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The Verde Independent | Cottonwood, Arizona

home : opinions : commentary October 1, 2016


9/3/2013 1:15:00 PM
Commentary: Making heads and tails of water, wastewater rate hikes
Mayor Diane Joens
Mayor Diane Joens
By: Diane Joens
My Turn

Many people were present during the city council meetings when the new water and wastewater rates were considered. However, many customers were not present. The majority of the city council explained the reasons they supported the water and wastewater rate increases during the meetings.

The rates are substantial this year as a result of delaying increases for many years. There hasn't been a rate increase in wastewater rates for 12 years and there has only been one rate increase for water in nine years.

The one water rate increase was an 8-percent increase in 2010. At that time the council worked diligently to keep rates lower for low water users. The reasons these rate increases were delayed or minimized, particularly the last five years, was to avoid the impact on our customers, particularly during the recession.

The city council made every effort not to raise rates during the tough times -- to the point of alarming the bondholders who financed the purchase of the water companies. The bondholders' concerns resulted, ultimately, in the lowering of our bond rating. The lowering of our bond rating was not from mismanagement as some citizens have claimed; it was the result of a conscious decision by the city council to protect water customers during a very difficult economic period.

The reasons for the increase in rates include the following:

• When the city purchased the water companies, the funding was borrowed through a municipal bond program. Like any loan, the city was required to meet certain requirements. The most important requirement was that the city maintain a 1.35 ratio of revenues to operating expenses. During the recession, that rate fell below 1.00.

• An extensive rate study was conducted during the last year and a rate committee was convened that included residents and non-residents of the city as well as staff and citizens. The committee reviewed the study and had many questions. In conclusion, they agreed with the recommended rate hikes and the differential rates between residents of the city and non-residents.

• The study revealed that providing water outside the city limits, particularly in the Verde Village area, was more expensive. Both Verde Village and Verde Santa Fe were served by separate water companies prior to the city purchasing those systems. Both systems have required a substantial investment to bring them to a safe and reliable condition.

• The Verde Village system operates in a hilly terrain that requires pumps to move the water necessitating constant electrical power. There are 14 wells and 13 arsenic systems in Verde Village -- double the number of wells and arsenic systems in the city. The city system is gravity operated and does not require the electrical costs incurred in Verde Village.

• The city recently purchased another water company in the Quail Canyon development for the express purpose of providing a new, more reliable source of water to Verde Village. Between the cost of the water company and making the necessary connections, the city invested more than $1 million in this project alone.

• Private water companies are not required by state law to install fire hydrants, so there were no hydrants in Verde Village when the city bought the water company. The city has installed 16 operating fire hydrants in Verde Village for a cost of more than $7,000 each to purchase and install.

• Sixty percent of water leaks occur in Verde Village and they are dangerous to fix because several water lines were buried with a 7,200 volt electric line. Extra care and time must be taken to protect utility workers and Verde Village residents.

• When the city purchased the Verde Santa Fe system, there was only one potable well, which left residents vulnerable and at risk if that well or pump stopped working, for both a potable water supply and fire protection. The city upgraded an irrigation well to a potable standard, providing a safe backup water supply for Verde Santa Fe residents. The city made extensive upgrades to the equipment that operated the system including arsenic remediation.

• Finally, prior to the city purchasing the water systems, the rates outside the city were higher than inside the city because the costs outside the city were higher. Neither the rate committee nor the city council believed it was appropriate for citizens inside the city to carry the additional cost of providing water outside the city.

• Several times throughout the public hearings, citizens who lived outside the city stated they should be treated the same because they shop in Cottonwood and provide sales tax. The city appreciates the business and revenue these citizens provide; however, it is not equal to the investment and revenues provided by citizens who live inside the city. Citizens inside the city provide a portion of their income tax and a percentage of the sales taxes charged by the state through the State Shared Revenues program. These additional revenues amount to approximately $900 annually per household or nearly $4 million per year to support the operations of the city. This is also the reason that the city charges a little more for recreation programs and the use of the recreation center to citizens outside the city; it is not equitable for citizens inside the city to subsidize the use of these services for citizens who live outside the city.

