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Committee urges Austin Water Utility: Cut costs, consider drought fee

Austin Water Utility should take unprecedented steps to shore up its finances during this historic drought, a city committee has urged.

The committee’s suggestions include cutting $30 million, or 5.6 percent, from the water utility’s $540 million budget, charging customers a “drought fee” if the drought worsens and — for the first time — moving city programs that have nothing to do with providing water out of the utility’s budget.

Even if the utility took all of those suggestions, it still would have to increase Austinites’ water rates next year — though it’s not clear by how much, Assistant Director David Anders said. The utility is losing money — it expects to take in $35 million less this year than it planned — as the drought persists and Austinites use less water.

Austinites have conserved much more in recent years and cut their per-capita water use from 190 gallons a day in 2006 to 136 gallons in 2013. But the utility has many “fixed” costs it must pay for, such as debt from long-finished projects, regardless of how little water it sells, Anders said.

Since March, a seven-member, City Council-appointed committee has been reviewing Austin Water Utility’s finances and rates in fine-grain detail and looking for ways to get the utility’s floundering finances back on track.

“Some people might say that it’s conservation that has caused the (financial) problems, but that’s not the case,” said Luke Metzger, a committee member. “We’re in an extreme drought, lake levels are incredibly low, and it’s an emergency situation. Unfortunately, that means we all will have to sacrifice and pay a bit more to make sure that the utility can continue to serve the community.”

The group wrapped up its work last week and its ideas — which passed on a 4-2 vote, with one member absent — will now go to utility and budget staffers as they develop rates for Austin’s 2014-15 budget.

Austin Water Utility officials will propose new water rates in late July. The City Council can change those rates when it OKs a city budget in September. New water rates would take effect Nov. 1.

The committee’s ideas include:

• Cut $30 million: Austin Water Utility officials have already come up with $30 million in possible cuts that they say won’t affect public health or safety. There are hundreds of items on the list, ranging from not buying new office supplies, furniture and computers to cutting nine vacant, full-time jobs and 40 temporary jobs.

Anders said $30 million would be the biggest cut to the utility’s budget in recent memory.

“We were trying to strike a balance between keeping the utility funded and operating in a sound way and not raising rates any more than they have to be,” said Mickey Fishbeck, committee chairwoman.

• Keep rate structure, for now: Currently, the utility charges Austinites a few fixed fees and a volume-based rate that escalates as customers use more water. The committee said the utility should keep that rate structure the same next year, but charge higher fixed fees in the future.

The committee didn’t suggest specific rates for next year. Early estimates from the utility show that if $30 million in cuts were factored in, the typical Austin household would pay $47 a month for water next year, an increase of $8 or $9 dollars, or about 22 percent.

• Enact a “drought fee”: Austin is currently in Stage 2 watering restrictions, which limit lawn watering to one day a week. If lakes Travis and Buchanan, from which Austin gets its water, fall to even lower levels this year, Austin might enact Stage 3 restrictions and reduce the one-day-a-week watering hours.

The committee said if Austin reaches Stage 3, the utility should charge a “drought fee” to make up for some of the revenue it would lose. The group didn’t recommend a specific rate, but said it should be charged per thousand gallons — instead of higher rates for bigger water users — to spread the pain across all types of customers.

• Move or cut ancillary programs: Austin Water Utility currently pays for more than $10 million in programs that are unrelated to providing water, including economic development and affordable housing programs.

The committee said the utility should no longer be forced to pay for those programs, because it needs that money to cover its own costs. Only the City Council could cut those programs or move them to other departments. Mayor Lee Leffingwell and other council members have expressed an interest in doing that.

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