Utilities Rate Advisory Commission Public Hearing on Proposed Water and Sewer Rates - January 25, 2012

The Utilities Rate Advisory Commission (RAC) convened at 5:30 p.m. on January 25, 2012, to hold a public hearing on the Department of Utilities' proposed water and sewer rate increases for fiscal years 2013-2016. The proposal included 10% annual water rate increases and 16%, 15%, and 14% annual sewer rate increases over three years. The commission also reviewed report-back items from the December 15, 2011 meeting. After staff presentations, public testimony, and deliberation, the commission voted down the department's unconditional proposal and discussed alternative recommendations, ultimately continuing the discussion to February 2, 2012.

Consent Calendar

• Item 1: Approved the December 15, 2011, meeting minutes. (Motion passed unanimously.)

Public Comments & Testimony

• Joshua Foster: Asked for alternatives, questioned utility tax increases, and expressed concern about bureaucracy versus frontline staffing.
• Craig Powell (Ion Sacramento): Urged the commission to slow down the process, bring in outside financial and engineering experts, and avoid rushing. Handed out a preliminary analysis showing likely cumulative rate hikes exceeding $200/month within four years.
• Julie Berry (written): Expressed support for the proposed rate increases, citing aging infrastructure and the need for investment.
• Martha Ronaldi: Opposed the magnitude of the increases, calculating a $229.02 increase over three years on her water/sewer bill. Proposed smaller, incremental increases of $2/month.
• Mac Worthy: Fully supported the rate increases, emphasizing job creation and the importance of infrastructure investment. Stated, "this is real jobs."
• Mr. Fratz: Criticized the process, low-income impact, and forced services. Argued the city should consider privatization and noted that the utility tax is regressive.
• Don Dunavan: Concerned about affordability for low-income residents, especially given no COLA for Social Security.
• Vicky Davis: Questioned the timing of the notice (holiday season) and the decision-making process, suggesting the decision was predetermined. Expressed distrust and urged more community input.
• Dr. Lee Turner-Muki (Community Housing Opportunities Corporation): Explained that affordable housing providers cannot pass on rate increases to tenants due to regulatory caps, making the proposed increases unsustainable for low-income housing properties.
• Valerie Marlowe Bailey: Opposed the increases due to accountability concerns and questioned how infrastructure got into its current state.
• Alma Watson: Raised accountability issues, questioned why pipes deteriorated, and suggested that wastewater billing should be based on water usage rather than house size for metered customers.

Discussion Items

• Staff Report-Back (Dave Brent): Addressed items from December 15: reserved February 2 for continuation if needed; provided revenue split (80-20 residential/commercial for both water and sewer); presented a commercial water rate comparison showing Sacramento's rates are currently lower than Folsom, San Juan Water District, and Sac Suburban; shared national examples of infrastructure investment (Washington D.C., Los Angeles, Kansas City, Portland, Seattle); and discussed low-income assistance using the utility tax (estimated $1.1M in first year rising to about $7M over three years, potentially covering 16% of low-income households).
• Staff Presentations: Bill B. Safe outlined the capital improvement program (CIP) – $235M for water (including $152M for water treatment plant rehab, $57M for meter retrofit) and $25.5M for sewer. He proposed a conceptual accountability plan involving a report card and annual report-backs. Dan Sherry discussed the condition assessment of cast iron water mains (60% loss of carrying capacity) and the water treatment plant rehab (30% design, $150M). Jamil Moons detailed the financing plan: 75% of rate increases go to capital/reserves; use of debt financing and capitalized interest to smooth rates; comparisons of current path (8%/7%/6% increases) vs. proposed path. Russ Fair (City Treasurer) expressed support, noting the general fund can no longer back utilities. Sanjay Varshney (CSUS) presented an economic impact study: five-year CIP of $469.6M could generate $857.6M in total output and 6,446 jobs; 30-year plan could yield $3.5B output and 26,620 jobs. Jessica Hess summarized community engagement: 26 presentations, four workshops, over 1,100 surveys, 170,000 notifications, and 235 written protests.
• Commission Deliberation: Commissioners discussed accountability, low-income assistance, labor cost assumptions, debt levels, and the need for conditions. A motion to approve the department's unconditional proposal failed 6-1 (only Karen McBride in favor). Chair Archibald introduced an alternative framework: either one-year increases (8% water, 7% sewer) with no conditions, or three-year increases (10%/10%/10% water; 16%/15%/14% sewer) subject to conditions including an accountability plan, independent audit, and allocation of utility tax revenue for low-income assistance. Commissioners proposed modifications: Scott Brown suggested 9% water and 14%/13%/12% sewer reductions; Doug Brown favored semi-annual reporting and alternative low-income assistance design. The commission agreed to continue the discussion on February 2, 2012.

Key Outcomes

• The commission voted down the Department of Utilities' unconditional three-year rate proposal (10% water, 16%/15%/14% sewer).
• No alternative proposal was adopted. The commission will continue deliberations on February 2, 2012, with staff to provide additional analysis on different rate scenarios (e.g., Commissioner Brown's proposed reductions, pay-go vs. debt financing options).
• The formal Proposition 218 protest period closed at this hearing; 235 written protests were received out of 171,000 notices sent. The council will consider the commission's recommendation at its February 21 and February 28, 2012 meetings.
• The commission intends to develop a conditional recommendation addressing accountability, capital expenditure tracking, and low-income financial assistance using a portion of the utility tax revenue generated by any rate increases.