Higher water rates for unincorporated customers back before Tucson City Council

The Tucson City Council will revisit at its meeting Tuesday the topic of raising water bills for unincorporated residents.

Council members postponed making a decision June 8 and decided to leave the public hearing on the proposal open. Residents will have the option to call into the meeting when the hearing continues June 22.

Council members unanimously voted in April to begin the process of raising rates for some Tucson Water customers. While the council members have shown support for the initiative, they voted to direct city staff to return to Tuesday’s meeting with more information.

After gathering said information, City Manager Michael Ortega is recommending the City Council consider one of four proposed rate increase structures. If council members adopt a rate increase, unincorporated residents would see higher water bills on or after Aug. 1.

At mayor and council’s direction, city staff analyzed each option’s projected revenues and impact to water bills while looking into how the revenues could expand low-income services, enhance water resource management and improve infrastructure reliability.

Impact of differential rates

The City Council voted to look into a flat 10% increase, a flat 40% increase or a flat 5% or 10% increase with a higher tiered-cost based on water usage for unincorporated residents.

According to the city, the average Tucson Water customer in unincorporated Pima County uses about 7,500 gallons of water for a monthly bill of about $50.28. Here’s what unincorporated residents’ water bills would look like for the average customer at these four levels:

A flat 10% increase: $55.31.

A flat 40% increase: $70.39.

A flat 5% increase with escalating tiers based on usage: $53.37.

A flat 10% increase with escalating tiers based on usage: $56.45.

Of the four rate structures, the city estimates at least $6.3 million and at most $26.5 million would be generated for Tucson Water.

City staff also looked into how the extra revenue generated from differential rates could support low-income assistance programs. The water utility already has an assistance program in place that reduces monthly water bills for qualified customers based on their income.

The funds from rate hikes could expand the capacity of the existing program, provide one-time debt forgiveness for those behind on payments due to the pandemic or develop and “special hardship relief program,” according to city staff.

“Some of that money would be for ongoing funding programs, current and expanded, now and into the future,” said Tim Thomure, interim assistant city manager. “But in the near term, we would find a mechanism to be able to provide relief to people who’ve been impacted by COVID.”

Staff said revenue could also enhance water resource management by expanding recharging capacity, putting more money into storm water capture and developing new renewable water supplies.

In terms of improving water infrastructure, staff suggested addressing system-wide leaks, renewing older equipment and working on system reliability.

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Legal issues

A central argument circulating against differential rates has been that there has not been a cost-of-service study conducted to determine if it costs more money for the city to provide water to unincorporated areas.

At the June 8 public hearing, speakers cited a state statute and city code that suggest a cost-of-service study has to be conducted before raising rates. Councilman Steve Kozachik asked staff to look into this.

One state statute says a municipality shall not increase water rates without indicating “the overall expenses for providing water or wastewater service.”

The Tucson city code says water rates shall “be consistent with the policy for charging for water in direct proportion to the cost of securing, developing and delivering water to the customers of the city water system.”

The two laws were analyzed in a memorandum from Chris Avery, the principal assistant city attorney. He points to an Arizona Supreme Court ruling that said municipally owned water utilities can charge more for water service outside its “corporate limits.”

Ultimately, Avery recommended any differential rate adopted undergo a cost-of-service study before final adoption in order to withstand any legal challenges to the reasonability of the rates. However, Avery said since revenues generated will stay within the utility, “Tucson Water’s rates, in the aggregate, are ‘cost-of-service’ rates.”

As to why city staff have not conducted a cost-of-service analysis yet, Thomure said they haven’t been told to do one by city leaders. And according to the city’s legal interpretation, they are not obligated to, as the decision can be based on policy as well as cost.

Thomure says if the council asked for a cost-of-service study, it would take about six months. Historically, Tucson Water has only conducted cost-of-service studies on a system-wide level, and not by wards or ZIP codes.

A city-county rift

Before mayor and council voted unanimously to begin the process of raising water rates for unincorporated customers April 6, the Pima County Board of Supervisors voted 3-2 to publicly oppose differential water rates.

Supervisor Rex Scott, who represents many unincorporated residents in District 1, called in to the June 8 public hearing to express his concerns.

“These higher water rates, which are unfair, inequitable and illogically conceived, would affect many of the people that I represent,” he said, “I ask you to reject this divisive and unjust proposal that will punish Tucson Water ratepayers solely because they live in unincorporated Pima County.”

Mark Taylor, the chair of Citizens’ Water Advisory Committee, a group established in 1977 to advise the City Council on water resource planning for citizens in and outside city boundaries, has expressed concerns about creating a divide between the city and county.

“It’s important for the Tucson Water customers to be treated equitably between all of them, and not break them into two different groups or two different classes,” he said. “I think it’s a potential to divide the customer base of Tucson Water.”

But Thomure feels both jurisdictions can work through the issue in continuation of a collaborative, regional partnership.

The public hearing on differential rates will be held during the City Council’s regular meeting at 5:30 p.m. Tuesday, June 22. The meeting will be livestreamed on the city of Tucson’s YouTube channel.