The Citizens' Water Advisory Committee (CWAC) was scheduled to meet on Jan. 9, and may have then taken the first step in the rate-raising process. The CWAC agenda included a vote on a recommendation to the City Council concerning a draft financial plan for Tucson Water covering the next fiscal year, which begins July 1.
But less than 24 hours before the meeting, it was abruptly cancelled. Tucson Water Director David Modeer stated on Jan. 9: "We were instructed to make revisions to the financial plan late yesterday by the city manager's office."
City Manager Mike Hein denied that his office ordered the meeting cancelled. Instead, Hein said, he planned on attending the meeting.
The financial plan to be considered by CWAC called for 9.8 percent increases in water-sales revenue during each of the next two years, boosting the presently budgeted figure of $116 million.
Since residential consumption accounts for the majority of Tucson Water's sales, the utility's proposed revenue increase has historically been a good benchmark to determine how much household water bills will rise. The exact water-bill increase decision is usually made in June, when the City Council adjusts rates.
The possibility of a 10 percent increase in residential water bills later this summer contrasts sharply with recent hikes. Three years ago, there was no increase, followed by increases of 4.6 percent, and for this year, 6.2 percent.
The sudden cancellation of the CWAC meeting happened even though, according to a Tucson Water document, Hein's office had been involved with the preparation of the financial plan since August and reviewed a draft in December.
Despite that, Hein last week said: "I think there are opportunities to change the financial projections. I didn't approve the plan. ... I've had conversations with council offices and CWAC members and said the plan could be pared down. That needs to be discussed. These are significant increases."
Hein said he believed certain assumptions in the draft plan, such as the amount of pay raises granted to Tucson Water employees, need to be reviewed.
"Every 1 percent saved," he said about the Tucson Water budget, "is about $1 million. So maybe we can save a couple of million between capital and operating expenses."
Along with Hein's office, a subcommittee of CWAC also reviewed the draft financial plan. They recommended it for adoption.
"I thought, given the plan's assumptions, that the cost increases and revenues were justified," said Francis Boyle, a member of the subcommittee.
Acknowledging that he doesn't know what the City Manager has in mind, Boyle said that altering the financial assumptions could indeed change the plan's bottom line. "It's real hard with rate increases that high when the economy is slowing down."
Another subcommittee member who endorsed the plan is James Horvath. He stressed that the substantial rate increase was caused in part by prior actions.
"The cost of water was artificially held low," Horvath said about the last few years. "As a result, sooner or later, you have to pay the piper."
The now-shelved financial plan plainly laid out why the significant increases in revenue were required. The primary reason: The utility isn't selling as much water as it needs to in order to pay its bills.
Fewer new homes are being built in Tucson, so there are fewer new customers. The result is that the flow of new cash to Tucson Water has slowed considerably.
"The bad news," stated a November memorandum to Modeer on the issue, "is that FY (fiscal year) 2007 missed its original water sales revenue projection by the greatest margin in the utility's history," by more than $8.3 million.
Since July, water sales are up slightly higher than that historic low, but total revenues are still $2.5 million below projections. Plus, things aren't expected to improve anytime soon.
Tucson also experienced a relatively wet summer, and therefore, households on average used less water than in previous years. While that conservation might seem like a good thing, to a utility which relies on sales, it translates into financial troubles.
"When less water is used for whatever reason," Modeer pointed out, "because we're a utility, that impacts our revenues."
However, Modeer said he doesn't want to discourage conservation, and placed blame for the utility's financial troubles elsewhere: "The housing recession has had the greatest impact, because we rely on revenue from growth."
The tentative schedule for reviewing the revised financial plan now calls for the CWAC subcommittee to consider it on Jan. 17. Five days later, the entire committee should take a look at it.
Modeer indicated he didn't know what would be changed, but said "everything will be looked at."
The City Council originally was supposed to review the financial plan at its meeting on Feb. 12. Whether that timeline can still be met remains unclear.
What is clear is that elected officials don't like to raise fees by large amounts in a single swoop, especially when people have serious worries about the economy. While no new specific revenue-increase goal for Tucson Water has yet been established, it's safe to say it will be less than 10 percent.
