Gunter Calls It: Politicians Will Never Reduce Water Rates, They Love that Money
SAN ANGELO, TX — Candidate for Mayor of San Angelo Brenda Gunter called it correctly when she said last week that the City of San Angelo will not be reducing water rates any time soon.
The question of San Angelo’s high water bills came up during Tuesday’s city council meeting where city staff urged the council to continue the current rate structure even though citizen complaints noted it was too high. Water rates were just raised in January in accordance with a five-year plan agreed upon at the end of 2015.
Tuesday, the council had the option to acknowledge the water department’s $3.1 million water enterprise fund balance and offer a rebate to water customers. However, the council voted 4-1 not to. Only Mayor Dwain Morrison wanted the option to grant citizens a water bill rebate.
“And I’m not even running for office,” he quipped.
At last week’s San Angelo Home Builders Association luncheon, Gunter predicted water rate hikes are likely permanent when asked a related question about the City’s purchase of the Ford Ranch.
“As a citizen, I will tell you my first thought when you asked the question is relative to politicians. And that is, [have] you [ever] known a politician who raised a rate [to] ever reduce that rate? It hasn't happened very often in history,” Gunter said last week. “So I think you have to be a little nervous about statements like ‘there is a plan in place,’ because generally the plan stays in place and the rates don’t get reduced because there is always another reason why they need that money.”
Here is some background: During the drought of 2014, city water customers conserved so much water that the City Water Department lost money for so long that it drained its cash reserves. People weren’t purchasing as much water and the City had a dwindling supply of it to sell.
The Water Department is akin to a separate business with its own balance sheet and profit and loss statement for accounting. It is referred to as an “enterprise fund.” When the water enterprise fund is running a deficit, money from sales taxes and property taxes in the general revenue fund are used to subsidize the enterprise.
Doing this isn’t healthy because the general revenue fund finances necessities such as public safety.
At the same time, the City’s water infrastructure is lacking. Maintenance expenses are piling up due to old, leaking pipelines and a decaying water treatment plant that, though it has had many upgrades, was built in the 1920s. Also, the drought reminded city leaders of the urgency of procuring an additional water supply. In 2016 that idea was to recycle toilet water into drinking water. That effort failed to obtain council approval. It was too expensive.
The City committed to a five-year water rate structure starting in January 2016 with pre-set annual rate increases that has many citizens complaining, especially since there is no large water infrastructure project the rates are supposed to finance. Mayor Dwain Morrison argued that was the way the five-year plan and its automatic water rate increases was sold to council and constituents. That is, increased cash flow from higher rates was needed to fund bonds to pay for a large infrastructure project.
Candidate for city council Chris Giroux addressed the council Tuesday. He said he lives as a single man and believes his $70 per month water bill is too high. He called late charges usury fees forced upon hapless citizens “for being a minute late to paying the water bill.” He concluded, “You’re going to price people out of living in San Angelo because they can’t afford the water.”
Also Tuesday, council candidate Steve Hampton tried to explain the higher fees run contrary to the theory of supply-side economics. He suggested that if the city lowered the fees, more water will be sold because customers will be able to afford to consume more.
Yet, the water rates today are based upon a consultant’s 2015 study, slightly modified by council to ease the annual increases. Mayor Morrison argued again at Tuesday’s meeting that building an additional source of water, a potty water treatment plant, officially called the water reclamation facility, was the vehicle used to sell the increase in water rates.
City Manager Daniel Valenzuela disagreed with the Mayor.
“Here we go again,” he started. “As far as the project that was direct potable reuse, I mean the discussion was for a future project. I mean it could have been a desalinization project at this point.”
Valenzuela said there were three different problems the rate hikes were intended to fix. One was to generate a 75-day fund balance in the water enterprise fund. The second was to replace old pipes in the water distribution system, and finally provide cash flow to finance a large, unnamed water supply capital project.
What Valenzuela described is a five-year plan, something Brenda Gunter warned us about. Nonetheless, our reporting backs Valenzuela up.
At last week’s HBA forum, the question asked of the three mayoral candidates was about the City’s use of the cash flow from water rate hikes to finance the purchase of the Ford Ranch 60 miles south of here, a $45 million flip-or-flop gamble the council approved last year instead of borrowing $150 million for a water infrastructure project.
The late G. Rollie White’s Ford Ranch spans three counties and sits atop the groundwater to which the City of San Angelo has rights called the Hickory Aquifer. In 2009 the City borrowed $120 million to develop water wells there, build a 60-mile pipeline to San Angelo, and construct a special water treatment plant to remove low-level radium from the Hickory water.
Last year, the City’s legal team devised a plan to settle once and for all any future claims against the City of San Angelo’s Hickory groundwater made by future landowners. Seeing the Ford Ranch for sale, and fearing the family estate being split into multiple new tracts and landowners, the City decided to purchase the $45 million ranch all for itself. Then, the City will use its status as landowner to solidify the groundwater legal issues, before finding a new buyer for the ranch.
Gunter isn’t a fan of the need to purchase the ranch. At last week’s HBA forum, she stated further, “Another interesting thing we need to talk about the purchase of the Ford Ranch for $43-50 million is: why did we spend $120 million developing wells and water pipelines into San Angelo if we were nervous about the water rights out there?”
Last week, mayoral candidate Tony Villarreal didn’t directly address the question of the Ford Ranch or water, except to say the higher rates were the reason four seats on council turned over. In reality, only one seat on council was lost ostensibly for the potty water project; two other council members retired. Elizabeth Grindstaff successfully formed a coalition with Water Advisory Board Chair Mike Boyd to kill the water reclamation project last year. She lost re-election to Lane Carter for her efforts.
The politics of water is toxic.
Villarreal went on to stress that his leadership skills were needed to bring all parties together to solve mutual problems. He suggested the county, state and feds need to be involved as well.
When he was Mayor of Fort Stockton, Villarreal said, “We earned the ‘hardest-working shining star-ruled community’ because of the collaboration, economic development, and all of the improvements that we made during that time by working together. It doesn’t happen by one person, I’ll tell you that.”
Tuesday, Councilwoman Charlotte Farmer, who is also running for mayor, made the motion to retain the current high water rate structure many are complaining about.
“I just don’t see that we can do anything at this time. And being an election year, I certainly hate to be the one to say I make a motion not to do any refunds at this time,” Farmer said Tuesday. “But I don’t think it is financially responsible for the City to give that (money) back, so I do make that motion.”
Councilman Lane Carter seconded Farmer’s motion to retain the five-year rate structure.
Councilman Harry Thomas noted that the five-year plan will eventually generate a 75-day fund balance for the Water Enterprise Fund. That way, with no revenue at all, the water department will operate for at least 75 days. The water department requires $4.8 million in the bank to meet the 75-day fund balance goal. Currently, it has $3.1 million cash on hand. Thomas estimates this covers about 50 days of expenses, or about two-thirds to obtaining the goal.
Thomas guessed it won’t be until sometime past the year 2020 before there is a chance of a rebate or rate rollback for water customers.