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Austin Water Utility could lose revenue over reclaimed water deal

Friday, July 19, 2013 by Charlotte Moore

The Austin Water Utility could lose more than $300,000 in revenue due to special reclaimed water rates proposed for the city’s parks system for the next fiscal year.

The utility presented its final proposed rates for FY2014 to the budget committee of the city’s Water and Wastewater Commission Monday night. Overall, the average customer can expect to see a 6 percent increase on their bills based on a 12.3 percent increase in water rates and a .02 percent increase in wastewater rates.

According to the utility’s figures, a current bill totaling $83.24 under the 2013 rates would see a more than $5 increase under the proposed 2014 rates resulting in a bill for $88.30. A small portion of customers’ bills will be applied to subsidizing the city’s reclaimed water initiative.

Reclaimed water is recycled from wastewater, minimally treated, and reserved for such uses as irrigation, cooling towers, industrial uses and toilet flushing. The city supports the program in the name of both fiscal and water conservation.

Some customers of reclaimed water include Austin-Bergstrom International Airport, The University of Texas’ main campus, some Mueller retail areas, and city golf courses and ballparks. Currently, the system-wide rate for reclaimed water is $1.50 per 1,000 gallons. That figure is roughly one-third of the price to use and treat drinking water, a number that can exceed $5 for 1,000 gallons.

The proposed FY2014 system-wide rate for reclaimed water is $1.73. However, if the budget passes, not every user will pay that rate.

In June, after pushback by the Golf Advisory Board and others, Austin City Council members adopted a resolution asking the utility to consider setting a special rate for the city’s public golf courses. The resolution states that the proposed increase for reclaimed water rates will severely impact operating expenses for the facilities. It further suggests that, because irrigation of these parkland facilities is a necessary community resource, the Water and Wastewater Commission should work with City Manager Marc Ott to develop special reclaimed water rates for parkland use.

According to the utility, the total revenue the utility would generate from the entire reclaimed water system if the Parks and Recreation Department’s rate were the same as that for the rest of the city is a projected $1,172,457. PARD’s portion of the revenue under that scenario would be $738,420.

However, the FY2014 utility budget drops that rate to $1.00 per 1,000 gallons of reclaimed water. In some cases, for facilities already paying in excess of the rate, the figure will amount to an unsolicited discount.

If the rate for PARD is approved at $1.00, the total reclaimed revenue will be reduced to $869,197 – a more than $300,000 loss. The utility would then increase the rate for parks over the next five years by 15 percent per year. It would eventually plateau at $1.75 per 1,000 gallons in FY2018.

Most of the city’s golf courses are already paying the system-wide rate of $1.50 for reclaimed water. However, the Jimmy Clay & Roy Kizer Golf Course – which for 20 years has enjoyed a reduced reclaimed water rate of 41 cents thanks to an agreement that hinged on the course installing its own reclaimed water lines – would feel an immediate hit of nearly $400,000 if it began paying the system-wide rate in 2014. That course, the Golf Advisory Board, AWU and the City of Austin have for months been embroiled in devising a plan that would phase the course into paying system-wide rates over the next few years. 

Kevin Gomillion, manager for the City of Austin Golf Division, says the position of the Golf Advisory Board is that the reclaimed water system is underutilized. “As a whole the water utility continues to increase the water rate for reclaimed water and they’re not bringing new users on,” he said. “The parks are a great potential because we’re some of the biggest users of some of the reclaimed line. If the rates continue to increase, then we have to reduce consumption which doesn’t help the water utility or usage of the system. By increasing it to $1.73 we don’t keep as much water at our golf courses, we reduce watering of the golf course – it’s this trickle-down effect.”

Gomillion also says if the reclaimed water rates rise to unmanageable levels, it’s not the greens which will suffer, but the habitat and the trees.

“We have over 300 migratory birds that fly into the golf course,” he said. “If I have to reduce water, I’m not going to reduce it to the greens. I’ll reduce it to the lakes.”

Greens fees would go up, too. “We try to provide affordable areas where some city tax payers can’t pay at a country club or other facilities with high-end daily use fees.” The higher reclaimed water rate would have had “about a $400,000 impact that would have (affected) green fees,” Gomillion said. “It would have been a $3 fee increase. That would have been a major hit.”

“As far as ‘recouping’, the Water Utility funds will transfer an additional $300k to the Reclaimed Utility Fund in FY2014,” AWU Budget and Finance Manager Michael Castillo explained to In Fact Daily in an e-mail. “This increases their individual fund requirements, and (customer) rates are adjusted accordingly.”

Austin Water’s total projected revenue for FY2014 is more than $500 million. Reclaimed water revenue, with the reduced parks rate, represents only $869,197 of that figure. Still, AWU customers will feel some of the adjustment for decreased reclaimed water rates. “It may only be a penny or less than a penny, but that dollar amount of subsidy is being borne by the water wastewater customers,” Castillo said. “When you start down one path, pretty soon it’s real dollars people are paying. It doesn’t lower our expenses; the question is how do we recover our revenues?”

For Gomillion, the answer is clear. “There’s not as many users coming onto the system as there needs to be,” he said. “I still make the case as a user that anything we can do to increase the consumption of reclaimed water is a benefit to Austin. Keep raising the rates, and there will be fewer users.”

Customers wanting to voice their opinion on Austin Water’s FY2014 budget and proposed rate fee hikes can do so at a public hearing scheduled for August 22. Between now and budget approval, changes to the budget could occur. City council is scheduled to approve the budget on Sept. 11.

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