Water rates will be increasing in Pearland for residents and businesses alike as City Council approved new base and usage charges in water and wastewater fees at its Sept. 19 regular meeting.
Base charges for businesses are increasing by anywhere from 185 to 8,506 percent, putting strain on business owners to supplement the cost of both residential and commercial users in the city, according to Pearland Chamber of Commerce President and CEO Carol Artz-Bucek.
“Water certainly is a high commodity and will continue to be,” Artz-Bucek said. “I understand having to look at that from a city perspective in covering cost, however, businesses aren’t the only ones that use water.”
While usage, or volumetric, charges are increasing as well, the major change comes to base charges. The base charge is determined by the volumetric capacity of the meter inside of a facility, Pearland Assistant City Manager Trent Epperson said.
“Our rate model was about 10 years old,” Epperson said. “Those should be looked at a little sooner than that. We went through developing an updated rate model, and it’s one we can use well into the future.”
The new model creates a structure by which a ratio is determined according to standards set forth by the American Water Works Association: increasing the base cost as the meter size increases. It is an option Epperson said was common among many cities.
During the fiscal year 2015-16, each meter carried a base charge of $31.22, no matter the size of the meter. With the changes, base charges range from $34.64 for a 5/8-inch meter to $2,655.70 for a 10-inch meter.
“We have industrial users that have a 6-, 8- or 10 inch meter,” Epperson said. “They were getting charged the same base rate as a residential house would. Because they have those larger meters, we’ve got to have that much more capacity in the system to serve them.”
Cost of doing business
The greatest increases in the base charges will be felt by large businesses across the city as the new rate structure has the most significant effect on larger meters.
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A majority—92.6 percent—of the 35,426 meters in the city are 5/8-inch meters, representing nearly all residential meters. These customers will see minimal change in base charges from 2016.
Businesses, however, will feel a much different effect, Artz-Bucek said.
“There is a concern more than anything,” Artz-Bucek said. “Everyone knows that cost [will] go up. But for [water] to go up exponentially was very harming as quickly as it was happening. It was like there was a push to get the rates raised only on commercial.”
The ratio for a 10-inch meter is a 766.7 percent increase from the 5/8-inch meter—even though there are just two 10-inch meters in the city.
The smaller 1-inch and 2-inch meters in the city—often the sizes for small businesses, office buildings and hotels—will see a 67 percent and 433 percent increase, respectively.
The increases continue to grow for larger businesses, such as hospitals, hotels and schools—which often have 4- to 10-inch meters.
Rushi Patel, vice president of Omkar Enterprises Management, which operates the Springhill Suites and Hampton Inn in Pearland, said big business are going to be affected the most.
“Some of these large users are going to see a $6,000 to $8,000 increase per month,” he said. “The schools are going to be hit major times. Guess who is going to pay that bill? Taxpayers, eventually. The schools are going to have to cover those operating costs somewhere. Not just schools—hospitals, all these big users are going to see a significant [increase].”
Epperson said in the past, larger businesses were not being charged for full cost of their usage.
“We’ve got to build the system to be able to serve that type of usage,” Epperson said. “I think this more accurately reflects their impact on the system and the cost to develop and operate the system for those types of users.”
Future planning
The decision to raise water and wastewater rates comes as the city looks toward future costs associated with a growing population and increased expenditures associated with all things water, Epperson said.
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The city is in the process of an expansion project of the Reflection Bay Water Reclamation Facility, which will increase the capacity of the facility from 2 million gallons per day to 6 million. Epperson said preliminary engineering reports are out on two other treatment plants within the city, which will need to be expanded in the next two to five years.
“The water and wastewater fund is separate from the city’s general fund,” he said. “It’s an enterprise fund. What that means is basically it is self-operating. It’s self-sustaining. Every year, we’re looking at the cost to operate our water and wastewater facility.”
Epperson said between 2010 and 2014, the city did not raise the water rates.
“That’s one of those things where it’s nice to be able to do that, but looking out into the future, should we have been taking some incremental looks at it then?” he said. “Maybe we wouldn’t be looking at the increase we’re looking at today.”
A national problem
According to a 2014 AWWA study, water rates have been increasing steadily across the country for the past two decades. The AWWA polled water utilities across the U.S. and found rates increased on average at least 12 percent from 2008-14.
“If a utility has been putting off rate increases or implementing very small ones, it likely has some catching up to do to keep its infrastructure sound and to comply with regulations,” said Tommy Holmes, the legislative director for the AWWA.
He said he thinks there are some “reality checks” taking place at many utilities across the country about the cost of providing water. In addition, many are working to correct water rates that have been too low.
“I think in the coming years we are going to see lots of utilities striving toward full-cost pricing—the true cost [of water],” Holmes said.
He said the South and Southwest U.S., in particular, have struggled to keep up with water demands because of a growing population and drought. Increasing rates are also caused by the need to replace aging infrastructure.
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Holmes said the AWWA has been campaigning for a decade to get policymakers and the public to better understand the need to reinvest in water infrastructure.
The AWWA, along with other organizations, worked to get the Water Infrastructure Finance Innovation Act passed by Congress in 2014, Holmes said. WIFIA will allow utilities or municipalities to apply for low-interest federal loans for drinking water, wastewater or stormwater projects.
Holmes said the Environmental Protection Agency has spent the past two years putting together the program administration.
For Pearland, Patel said although he understood utilities sometimes need to increase rates, he hoped the increases were not solely targeting businesses.
“This is supposed to be a business-friendly area,” Patel said. “We want businesses to come. What they don’t tell businesses is, ‘Oh, by the way, down the road we are going to tack on all these costs.’ Most businesses don’t really think about it that way.”
Additional reporting by Krista Wadsworth
