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Palo Alto braces for rising water rates

Original post made on Jan 31, 2011

Palo Altans could face years of steep water-rate increases, including a 12.5 percent jump in July, because of regional efforts to repair aged water infrastructure and spiking water-supply costs.

Read the full story here Web Link posted Monday, January 31, 2011, 10:11 PM

Comments (32)

Posted by qq, a resident of Barron Park
on Jan 31, 2011 at 11:15 pm

This is like some Twilight Zone version of the grocery shrink ray.

Use less, pay the same, OR MORE!

First the garbage contract, and now this.

Web Link

Except in the grocery it is get less, pay the same. The rational there is that consumers are "price sensitive" and would rather pay more per unit volume, in order to have a (smaller) bottle or (smaller) box of whatever stay the same price.

qq


Posted by hmmm, a resident of Charleston Meadows
on Feb 1, 2011 at 9:12 am

I don't get it. Our water rates go up because we use less? Or does this money go to some other uses? It would be really interesting to know the details of how the money is spent.


Posted by Why?, a resident of College Terrace
on Feb 1, 2011 at 9:55 am

Palo Alto MUST open the books on how finances are handled with respect to water.



Posted by Anon., a resident of Crescent Park
on Feb 1, 2011 at 10:19 am

I;d have to agree with Why? ... we need and audit of the whole city. Incentives are all messed up, use less, pay more ... what kind of logic is that? Who knows what kind of hanky panky is going on in this city ?


Posted by common sense, a resident of Midtown
on Feb 1, 2011 at 10:24 am

Here's a list of utility money that the city gets:

- Utility Users tax, $11,400,000

- Utility "Return on Investment", $16,500,000

- Rent paid to city, $10,827,000

which is a total of almost $39 million dollars. This is about $600 per resident/year; an average family of 4, this is about $2,400 of your utility bill.


Posted by Question, a resident of Downtown North
on Feb 1, 2011 at 10:51 am

So it also says they took a poll and we pay less, so is that a good reason for us to pay more? Come on Palo Alto, it use to be a good thing to be under PA utilities, not amymore


Posted by Forgetful-Palo-Alto, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 10:52 am

Several years ago, this matter came before the City Council, and the rate payers. John Ulrich (the disgraced former Utilities Director) made it clear that the cost of the Hetch Hetchy Refurbishment project, estimated to be about $5B at one point, would have to be paid for by increased water prices. Ulrich suggested incremental raises over a ten year period until the cost of water was doubled.

It's a shame there is no institutional history in this town.

One question that Ulrich never answered was: "Once Palo Alto's contribution to the Hetch Hetchy Refurbishment Project was paid off, would the cost of water come back down. He did not (or would not) answer the question.

What's needed is an open accounting (presumably in the City Budget) for Palo Alto's payment into this fund. That way, we won't forget why the cost of water was increased, and that the increase need not be permanent.


Posted by Frank, a resident of Ventura
on Feb 1, 2011 at 10:59 am

Sure audit the books - never a bad idea but I doubt we'll find much.

In the end we have a water system that is a hundred years old in spots and it needs upgrading. The water main outside of my home broke about three years ago, they patched it by replacing about 6 feet of it. The rest is now about 3 years older... Construction is expensive.

As for using less - there are more of us and the same amount of water. Water is the new oil.

Still there are some interesting ideas we haven't looked into: grey water is still illegal, reusing waste water (after it's been treated).


Posted by Forgetful-Palo-Alto, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 11:21 am

> we have a water system that is a hundred years old in spots

Well, the PAU could provide the residents a map of the city's water distribution system, annotated with age of the segments, and some sense of the need for repair/refurbishment of the segments. Certainly they must have such information.

The Utility has had an on-going replacement program of 2%/year for a while now, so it's hard to believe that there is much of the Palo Alto water system that is 100 years old. The PAU could make this information available, if we had decent Council Members who understood transparency in government and indicated to the City Manager to make this information available.

Concrete pipe generally has a service life of 100 years, so that number should not be necessarily upsetting. (Remember there are structures built by the Romans using concrete that are still in service.)

What's needed is more transparency in the process, so that the real needs, and the real costs, are on the table. Larry Klein is the last person in the world who is like to tell the residents, property owners and business owners the truth about anything.


Posted by Carlito Ways, a resident of Old Palo Alto
on Feb 1, 2011 at 12:03 pm

>Lower water usage meant dropping revenues. Eric Keniston and Ipek Connoly, resource planners in the Utilities Department, wrote in the report that a 1 percent drop in water demand results in a 0.9 percent revenue loss for fiscal year 2011.

