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.
The city's Utilities Advisory Commission is scheduled to discuss on Wednesday night a staff proposal to raise water rates by 12.5 percent in July. The proposed rate schedule would also raise water rates by 17 percent next year and by 16 percent the year after that.
The greatest driver of the rate increase is the $4.6 billion effort by the San Francisco Public Utilities Commission (SFPUC) to repair pipelines, reservoirs and other types of water infrastructure. Palo Alto is a member of the Bay Area Water Supply & Conservation Agency (BAWSCA), a coalition of cities that gets its water from the SFPUC.
Palo Alto City Councilman Larry Klein, who serves on BAWSCA's board of directors and who was recently named chair of the agency's Board Policy
Committee, said other cities served by the SFPUC are bracing for similar cuts.
"San Francisco itself has been increasing the rate for its customers by 15 percent by year," Klein said. "I think we'll be looking at that for many years to come."
He also told the council that the cost of acquiring water will go up by 30 to 40 percent for Palo Alto this year.
The infrastructure project is also projected to nearly double Palo Alto's water-supply costs between the current fiscal year and 2016 -- from $10.8 million to $21.5 million.
The city's own infrastructural repairs will also impact water rates. Palo Alto is preparing to seismically retrofit its own aged water-storage tanks and to build a new water-storage tank at El Camino Park -- a bond-funded project that could cost more than $32 million.
Palo Alto's conservation efforts may have also contributed to the rising rates. In fiscal year 2010, Palo Altans used 9 percent less water than they did in 2009 and 14 percent less than in 2008. Overall, water usage in 2010 was the city's lowest since 1992, when the area was going through a drought, according to a new report from the Utilities Department.
Other Bay Area cities have also seen declines in water usage, Klein told the council.
"It's a mystery whether it's attributable to increased conservation efforts, economy or other factors," Klein said.
The city's water rates, meanwhile, remained the same in the current fiscal year after a 5 percent increase the year before.
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.
"We are keenly aware of the need to manage costs in this current economic climate, and appreciate the outstanding and ongoing efforts of the citizens of Palo Alto to conserve our natural resources," Utilities Director Valerie Fong said in a statement. "However, the underlying costs of providing water require us to propose these changes."
The Utilities Advisory Commission plans to discuss the proposed water rates at its 7 p.m. meeting Wednesday. The City Council will consider the rate increases in June.