The citizens inside the city are also responsible for any liability associated with the operation and financing of those systems outside the city. If the bondholders or an injured party sues because of a water system problem, it is the citizens inside the city who bear the responsibility for absorbing those liabilities.

The city has made great strides in reducing costs in operating the water and wastewater systems. However, all the systems are old and some were improperly installed and maintained.

And certainly, the federal requirement to install arsenic remediation systems has been costly.

However, through efficient investment of user fees we have more reliable, healthier, and efficient water and wastewater systems. While we can debate whether the city should have been imposing small rate increases during the last 12 years, it should also be clear that the city council was trying to do the right thing for all customers by not burdening them with rate increases during a very difficult economy.

The rate study is available on the city's website at www.cottonwoodaz.gov. If you have any questions, please do not hesitate to contact our Utilities or Finance department by calling 928-634-5526.



Diane Joens is the mayor of Cottonwood.


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Reader Comments

Posted: Thursday, September 5, 2013
Article comment by: Navy Head Doc needs to see a Head Doc -

Being retired military the doc should know the term 'collateral damage'... and that is exactly what he would inflict by taking his distaste for the city out on local merchants. Trying to hurt the city by taking it out on local businesses is a rather shortsighted tactic.

You might try actually taking part in the governmental process rather than just taking your toys and going home in a fit. Ask your elected officials (county) why they did not notify you of the rate study meetings or send anyone to more than a few of them?

The question arises... how many folks from out side the city limits own businesses in the limits and how do they feel about a boycott? (a boycott that includes forcing retired folks on fixed incomes that can't afford the rate increase to spend extra money driving all over the place just to dispute the cost of a rate increase?)

The law of unintended consequences is in full force here folks.


Posted: Wednesday, September 4, 2013
Article comment by: NAVY HEAD DOC

Wow... The rich get richer and the poor get poorer. A rate increase for those of us who, support cottonwood with our purchases. Maybe even work in cottonwood and have taxes for the city taken out of our check. Seems to me that this water they are charging me for was mine to begin with... I've lived here since 1967.... I believe most of you people moved in WAY after that !! We had lots of water then. But have seen many wells go dry since and water companies purchased out of shear GREED. You speak about installing fire hydrants..... I don't even have one within miles of my home.... so what upgrades ? I haven't seen city of cottonwood working on leaks in and around the area in which I live...This all sounds like hogwash to me. Or is it to line some one's pocket...I believe a complete boycott of city business is in order.

Posted: Wednesday, September 4, 2013
Article comment by: So glad all the armchair mayors -

Are out in force today.

Oddly they never seem to be seen attending any regular meetings on the TV.

As far as a reason to buy a water system in poor repair... not greed for money at all. As explained on the tv meetings, conservation was the key. A water leak does not care if it's inside or outside the city limits, it still leaks and wastes water that most all agree should not be wasted. Since the purchase the amount pumped out of the ground has fallen by about 20%, how much will that be worth moving ahead? Where are all those that are so focused on conservation? How about getting the cities back here folks. Unless you like leaky pipes and pumping 20% more water than we need?

As far as boycotts... they often don't affect the ones you are attempting to seek revenge on. Rather than punish local businesses/owners try drilling a well or limiting your water use/waste.

That is a win/win... you get to 'stick it to the man' directly and/or save some of the limited natural resources that so many claim to love so deeply.

Of course those living on a fixed income might have a hard time justifying a drive out of town for groceries or other items... unless they are in fact not so fixed? Odd irony there indeed. We can't afford your water increase so we will spend twice as much on gas and vehicle wear and tear to prove it!

hmmm... ?


Posted: Wednesday, September 4, 2013
Article comment by: On the Board

I think it very clear that the old 'city' of Cottonwood needs to retire it's good-ole-boy Gestapo tactics and con games.

PROPOSAL
Dissolve Cottonwood as a Corporate entity.

HOW
Verde Santa Fe, The Villages, and Cornville need to all unite under one Corporate Charter.

SIMPLE
WHEREAS
The citizens of Verde Valley herby form one governing body in which every citizen voice is heard, and can be
legally heard.

