A proposed utility rate increase in Mesa will bring in an additional $13.9 million in revenue, the city says.
Nearly all utilities — water, waste water, natural gas, electric and solid waste — have rate hikes suggested in a proposal from city staff. Most notable is the water rate increase of 7 percent, the highest rate change since the 1995-1996 fiscal year.
The City Council will vote on the issue when it meets on Monday night.
The suggested rate increases for water, waste water (7 percent) and solid waste (6.9 percent) are at least 2 percent more than forecast last year. In addition, the city staff presentation recommended the same rates of change through 2017.
“When we say 7 percent we mean a 7 percent increase in revenues, how those are implemented can vary. Staff recommendation is an increase in service charges,” said Candace Cannistraro, director of the Office of Management and Budget.
In the 1940s, Mesa decided to use utilities revenue, via the enterprise fund, to supplement the general fund instead of levying a primary property tax. Mesa does have a secondary property tax, used to service debt from general obligation bonds. Secondary property taxes are based on the full cash value of property, verses the limited value assessment used to calculate primary property tax.
This year, the mayor and City Council ordered the regular transfer from the enterprise fund to the general fund raised by more than $5 million, to $95.7 million. The April presentation on the issue said the average customer’s water bill would increase from $39.69 to $43.32, or just over 9 percent — tantamount to raising the average price of gas in the Valley from the current $3.49 to $3.80
Cannistraro went on to describe how the city is trying to smooth rate increases to offset possible higher increases later. She also pointed out the city’s cost of buying water increased by $1.6 million last year. However, the amount water revenues are expected to increase is just over $6 million.
Jorge Figueroa, a water policy analyst at Western Resource Advocates, said Mesa residents should be much more concerned about what the city is doing to promote water conservation than with year-to-year rate changes. He said this is a good chance to step back and look at the financial health of the water system.
“Seven percent doesn’t seem that high to me. The city of Colorado Springs is basically doubling their water rates,” Figueroa said. “The more water conservation you do, the less revenue you get, so that’s a big disincentive.”
However, Figueroa said the city of Westminster, Colo., did a study in which they found that decreasing the per-capita demand by 21 percent avoided raising rates by 99 percent, and tap rates by 80 percent. Push back against raising water rates could lead to politicians shying away from conservation, to avoid rate hikes, but avoiding conservation could lead to increased costs of buying water, and more significant rates advances later.
Overall, the enterprise fund is forecasted to run at a deficit of about $6 million during the 2014-2015 fiscal year. Compounded with the heightened demand from the general fund, and the rising cost of water, the city may be left with no choice but to raise rates, and substantially, for the foreseeable future.