They wrote that "since most costs facing the water utility are fixed, at least in the short run, this results in a corresponding need to increase water revenues and, therefore, rates."

The proposed rate change would raise the average residential water bill in Palo Alto by about $8, from $72 to $80. A "large residential" customer would see the bill go from $190 to $207, while a "small residential" customer would see the average bill go from $32.64 to $42.17.


Looks like this is the infamous "Palo Alto Way", and the majority of Palo Altans just go with the flow, then the trolls in the City government feel empowered to run amok.


Posted by Julius, a resident of Monroe Park
on Feb 1, 2011 at 12:34 pm

Who knows a good "green landscaper" who can design and implement water-efficient planting and irrigation? It seems really silly to spend on the order of $100/month watering a thirsty lawn all spring, summer, and fall.


Posted by Julius, a resident of Monroe Park
on Feb 1, 2011 at 12:42 pm

Also, regarding infrastructure upgrades, this is a relatively good time to sell a long-term bond. Isn't that the usual way such costs are spread out over a long period of time? Maybe that's what they're doing, but we need transparency to see that and check it.


Posted by Bill, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 1:06 pm

Palo Alto's water comes from San Francisco's Hetch Hetchy system which is undergoing extensive repairs and improvemnts likely to cost in the $5 billion range. San Francisco is financing the repairs by issuing revenue bonds payable over the next 30-40 years. Palo Alto's costs will rise as the repairs are financed, and will have to pay its pro rata share of these costs going forward.

So rates are going up. They won't be coming back down. On the plus side, our rates were low to begin with, and will continue to be relatively low even with these increases.

One other major plus, from my perspective. We'll continue to have access to some of the best water in the world, stand a much greater chance of surviving a catastrophic earthquake without lengthy service disruptions, and recover far more quickly if there are disruptions.


Posted by Forgetful-Palo-Alto, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 1:48 pm

> our rates were low to begin with, and will continue to be relatively
> low even with these increases.

Low compared to what? Periodic comparisons of PA utilities shows that they are never the lowest in the surrounding area.

And as posted above, once the Hetch Hetchy Refurbishment commitment is paid off, why shouldn't the cost of water be lowered?


Posted by hmmm, a resident of Charleston Meadows
on Feb 1, 2011 at 2:55 pm

Open the books and then I don't mind paying more if I know we are using the taxes as efficiently as possible.

And, like Julius, does any one know of a good landscaper?

Also, on average, what can I expect to pay to redo the front lawn. (I realize this could vary depending on how fancy or how much gets redone, but maybe someone can just give some examples of the costs).


Posted by Mike, a resident of Crescent Park
on Feb 1, 2011 at 3:26 pm

We need to face up to the fact that to our governments-local, state and federal, we are pretty much nothing but revenue sources to keep their machine and schemes alive and in play.

Specifically, our utilities revenues are used to offset general fund expenditures, so any chance they get to raise utilities will be considered and probably implemented.


Posted by Giveusabreak, a resident of Monroe Park
on Feb 1, 2011 at 4:59 pm

I have a large lot (with two small lawns and lots of trees, flowers and shrubs, and I am paying 200 dollars a month in the warmer months for water, even during a relatively cool summer. They can keep talking about the "average" customer, but many of us are not "average," and we are being priced out of the market. I cannot afford 15 percent increases or more on a yearly basis, and I am sure I am not alone. This is all quite interesting when we consider that many in the Central Valley don't even have water meters, and often pay a flat monthly fee for water, regardless of how much they use. How does that work? The water issue in the Bay area seems like a racket, and it brings to mind the movie Chinatown. Apparently, 'twas ever thus.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 5:30 pm

How can we as a City be using less water when we are building more and more homes and our population is increasing?
Since each resident needs to shower and flush, and their clothes need to be laundered, regardless of other uses, a higher population should cause higher overall consumption.


Posted by Forgetful-Palo-Alto, a resident of Another Palo Alto neighborhood
on Feb 1, 2011 at 6:06 pm

Some time last year there was some discussion about using more recycled water from the Water Quality Plant. This idea requires another pipe line to be laid from the Bayshore, under Highway 101 and then to some customers of this water. The schools use a lot of water during the warm months, as does the city in its parks. A couple of people claimed that the City was using recycled water on the golf course, so there is a precedent for using more of it on grass and lawns.

The idea didn't go very far at the time, but any time the City wants to get serious about using this water, rather than pumping it into the Bay, then there is a potential for saving some money over a fairly long time frame.


