (probably quite easily) so that meters can read often enough, anytime actually, to detect leaks or other conditions. That ability to read meters often should be there regardless of billing requirements.
So, quarterly billing doesn’t have to be a problem because it delays meter readings. But quarterly billing, itself, is appealing because it reduces the water bill for people who go over their base allotment. Plus, It is actually significantly less expensive to the city to bill quarterly. Plus it’s easier for the custom to write 4 checks per year instead of 12 checks per year.
2. The other item mentioned that i will comment on is the use of base allotments as part of the billing process.
Base allotments turns out to be quite a ridiculous hold over (in my not so humble opinion), a legacy method of billing. It’s complicated to explain why we should get rid of the base allotment method of billing, but i’ll outline the idea below. I have communicated with a city official about this, but they haven’t responded.
The stated policy for the water enterprise fund is to establish billing fees that will recover the expenses of maintaining and operating the water system.
In other words, an enterprise fund is not meant to be a profit center, but is meant to bring in enough revenue to recover near and long term expenses. If the city wants to make a profit to help other city expenses, that is perfectly legal, but of course it should be done transparently with stated policy and public budget disclosures.
So the math of budgeting the water system is simple: Revenue = Expenses
(Well, actually forward budgeting is sophisticated and tricky, allocating and projecting expenses and revenue and all that)
With a supply system there are two basic kinds of expenses:
1 Fixed expenses that are more or less constant no matter how much water is supplied.
2. Variable expenses, mostly the cost per gallon of supplying variable amounts of water.
Given that, logically, all customers should be billed a basic monthly subscription fee which represents their share of the fixed expenses, plus an additional fee proportional to how much water they individually consume.
This is the way most services operate – TV, telephone, trash, and so on.
So where does the base allotment of so many free gallons of water come from?
Well it doesn’t figure into anything mathematically, but it does complicate matters any time you want to adjust billing rates. It complicates it much more than is apparent. A base allotment isn’t a fixed expense and it isn’t a variable expense.
For example, the city wants to do a rate study to account for a possible change back to quarterly billing. But, again, it is the legacy “base allotment” complication that requires a new study.
My concern is that instead of a rate study the city should do a cost management study. Once costs are determined, rates are easily determined. So, in my opinion, the city should be focused on cost management. But, psychologically people want to talk about rates, not realizing it is the costs that drive rates. I have seen this behavior in a city meeting video.
From what I can tell, the base allotment method comes from a long ago idea that it encourages water conservation. Supposedly people will try to stay within their allotment so they don’t have to pay extra, and thus they end up conserving water.
Now, the obvious thing to do is to re-examine what we need regarding water conservation. Then if conservation is needed, the intelligent thing to do is have a focused method to achieve conservation.
As it is now with the base allotment, the conservation incentive really only works for those people who are frugal. It doesn’t incentivize well to do users. So, in many ways the base allotment method of incentivizing conservation is unfair and has completely unknown effectiveness. It is an obsolete method. If anything it is the short term rentals that use a very large amount of water. Perhaps they should be targeted for water conservation. But maybe not. The point is to do things thoughtfully and effectively.
It is questionable that we need any conservation program at all. After all most of the year we live in a rain forest. There is no shortage of water. And if unusual circumstances arise, then water conservation methods should be targeted carefully, not just targeted to frugal customers, and should be done in a way that is known to be effective.
So, there isn’t anything wrong with quarterly water billing, and there are improvements to the billing method and the cost management process that are available that would simplify the water billing process and would help reduce the confusions and controversies.
Thanks,
Bill
