Tucson plans to raise commercial water rates based on usage

The Tucson City Council will consider taking a step Tuesday, Oct. 18, toward charging businesses higher rates as their water usage increases, as it already does for homeowners.

The board will consider a request from two of its members to begin a process to establish a tiered rate structure for commercial users, which may be contentious. According to this structure, users pay more for the water they consume, as their consumption increases.

This change is promoted in the name of fairness, based on the belief that all users deserve similar or at least comparable pricing structures. Critics say it would be unfair to put businesses in the same rate class as landlords because there is a wide range of businesses, from mom-and-pop shops to hospitals, golf courses and industries.

This system has been in place for owners of the Tucson Water service area since 1976. It was part of a larger water rate increase, aimed at promoting conservation, among other things.

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Businesses, owners of apartment buildings and industries continue to pay a tariff that does not increase with water consumption. The only exception is in the summer where they charge extra for usage above a certain level.

Even so, the rates approved in 1976, including the increasing tiered rate structure for homeowners, were high enough to trigger a recall election that overthrew the majority of the board that had approved them. But the block pricing system has since been seen by virtually all observers as a key factor in promoting water savings, giving Tucson a national reputation as a conservation-minded city.

Council members Kevin Dahl and Paul Cunningham, along with a majority of the city’s Citizens’ Water Advisory Committee, want Tucson Water staff to study whether it’s possible to put the companies in the same system.

“Because residents are paying these conservation rates and commerce isn’t, it’s just not fair,” said Roxanna Valenzuela, a member of the water advisory committee who voted with the majority of the vote. committee 6-3 on September 5 to support the review of such a system for businesses. . “The burden falls on all residents. A lot of their money already goes to utility costs. Under the block system, residents often pay more for water than a business.

“I understand that some of these commercial properties are schools and other government facilities. But we’re all going to be affected, we’re already affected by the water drought in the southwest,” Valenzuela said.

There’s a good chance Arizona will lose most if not all of its Central Arizona Project water allocation over the next few years due to ongoing drought and climate change, Dahl said. The city needs all water customers, not just homeowners, to engage in water conservation, he said.

With sobering predictions of an impending near-term recession, Tucson must also consider every option to ensure fiscal stability remains in the city’s operations, Dahl and Cunningham said.

“There will be less water available in Tucson. Therefore, the cost of water will go up. We have to pay for it. We have to start early,” Dahl said.

If the city isn’t looking at commercial rates, how can it maintain its current service levels, Cunningham asked.

“How are we going to be able to buy water if the prices change? How are we going to be able to meet the cost of the infrastructure we maintain? said Cunningham. “The main thing we need to avoid is sticker shock. You can’t have a big boost all at once.”

But given what the profile of all commercial customers looks like, “if you try to compare a hospital with a small independent restaurant or a daycare, it doesn’t make sense to have the same block rates for them as for owners,” said Val Little, a member of the water advisory committee, which voted against recommending a flat rate structure for businesses.

“Hospitals would pay an astronomical amount because they’re huge. That could end up penalizing companies just for being big,” Little said.

Advisory committee chair Rory Juneman only votes in the event of a tie and therefore did not take a position on the trade block rate recommendation.

But he said it needed the same scrutiny as all the new conservation ideas now being considered. These include proposals to require new subdivisions to install “green infrastructure” to promote rainwater harvesting and a “net zero” requirement that new developments offset intended water use by reducing someone else’s use.

“They need to be thoroughly vetted, really studied and evaluated,” he said. “I think we need more information. Then hopefully the mayor and council can make an informed decision on this. These two populations are very different. That’s why I now think there is a rate difference.

Tuesday’s discussion comes just as the council is considering a general water rate increase of 5.5% per year for the next four years for all classes of customers. The increase will not be voted on Tuesday. The board is being asked by Tucson Water to schedule a public hearing for Dec. 20 on the increases.

As the system currently stands, homeowners pay $2.07 for the first 700 cubic feet of water they use each month. One hundred cubic feet equals 748 gallons. The rate gradually increases as usage increases. It caps out at $12.93 per 100 cubic feet for someone using more than 3,500 cubic feet. The same structure applies to owners of duplexes and triplexes.

All other customer categories pay a flat rate. Businesses pay $3.36 per 100 cubic feet, owners of multi-family structures pay $3.52, owners of mobile home parks pay $2.56, industrial users pay $3.38, and construction users pay $3.70.

About 46% of businesses pay an additional $1.08 per 100 cubic feet when their summer usage exceeds the winter average. They pay 29 cents more per 100 cubic feet to use at least 145% winter use.

In their September 22 memo advocating block rates for businesses, Dahl and Cunningham noted that the commercial rate is lower than all but the lowest residential rate.

“There is no ‘conservation signal’ through higher prices built into trade tariffs,” they wrote.

They also noted that commercial users represent only 6.2% of all Tucson Water customers, but use 22.8% of total utility water consumption. Residential customers represent 89.2% of all Tucson Water customers while using 53.8% of total utility water consumption, they noted.

Little says these comparisons are invalid. The city’s rate structure is based on costs to serve diverse customers, and you want diverse users to pay as much revenue as it costs to serve each class of user, she said.

The new rate structure the utility is offering to landlords, apartment building owners and businesses would increase revenue in proportion to the cost of serving each class, she said. Since the utility cannot make a profit on its operations, “if you raise commercial rates, you have to lower rates elsewhere. That throws the whole thing off balance.”

In a written response to questions from the Star, Tucson Water took no position on Dahl and Cunningham’s proposal. Determining whether the rate structure is fair is primarily a political discussion tied to the city’s economic, environmental and social goals, the utility said.

The utility echoed arguments that Little and others have questioned block rates for businesses. He said commercial customers bear about 22% of the utility’s annual costs and “it closely tracks” their share of water consumption.

Water uses of single-family homes are more consistent than those of commercial establishments, the utility added. That’s why commercial rates include summer surcharges, Tucson Water said.

“This type of seasonal rate is commonly used for commercial customers where a conservation-oriented rate design is desired to limit discretionary water use during peak season,” which is typically outdoor irrigation, said public service.

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