It just doesn't sound fair — water use goes down, so water rates go up. Some Tarpon Springs residents struggled with that concept after learning that the city was considering raising water rates for the second time since 2008 because not enough money has been coming into the water system. How could city commissioners raise rates in a recession, they asked. Couldn't officials cut something instead or get the extra money they needed from city reserves?
The answer, they learned, was that commissioners have little choice but to raise rates, and neither do most other local governments in Pinellas facing this dilemma: As people conserve water, foreclosures rise and growth slows, water systems aren't bringing in enough revenue to sustain themselves.
Tarpon Springs commissioners held a special public hearing on the proposed rate increase on Jan. 11 before voting 4-1 in favor of the rate hike at their regular meeting the following night. There will be another vote Jan. 26.
At the hearings, officials struggled to help residents understand the complex issues that have backed them into a corner.
Water customers often don't know that their local government's water system is an "enterprise fund," which must stand on its own and not be subsidized with tax dollars. Rates customers pay should cover the full cost of delivering the water, including funding capital projects, paying off debt and building reserves. If officials don't raise rates to cover those costs, the water system may default on its bonds or have its bond rating lowered, making it difficult or impossible to borrow money to finance water projects.
Tarpon Springs is in a particularly tough spot in that regard. After years of planning, the city is about to go to the bond market to finance construction of its own water system, including a reverse osmosis water treatment plant. To get financing in today's finicky bond market, cities must show they have water revenues amounting to at least 1.5 times the debt service on the bonds each year, city finance director Arie Walker said. Tarpon Springs previously adopted a water rate increase schedule to ensure its rates kept pace with needed revenues, but the money coming in hasn't matched projections.
There are several reasons for that. People have cut their water consumption to save money. Foreclosures mean that empty houses hooked onto the system are not helping to support it. Growth in Pinellas has slowed significantly, so new users are not replacing those who leave. Yet the costs for maintaining water systems have gone up and the wholesale cost of water has risen steadily. Tarpon buys its water from Pinellas County, which buys its water from Tampa Bay Water. Price increases upstream flow downstream to Tarpon. Efficiencies adopted in the water department, such as installing more efficient motors, have not made up the difference, and the system in the ground can't very well be dismantled to cut costs.
After much discussion, commissioners approved their water consultant's suggestion that starting in October, they add an additional 2 percent increase to the annual increases previously adopted. So in 2011, for example, rates will rise 10.5 percent instead of 8.5 percent. There will be hikes each year through 2019.
Tarpon officials believe they will have better control of water costs when they have their own water system and don't have to buy water. However, permitting and economic issues have pushed back construction another year. Until then, Tarpon Springs residents are going to find bad news in their water bills.