Understand – and better identify – infrastructure ‘wants’ vs. ‘needs’
BISMARCK, N.D. – When it comes to municipal water rates, “fairness” now seems to mean “perpetually subsidized to be kept as low as possible.” This is true regardless of the service’s carried costs, maintenance requirements and other expenses.
This view is now common among utilities, because the pressure to keep rates as low as possible has drained reserve accounts that are needed for emergencies, maintenance and improvements.
And kicking this financial can down the road leads to higher costs for all when major improvements or replacement is required. Furthermore, generational equity is often ignored, which means customers who’ve already paid for their utility infrastructure face ongoing rate increases as their community grows and its infrastructure needs expand.
Here’s another area in which public opinion affects how we pay for infrastructure: the “little bit of pain for everyone” approach. In recent decades, in their effort to spread the costs of expansion and improvement across their entire user base, utilities have tended to identify the benefits of those projects in increasingly broad strokes.
The trade-off for this is that it tends to promote “wants” in the same way that it does “needs.” But wants are infinite, so this approach often leaves municipalities strapped and unable to pay for basic infrastructure without Bank of North Dakota or other financial help.
Speaking of wants and needs, perhaps utilities and municipalities alike should use those terms more often when describing infrastructure projects. This would help customers better understand the difference, and might lead to more efficiency as the better-informed customers become better able to set infrastructure priorities.
Here’s an example. I recently attended a city commission meeting where residents were listing a host of complaints about a pending increase in water rates. Invariably, the complaints were from people who’d been notified that their irrigation (lawn watering) use was now going to be billed at a higher rate than their base (average residential) use.
The notification letters gave residents a breakdown of their water use for the prior year and what the new cost for a peak watering month might be.
Additional information was offered regarding best practices for the types of grass typically grown in the area. Also provided were links to the Extension Service and information about “smart sprinkler” systems, which monitor weather forecasts and rainfall to avoid excessive irrigation.
The rate increase was the result of an intensive analysis of water, wastewater and stormwater utility rates. Thanks to the technological revolution, decision makers now have new and powerful tools that can analyze water use and integrate that information into rate setting in equitable ways.
In this case, the analysis looked at which users, user classes and uses were generating costs, then used this information to set water rates.
But according to many people in the crowd and one city commissioner, the previous system – in which two-thirds of the households subsidized the remaining one-third’s water rates for irrigation – was the more fair. Kudos to the commission and the public works director for rejecting this view, and for pointing out that there’s no justice in continuing a system that burdens a majority of residents for the actions of the minority.
Also, kudos to the public works director for reminding everyone that the primary purpose of a municipal water supply is to provide safe water for human consumption. Another key purpose is to provide firefighters with a reliable water supply, a water-use that greatly improves a city’s ability to protect life and property.
Both these purposes can easily be justified as needs. Just as clearly, watering grass is a want.
But considering not only how much this “want” affects the water system, but also how much pushback was inspired by the proposal to price wants higher than needs, it’s clear that infrastructure cost, value and equity are poorly understood by most consumers.
As one of the property owners who received the letter, I had a decision to make: either use a “smart sprinkler” or similar system to modify my lawn-watering habits, or pay more for that particular water service. That seemed like a fair choice to me.
Senior Project Manager
Houston Engineering, Inc.