Posted by Benjamin Pink, a resident of another community
on Feb 1, 2011 at 9:26 pm

Palo Alto is unfortunately experiencing the same "death spiral" that many other utilities face: ask for conservation, people use less, revenues fall, rates must rise. This cycle is the result of poorly structured rates. What utilities need to do is structure their rates so that higher water users basically subsidize lower water users. The tiers in an increasing block structure should allow for some water at a very low price, some more for a bit more, then very steeply inclining blocks. Higher water users, people with big lawns or landscapes often won't care and will pay the higher rates to keep their greenery. These users will generate revenue that will cover lower users in the early blocks. Additionally, there should be a general water conservation tax on everyones bill that is used only to fund conservation rebate programs within the city. Costs in general will rise for sure (due to Hetch Hetchy system upgrades), but with properly structured rates the death spiral can be avoided.


Posted by Walter_E_Wallis, a resident of Midtown
on Feb 1, 2011 at 11:51 pm

Walter_E_Wallis is a registered user.

Mr.Pink, why should anyone subsidize another's water? The real solution is to build more dams. Oroville and Round Mountain for a start.


Posted by xyzstela, a resident of Barron Park
on Feb 2, 2011 at 1:03 am

This totally should be investigated. How come the price can go up when it was raining so much that there is no water shortage???


Posted by Benjamin Pink, a resident of another community
on Feb 2, 2011 at 7:58 am

"Mr.Pink, why should anyone subsidize another's water? The real solution is to build more dams. Oroville and Round Mountain for a start."

By subsidize in this case I mean that the revenue collected in higher tiers will balance out the overall revenue for the utility. In other words, wasteful users will generate "excess" revenue that will be used to offset lower revenue from the lower tiers /lower users.

Using properly structured rates is an example of a demand measure to encourage conservation. This technique is in stark contrast to supply side measures like building reservoirs/dams. Building dams is an outdated, highly expensive and environmentally damaging means of supplying water. Conservation (via demand side techniques) is dramatically more cost effective.


Posted by Resident, a resident of Another Palo Alto neighborhood
on Feb 2, 2011 at 8:11 am

I agree with Ben Pink.

Everyone should have a low cost low rate starting point and the more water over that minimum should cost more. Regardless of the size of the home or the lot, or the number of people living in the home, there should be a basic low cost minimum.

You may ask why, but I know that some will refrain from basic hygiene in an effort to save money. Not flushing toilets and not showering regularly are not good ways to save money. Some people will try to save money rather than save water.


Posted by Anon., a resident of Crescent Park
on Feb 2, 2011 at 10:27 am

I don't like the water increases ... for using less, like the garbage increases for using less ... the city management is incompetent to do their jobs.

What I really do not like is $0.15 per kWhr electricity. I calculated my overall cost of electricity last month and that's what it was. Since I don't know what it is in other cities in the area, I suppose I can't be sure about that ... but it seems high to me.

Anyone know what electricity rates are in the area ... is 15 cents per kWhr high?

That's like paying a quarter to run a 75 watt bulb for 24 hours - seems like a lot.


Posted by Resident 0.1, a resident of Another Palo Alto neighborhood
on Feb 2, 2011 at 11:29 am

Financing
Funds from the sale of general obligation and revenue bonds have provided about 78 percent of financing for construction of the State Water Project. Full repayment of these bond funds is being made by Project beneficiaries, rather than by the general taxpayer.

Other funding sources have included tideland oil revenues, investment earnings, legislative appropriations for recreation, federal flood control payments, and water contractor advances.

Currently, short-term financing is obtained by commercial paper notes which are replaced periodically by long-term revenue bonds.

All contractors pay the same rate per acre-foot for the cost of constructing and operating facilities which store and convey the SWP water supply. In addition, each contractor pays a transportation charge which covers the cost of facilities required to deliver water to its service area. Thus, the contractors more distant from the Delta pay higher transportation charges than those near the Delta.

Full payments are made each year for fixed SWP costs regardless of the variations in water deliveries that occur from year to year. Fixed costs include those for operation, maintenance and debt service. Contractors also pay costs which do vary depending on the amount of water delivered during the year. These include the costs for energy used to pump water to their aqueduct turnout locations.

Web Link

Dear Palo Alto residents: if we build bigger buildings, increase our population, we will have to pay for water infrastucture growth. Say no to the massive hospital growth, yes to the upgrade.


Posted by Giveusabreak, a resident of Monroe Park
on Feb 3, 2011 at 10:01 am

Mr. Pink, you are assuming that I am a "wasteful user" simply because I have a large lot and therefore need more water than someone with a smaller lot. I am not wasteful, I am merely trying to maintain a very large investment in landscaping, which frankly, has also helped to beautify my neighborhood. I have a very small house, and live quite simply. When we make value judgments on a constant basis about every choice that other people make in life we are guilty of very simplistic thinking, but this seems to be the Palo Alto way. I am growing tired of it, and I think others are as well.


