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Mayor criticizes use of Austin Water funds to pay for general fund expenses

Monday, May 12, 2014 by Elizabeth Pagano

The Austin Water Utility came under scrutiny at last week’s budget session, as City Council members took a closer look at rate increases proposed by the utility. In fact, Mayor Lee Leffingwell called for “truth in budgeting,” telling AWU officials that he thinks there are expenses they could cut to avoid raising rates.


The utility has proposed a rate increase for FY2015 of about 15 percent. Additionally, AWU is considering charging customers a higher “drought rate” that would go into effect if the city goes to Stage 3 water restrictions or higher. The city is currently in Stage 2.


“Our biggest unmet need is water in the Highland Lakes,” said Austin Water Utility Director Greg Meszaros. Lakes Travis and Buchanan, the LCRA’s storage reservoirs, are currently just 35 percent full.


Meszaros explained that they were now operating under the assumption that Stage 2 water use is the new norm, and would recommend the crafting of drought rates for Stages 3 and 4, in order to anticipate reduced water sales.


That reduction could be substantial, explained Meszaros, who said that Stage 4 water restrictions could mean a loss in revenue of $100 million a year for the utility. He estimated that, if the drought continues, the utility stands to lose $30-40 million this year.


“It still costs a lot of money to run the utility. We have fixed costs,” said Meszaros. “We have to provide fire connection water. We fix leaks. We keep wastewater from overflowing. I mean, on and on and on. There’s a certain critical mass to that that you have to fund.”


However,Leffingwell questioned some of those fixed costs, pointing to a number of recurring costs in the AWU budget that have, in his estimation, “nothing to do with the water utility’s operations.”


Leffingwell added up the cost of items such as the Sustainability Fund, the cost of being a Green Choice customer, and the Wildland Conservation Decision, and pointed out that came to $17 million in next year’s budget. He also factored in an additional $39 million in direct transfer items.


“I’m not talking about the merits of any of these programs. I’m just talking about the appropriateness of them being funded by the water utility,” said Leffingwell. “Really, if you were a business, you wouldn’t be paying any of this money. This is money that, by rights, should be funded out of the general fund.”


Leffingwell made the point that cutting $56 million from AWU’s budget could go a long way toward avoiding a rate increase, and railed against the idea of using the city’s utilities as “cash cows.” The issue, said Leffingwell, was one of “truth in budgeting.”


“That’s what we’ve been doing for years, with our energy company and our water utility. And now, when we are in a situation where times are a little bit tough, now we’ve got to raise rates. And that’s basically the same for all of our citizens as raising taxes,” said Leffingwell. “I think we ought to embark on a course to correct this. I certainly wouldn’t expect it to be corrected in one budget cycle, but we have to start making some changes.”


Meszaros said that the city has been seeing a combination of rain over Austin proper, which curtails outdoor watering demand, but no rain over the lakes, which has kept them very low.


“Historically, we knew we would lose money during wet years…then we made it up in dry years. But it doesn’t work like that any more. We lose money like mad in wet years, and we lose money like mad in dry years,” said Meszaros. “That’s why we have to change this model. It’s just not sustainable for us.”


“I know it drives citizens nuts,” said Meszaros, who made it clear that people weren’t being “punished” for conserving water.

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