While (appropriately) pouring over glasses of ice water at their meeting this morning, the members of the Denver Water Board voted unanimously to support a 5.5 percent hike in the city's water rates. After four months of public discussion, the decision comes as a direct result of analysis indicating the current budget is not supported by the current rates.
"Our rates are insufficient to meet our requirements over the next ten years, so we wanted to create a financial plan to operate in the correct capacity," Todd Cristiano, Denver Water's manager of rates administration, told those assembled at the meeting. Beginning in late May, the board ran approximately twenty scenarios before slimming down to four and then selecting the recently approved option. "The most feasible way to realign our budget is through an increase in the rates our users pay," he added.
Under the new rate hike, which will begin on January 1, the increase will remain equal across the board. Based on the projected revenue requirement for the rates section of the budget in 2012, the rate adjustment will recover the total revenue requirements while serving as a transition model for future rate adjustments. Even with the 5.5 percent increase, Denver Water will be drawing on capital reserves in order to make up the difference, board vice president Penfield Tate said.
"Are we all right drawing from the reserves?" he asked the gathering.
"This year," joked treasurer Usha Sharma.
Although the meeting included space for public response, only one man aired complaints about the proposal. His concerns focused primarily on the difference between Denver Water's services inside and outside of the city limits. On both sides of the boundaries, the increase will maintain the same ration in price structures. Based on an annual bill for a uniformly average 105,000 gallons of water, the total bill would increase from the current $356.38 by 5.5 percent to $375.81. The average monthly increase, then, is about $1.62.
"Our current methodology doesn't make any sense," first vice president Greg Austin said. "Our model was based on numbers that were assumed and incorrect, and it turned out to be untenable. That leaves 2012 as a transition year that maybe nobody's happy with until we get a final model solidified, but it's an important transition."
Denver Water, which is the largest system in the region, serves the most customers in its area, a fact that includes the sale of treated and untreated water to other local communities, such as Arvada. Comparing Denver Water's projected 2012 rates to the current rates of its peers on the Front Range, Denver would move from the role of the second cheapest company to the fifth on the list in an analysis of single-family residential use.
'There's a ripple effect in terms of our rate structure," said Tate. "Our rates affect their rates down the line, and theirs don't usually affect ours. At the end of the day, the most important thing is that when you turn on the spigot in your house, something comes out.
"And there's a cost associated with that."
Look below to see a graphic of Denver Water's 2012 revenue requirements.
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