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Austin might add ‘drought fee’ to water bills

By Sarah Coppola - American-Statesman Staff

Austinites might soon see the cost of Texas’ prolonged drought directly on their water bills.

For the first time ever, the Austin Water Utility is considering charging a “drought fee” sometime this year if the drought gets even worse.

The utility — a city department that treats and sells water to Austin customers — says the fee would help it recoup some of the millions of dollars it is losing as Austinites heed the call of conservation and use less water.

The utility also plans to raise its base water rates in the coming year, potentially amounting to a double hit on customers’ wallets.

“Austinites have really helped (with conservation) in this drought, but the water utility has a lot of costs that it must continue to pay for regardless of how much water customers use,” said David Anders, an Austin Water Utility assistant director. “We can’t just cost-cut our way out of this drought.”

The utility has suggested five possible drought fees to a city committee, which will recommend one by month’s end. Austin Water Utility officials will use the advice to propose a drought fee this summer that could take effect this fall if the lakes that Austin relies on for water continue to drop.

The ideas range from charging every customer a flat fee to charging volume-based fees that would hurt heavy water users the most. The different options could raise the monthly bill of a typical homeowner, who uses 7,000 gallons of water a month, by as much as $22.50.

Lakes Travis and Buchanan, the sources of water for Austin and many other Central Texas cities, have yet to rebound to pre-drought levels. The two lakes are only 36 percent full.

To handle that dwindling water supply, Austin has urged residents to conserve through things like education campaigns and by charging tiered, volume-based water rates that discourage heavy use.

Homes and businesses have gotten the message and have cut Austin’s per capita water use from 190 gallons a day in 2006 to 136 gallons in 2013. The total volume of water used dropped from about 50 billion gallons a year to 40 billion during that time, Anders said.

Another reason for the boost in conservation: In 2011, Austin enacted Stage 2 watering restrictions that let residents water their lawns no more than once a week, during certain hours. If the lakes dip even lower, to levels that officials expect to see as soon as July, Austin might enact more severe Stage 3 restrictions, further limiting the once-a-week watering hours.

Austin and other Texas cities have steadily raised their water rates in recent years to keep from hemorrhaging money during the drought and to continue making system upgrades. But it’s a vicious cycle: As the drought drags on, customers use less water and cities make less money, causing water utilities to consider raising rates once again.

The Austin Water Utility lost $27 million on water sales last year and expects to lose the same or more this year. That’s about 10 percent of the utility’s revenue.

“This has been an extraordinary drought,” Anders said. “We don’t know how people will react or how much they will conserve. Our predictions have been off the past few years due to these extraordinary circumstances.”

Anders said the utility plans to cut some costs next year, such as overtime and employee travel and training, and it is looking for more possible cuts. But 80 percent of its costs are “fixed,” or necessary from year to year, such as paying off debt from water-related projects that were built years ago, Anders said.

The utility plans to increase its base water rates next year, resulting in a monthly bill of $49.12 for the typical homeowner, up from $38.35 this year — a 30 percent jump.

But it also wants to have a drought fee ready to add to customers’ bills if the drought deepens and Austin goes to Stage 3 restrictions, Anders said. The fee would help the utility bring in money and keep it financially stable even if it isn’t selling much water, he said.

The Austin Water Utility is also trying to figure out if certain customers should bear more of the pain from a drought fee than others. Nearly 200,000 of the utility’s accounts are customers who live in single-family homes, 5,700 are apartment complexes, 17,300 are businesses, and about two dozen are big companies or agencies that use especially large amounts of water, such as chipmaker Samsung and the University of Texas.

The utility will ask to include a drought fee in Austin’s 2014-15 budget, which the City Council will approve in early September. If and when Austin hits Stage 3, it would take about a month to add the fee to the city’s billing system and Austinites’ water bills.

Critics blame more than just the drought for the Austin Water Utility’s shaky finances.

Environmental advocates say that Austin shouldn’t have built a nearly completed water treatment plant in Northwest Austin, which added $1 billion in debt that the water utility must pay back over 30 years. Only about 1.5 percent of the increase on next year’s water bills will be due to that water plant, Anders said.

Mayor Lee Leffingwell has also repeatedly criticized the city’s practice of having the Austin Water Utility pay for programs that seem to have little to do with providing water, such as $2.7 million a year for a wildland conservation program and $4.8 million for a fund that helps pay for affordable housing.

It would take a vote of the City Council to cut those programs or move them into other departments.

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