Posted by Benjamin Pink, a resident of another community
on Feb 3, 2011 at 11:26 am

Hi, your comment about having a large lot and not being a wasteful user is right on point. Let me clarify further. I am not lumping you in as a wasteful user just because you have a large landscape. A proper rate structure can have multiple tiers. There should be a tier (probably the third tier) that would allow for a reasonable amount of water for home and landscape use at a moderate price. Higher tiers could address true wasteful use with significantly steeper prices. Irvine Ranch Water District is implementing a version of what I am talking about already and they take into account lot size and landscape area. Theirs is a water budget approach and is very data intensive/staff intensive to implement. I believe you can accomplish the same thing just with rate design and not using a water budget approach. Bottom line is that people should be allowed a reasonable amount of water -even enough to cover landscaping on a large lot--but water that goes beyond into the realm of wasteful should be considerably more expensive. It isn't too hard to figure out how much water should be apportioned to the tiers for reasonable use.


Posted by Giveusabreak, a resident of Monroe Park
on Feb 4, 2011 at 10:48 am

Thanks for a thoughtful response, Mr. Pink. I wish they would do what you suggest, but I don't see it happening anytime soon. For the moment, I am categorized as a "heavy user," and penalized as such. The search for revenue generally wins out over common sense - the only reason the very large rate increase on those with the smallest garbage cans didn't stand was public outcry. Perhaps, when the burden gets too great, the incessant rate increases for water will be equally scrutinized by the public, but we are not there yet.


Posted by Walter_E_Wallis, a resident of Midtown
on Feb 5, 2011 at 7:06 pm

Walter_E_Wallis is a registered user.

Mr Pink,"Building dams is an outdated, highly expensive and environmentally damaging means of supplying water. Conservation (via demand side techniques) is dramatically more cost effective."
If this were true, then why not breech all the existing dams? You cannot, in conscience, benefit from the dams that are and yet refuse dams for posterity. Fresh water that flows to the sea is lost to man's benefit. Your form of conservation is effective only in the short term but is disastrous in the long run. To ration by scarcity rather than to keep up with population growth is to raise the bridge after you have crossed it. Ultimately you wind up having to survive on the water that falls on your own property.


Posted by Benjamin Pink, a resident of another community
on Feb 10, 2011 at 10:47 am

"If this were true, then why not breech all the existing dams? You cannot, in conscience, benefit from the dams that are and yet refuse dams for posterity."

Umm, yes, I can benefit from existing dams and also say that there should not (generally speaking) be dams created in CA going forward. For example, Hetch Hetchy reservoir provides a huge benefit for residents of SF and the Peninsula. Would I build that dam today? no. Would I tear it down now? no. Breaching existing dams does not make sense in many cases for a variety of reasons. It can make sense in some cases if a reservoir is silted up and is beyond usefulness (Matilija Dam in Ventura County is one such example). Going forward, we must apply strict cost/benefit analysis to projects such as dams and desalination. If it can be shown that there are more cost effective options we should pass on these projects. in addition, the environment needs to come into the evaluation. Many dam projects are destructive.

"Your form of conservation is effective only in the short term but is disastrous in the long run. To ration by scarcity rather than to keep up with population growth is to raise the bridge after you have crossed it."
With correct pricing and rate setting, you can simultaneously prevent shortages and provide water in an equitable way. by just "keeping up with population growth" by adding new supplies is totally unsustainable. We are in a new era and water is not abundant.


Posted by Anon., a resident of Crescent Park
on Feb 10, 2011 at 4:43 pm

The subsidization of the larger, industrial users by the smaller users seems to me to encourage the idea of unlimited growth, that providing a cheap resource infrastructure of power, water, communication which does not work in the modern closed loop limited resource environment.

The reason it makes sense to me for larger uses to subsidize smaller users is that since they pay more already because they use more, an incremental increase in their rates can both generate more revenue to send a pricing signal to people to modify their behavior and rightsize their needs, and that cost can be passed on again through the market for whatever the larger users sell, again providing correct signals.

We have a lot of talk about the free market here in America, and it never goes beyond justifying ever-decreasing taxes and attacks on Liberals, and corporate critics, but the real market has to have the right signals that are public, ubiquitous, correct and based on reality to work right.

We could fix all our woes by rationalizing our systems instead of using authority and money to encourage corruption of decisions that are basically taken out of the public's hands because they do not have the infromation or the time to look up the real data to see the big picture.


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