It should be, and can be done through Reverse Annexation.

This way you dissolve the impenetrable Ironplate entity of Cottonwood, which obviously does not serve the true needs and people of the Verde Valley.

Call the new town >

Ironwood. . . .

-GW







Posted: Wednesday, September 4, 2013
Article comment by: John Wiseman

If the water systems were so bad why did Cottonwood buy out Cordes Lakes? Simple, GREED!!! I still say what Cottonwood needs is a good boycott of their businesses which would impact their tax revenues from sales. This increase is going to cause a hardship on many like myself. Retired and on a fixed income does not allow for an over 50% increase in water.

Posted: Wednesday, September 4, 2013
Article comment by: Biting the hand that feeds you

Sure the mayor can rationalize this discriminatory rate increase but that doesn't make it fair and it doesn't make it right. Step back a minute and see the big picture.

Cottonwood rakes in huge profits every month from combined revenue sources. Beyond utility profits, the city rakes in over a million a month from sales taxes, the majority of which is paid by non-city residents, particularly from Verde Village and Verde Santa Fe, who far outnumber those living in Cottonwood.

How profitable is this? The city's financial report shows it sits on literally tens of millions in excess cash reserves parked with the State Treasurer's office in Phoenix. Roughly half this largess is earmarked for debt service. The rest is profit. They won't call it that, but that's what it is.

The bond analysts know Cottonwood is a cash cow. They noted this in their comments. They know the city is in no danger of default, and would not mandate an increase. They know the city could easily pay off the bonds and have no indebtedness at all. So this whole bond issue is nothing more than a red herring.

Then there's the issue of various fees tacked onto each and every water bill, above and beyond the cost of water, or rather the "privilege of receiving water", as council member Randy Garrison so smugly put it.

These fees already paid for the purchase of Quail Canyon and other additions to the city's water portfolio. Yet the mayor wants to use Quail Canyon as a justification to raise rates.

So which is it Ms. Mayor, you want the fees or you want the discriminatory rate increase?

And if it is not equitable for city residents to shoulder the additional expense for providing water to Verde Village, then please tell us why it is fair and equitable for non-city residents to pay these additional fees that benefit only the city?

Another issue is operating costs. Somehow this supposedly cash-strapped city that so desperately needs to stick it to Verde Village and Verde Santa Fe has an extra $8+ million lying around to spend on an unnecessarily extravagant wastewater treatment plant (in a flood plain no less!) that everyone expects will ultimately cost up to double that.

But they've got all this extra money burning a hole in their pockets, so what the hey?

Bottom line: Financially, they didn't have to do this. No way. They unwisely chose to bite the hand that feeds them.


Posted: Wednesday, September 4, 2013
Article comment by: AZ GIRL

As a water customer and a single parent, I would have preferred to have my rates raised gradually. To have my rates jump over 50% at once is much more of a hardship to my family. This is too much too quickly I think. As another poster pointed out, I can't live without water. I don't have a choice to opt out and I am already doing everything I can to reduce the amount of ater that I use. The way this was handled will be a hardship on my family.


Posted: Wednesday, September 4, 2013
Article comment by: Dan Lueder

@water quality question: the white residue you mention is calcium which is a naturally occuring mineral that is prevalent in the aquifers throughout the Verde Valley

Posted: Wednesday, September 4, 2013
Article comment by: water quality question

I've read that bringing arsenic levels down to the 10 parts per billion demanded by the EPA requires expensive filtering equipment. But when city water evaporates it leaves a white powdery residue.

What is that residue composed of?


Posted: Wednesday, September 4, 2013
Article comment by: Tweetie Byrd

Raising the rates so much over night should never be done to customers, rather should be done gradually. This increase is an immense burden on some who have no other choice. After all, we cannot live without water.

Posted: Tuesday, September 3, 2013
Article comment by: Mary Eichman

Mayor Jones, I am the person who wrote stating that I think the city should have raised rates more often. Thank you for explaining the reasoning for not doing so, as well as reminding residents of all the background info that I had heard at the meetings. Of course, I still suggest that the city raise rates on a regular basis as needed. I agree with your other comments.



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