Riley presses Water Utility chief on WTP4 costs

Council Member Chris Riley carried the water for the opponents of Water Treatment Plant 4 in a discussion of the Austin Water Utility’s budget Wednesday morning, one of multiple sessions the Council plans to finalize the FY 2010 budget.

Riley carefully quizzed Director Greg Meszaros about the need to build the controversial north-side water treatment plant on Lake Travis, especially given the city’s goal to reduce water consumption by 1 percent per year. Given the conservation goals, could it possibly be put off, or even delayed? That’s an argument being presented by those who oppose the location of WTP4.

“If we’re reducing our consumption by 1 percent through 2017 then why are we struggling to get the plant online in 2014?” Riley asked. “I know there are some other reasons than simply meeting capacity, the capacity issue and the ability to meet demand. Is there some other number that’s driving the timeline for Water Treatment Plant 4?”

That 1 percent reduction in consumption would equate to 2.5 million gallons per day, Meszaros told the Council. The city continues to grow at 2.5 to 3 percent a year. In essence, the growth would outstrip existing conservation goals.

“That growth will more than compensate for our savings from conservation,” Meszaros said during the question-and-answer portion of his budget presentation.

Riley pointed out that if Council stopped the progress on WTP4 — and took no further votes in favor of the plant – it could cut another $52 million from this year’s budget. Meszaros said that figure was both real and a fiction. Without the plant, the city would still have the need to move water to the north.

The plant could be put off, but it wouldn’t put off the need for additional transmission lines, Meszaros said. How much would be required to add those lines would depend on the length of the postponement of the construction of the plant. The savings certainly would be less than the projected $52 million, although how much less was not clear from the discussion.

So what was the rush for 2014? Riley asked. Mezsaros said the timeline gave the city more latitude for construction. A multi-million dollar project like Water Treatment Plant 4 has its own quirks and delays, he said. A wider window would allow the city to address any of the issues that might arise from the unpredictability of construction.

Riley also commented on water rate increases, noting that increases in water rates were likely to be more significant for more homeowners than increases in property taxes. Property tax rates will increase less than 1 penny. The utility has proposed a 5 percent rate increase this year, which is expected to put an extra $3.78 per month on the average residential customer’s bill.

The rate increase is intended to bring charges on residential charges more in line with the actual cost of service, according to utility officials. Austin has one of the most progressive water rate schedules in the country, charging industrial users about 400 percent more than residential users. In fact, the city subsidizes many residential users on the backs of those system’s non-residential users. The utility’s goal, since a cost of service study last year, has been to lift residential rates to a more reasonable level. And the higher rates for industrial users were intended to encourage less water consumption on the bigger scale.

In his remarks, Riley said he didn’t want to pass water rate increases as a “given” in the budget; these increases sometimes ended up being as important to taxpayers as a property tax increase. Ratepayers will continue to see modest rate increases over the next five years.

The question also was raised as to why the Austin Water Utility wasn’t pursuing a new business model like its sister utility Austin Energy. Austin Energy, which leads the country in the sale of green energy, will present a new business model to Council later this month that is intended to recognize the basic tension of the utility service: to both encourage reduced consumption of local residents but also recognize the revenue the utility could reap from expanding its service base.

Meszaros said the utility had recognized the sometimes-conflicting goals and that some aspects of that kind of policy already were being implemented at the utility.

Austin Water Utility’s operating budget is only $100,000 more than last year’s budget, with a significant investment in capital infrastructure. The utility expects to spend $1.4 billion over the next five years to address rehabilitation, water reclamation, Davis Water Plant upgrades and WTP 4.

On the wastewater side, the utility also is committed to a major downtown tunnel – apart from the Waller Creek tunnel project – that will address downtown drainage. Additional expenditures will go to wastewater treatment plant upgrades and improvements along the Interstate 35 South corridor.

The utility also is proposing a larger financial “rainy day” fund, putting aside 45 days worth of expenditures rather than 30 days. That gives the utility a greater cushion to handle unanticipated revenue changes, Meszaros said. A rainy summer, for instance, could decrease the water utility’s revenue by $20 million. By keeping a larger contingency fund, it both handles unanticipated turns of events and reassures the bond market, Meszaros told the Council.