HOUSTON, TX - Mayor Annise Parker's administration is proposing drastic water and sewer rate increases to shore up Houston's Combined Utility System, which has operated with multimillion-dollar budget deficits for several years. The estimated rate hike under the proposal, presented to City Council on Tuesday, would be about 12.5 percent for residential water users, increasing from about $47 a month for the average household use of 6,000 gallons of water to about $53.
Those who live in apartments would face a far higher increase, in many cases greater than 50 percent, although that aspect of the proposal could change in the coming weeks, city officials said. Across all classes of ratepayers, including multifamily and commercial users, the proposed increase comes to about 25 percent.
Michael Marcotte, the director of the Department of Public Works and Engineering, warned of potential downgrades in the credit rating for some of the city's debt if rates are not significantly increased. He also said the system runs the risk of falling behind on much-needed maintenance that keeps drinking water safe.
The reason the water-sewer system is in arrears, he said, is that it has been hit in recent years by much higher costs than anticipated, lower water usage and water rates that did not keep up with expenses. This year, the city is projected to have a $102 million shortfall in the Combined Utility System, one it has closed with the use of debt.
"If we do nothing, then we will find ourselves unable to meet the basic regulatory requirements" for water and sewer systems, he said. "This is a matter of public health. People are drinking this water and putting it in their bodies."
Several City Council members voiced support for the plan, saying the city has to face the predicament the system is in and raise rates. They also said the rate hikes were needed to pay for capital improvements that will keep aspects of the system, like storm sewers and lift stations, maintained.
Others, however, objected to the high cost increases scheduled for apartment users, saying it would have a disproportionately high impact on the poor.
"Most of the people in my family live in apartments, and they live in low-income apartments," said Councilwoman Jolanda Jones, who grew emotional in speaking about the proposed increases. "They don't have an additional $5, $10, $12 to pay their water bill. … This will have a practical impact on people, and I know there are some … (who) can't make it."
Houston Apartment Association President Andy Teas said the increased bills to apartment complex owners would likely be passed on directly to tenants. Teas said the association was concerned that the administration would repeat the record increases of about six years ago, when apartment owners saw triple the rate hikes of homeowners.
"We're always concerned that even when a scientific measurement is required, there's a political aspect to this issue that single-family homeowners are the most reliable voters in city elections," Teas said, noting that he planned to examine the rate study to better understand the city's justification for 50 percent increases to multifamily customers and 12.5 percent increases to residential users. "We want to make sure that the city is not getting into the temptation to subsidize likely voters at the expense of the others."
Deputy Public Works Director Susan Bandy said that in establishing the rate proposal, the city had decided that all customers other than residential users should pay what it costs to deliver water and sewer service.
The department will revise the proposal based on council concerns about multifamily increases, she said.
For single-family residential consumers, the increase would make Houston's water and sewer rates higher than those in San Antonio, Dallas and Fort Worth and slightly lower than those of Los Angeles and Austin, according to city documents.
Although the department has identified more than $20 million in potential cuts, the city has faced huge increases in the costs of delivering water and sewer services, including a tripling of state fees from the Texas Commission on Environmental Quality and doubling of prices of chemicals, electricity and sludge disposal, officials said.
The system began running a deficit in fiscal 2008, which began at $23 million and is expected to reach $102 million at the end of this year, fiscal 2010.
Councilman Oliver Pennington asked why the city did not raise rates sooner, when deficits were apparent. "I just wonder what you guys were thinking," he said.
Marcotte noted that when the system was restructured in 2004, prompting what at the time was the largest rate increase in the city's history, another major rate increase was contemplated for 2010.
Councilman Ed Gonzalez urged his counterparts to approve the increase so the city will have the "best system" for its residents. "We can't just keep kicking the proverbial can down the road," he said.