Gauging the Gouge

Should officials give back part of the mountain of cash that came from high water rates?

Santa Fe had a big role in a recent New York Times story for having the nation’s highest water rates. Those who have been paying bills here, however, know that we got there after officials stuck it to water customers for five straight years of steep annual increases, which began in 2009.

Now, new information from City Hall suggests those brag-worthy rates, plus other taxes and fees, have allowed the city to amass a $95 million cash surplus.

The pressure is mounting. Did the government gouge the people? And should they give back some of the mountain of cash or lower rates (or both)?

The city has been in this pickle before. In the summer of 2011, city councilors repealed a plan to increase wastewater rates after they "discovered" a surplus in reserves of the city division that provides sewer services. This time around, the stakes are higher. Even with an operating reserve and healthy capital projects fund, the city's Water Division has at least $60 million more than it needs.

Public Utilities Department director Nick Schiavo said he couldn't comment for this story, noting it's completely up to the governing body to decide the next steps. But he laid the facts bare for the city's Finance Committee when it was his turn at the lectern during several days of budget hearings last month.

The division has $95 million in the bank. Next year, it expects to earn $44 million in revenue from water rates, a gross-receipts tax increment and interest from its cash reserves. Spending plans estimate it will cost $51 million to run the utility, complete a few planned capital projects and transfer some money to the city's other departments, as proposed by the city manager. That leaves about $88 million at the end of the year. With a reserve list that calls for keeping about $25 million in the bank for future projects, debt payments and operations, Schiavo called the remaining estimated $63 million "a relatively healthy fund."

So why does the city need to keep its rates so high? One answer is that the choice would allow the next five years to be steady.

"Assuming that there are no changes to revenues, and I keep the steady path that I have lined out for the [capital improvements plan], we should not have to raise rates for the next four to five fiscal years," Schiavo told councilors.

While that might be welcomed news, is there an argument to be made for giving consumers a break now, instead? After all, thanks to five consecutive 8.2 percent fee increases, according to figures provided by the city at the time, the average customer's water bill jumped from $31.51 in 2009 to $44.62 in 2013.

"We should be awash in opportunities to decide how you want to approach the future," Councilor Patti Bushee said during an April 30 budget hearing. "I see this as an opportunity. Now we can show the consumer that we've managed the water company so efficiently that we are going to give them a rebate."

What really might have local lawmakers in a tizzy is the idea that the mountain of water company cash could pay for projects in their districts, bail out other broken systems and avoid hard decisions—although talks about those tentative plans have mostly taken place out of the public eye.

Also noteworthy in the debate is that for years, the city has been siphoning money off the water company to supplement other operations. At present, Schiavo reports, Water Division funds have been paying for as many as 20 city employees in other departments with jobs as diverse as lawyers, computer techs and a graphic designer.

Finance Chairman Carmichael Dominguez says the city should stop using the water company funds for those positions, and he wants the City Council to consider a water rate adjustment or rebate. Yet all of that, he warns, needs to be handled slowly.

"We are not going to build a budget off of that issue," he says, noting that the city's overall financial plan is due to the state at the end of May. "We are not going to fix that issue this budget cycle."

A rebate could be costly to evaluate, but even a small rate reduction might be a political windfall for whoever backs it.

Dominguez, who actually voted against the 2008 plan for five increases, isn't about to say that's him.

"Rebates? Those are tough to do. I think it's something we should discuss," he says. "I don't want to rebate or lower the rates this year and then have to re-increase them the next year."

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