Raleigh awaits water rates

Maybe the fourth time will be the charm.

For the third straight meeting, the City Council has delayed voting on a proposed 17 percent increase in the water rate that City Manager Russell Allen says is needed to offset water sales made sluggish by conservation and rainy weather.

The delay Tuesday means the council will take up the issue, again, on Monday during a special meeting to discuss the Public Utilities Department's long-term capital improvement plan. The delays are exacerbating the water system's revenue problems, which eventually could endanger the system's credit rating and ability to meet expenses.

City Council members, mindful of angry residents who feel they're being punished for conserving water, have been seeking ways to avoid the full 17 percent increase. The increase would apply to water customers in Raleigh and Garner, but not the other Wake towns who are still paying off the cost of merging with Raleigh's system.

But it has now been more than a month since Allen told the council that the city needed an immediate 17 percent rate increase, which amounts to about $5 a month for the average household.

Raleigh's water system is projected to take in 10 percent less revenue than budgeted during the fiscal year that ends June 30. The water system is considered an "enterprise" department, meaning its operations are solely funded by the revenue generated from water and sewer service.

During the first three months of this year, Raleigh water customers consumed about 8 percent less water than they did over the same period in 2008.

The council's delay has caused the Public Utilities Department to increase the amount in receives annually from a reserve account used to reimburse public and private groups that install water and sewer mains.

At Tuesday's meeting, Allen presented the City Council will three different water increase proposals. Two included sizable increases in the fees the city charges developers to tie into the water system.

One option would increase those fees by $2,500 over a two-year period, while the other would increase the fees by $1,500 over the same period. Raleigh now charges developers $1,666 to add a new connection to the water system.

The additional connection fees would offer water customers some relief, but not much. The city is spending about $100million a year on capital improvements to its public utilities system, and the debt service on that money is driving the need for annual rate increases.

The recession has also slowed Raleigh's growth and greatly reduced the number of new connections. The city had been averaging about 5,000 new connections a year, but this year it is on pace for less than half that number.

Half now, half later?

Mayor Charles Meeker proposed a fourth option Tuesday -- that the city adopt half the 17percent rate increase now, and the other half Dec. 1 when the city is expected to switch to tiered water rates.

Under tiered rates, the rates will rise according to consumption, and Meeker said that would allow customers to save more money through conservation.

Allen warned the council that such a plan would put off raising revenue that is needed now. He said figuring out what a 8.5percent increase would be under tiered rates would be difficult, because the city doesn't know how its customers will respond to the new pricing system.

"That introduces significant risk," he said.