Albuquerque’s water utility took the first step Wednesday toward a 5 percent rate hike as the agency tries to dig out of a hole created in part by reduced water use in the metro area.
The increase, which would amount to $3 per month for a typical homeowner, is needed because of a 9 percent drop in water consumption in the last year, reducing water sales revenue, utility officials told members of the Albuquerque Bernalillo County Water Utility Authority’s board of directors.
But critics said the real problem was a failure over the past decade to approve routine rate hikes to keep up with inflation.
Past conservation trends and the agency’s own projections should have made it obvious that metro area water use would drop, along with the agency’s need to produce water to meet community needs, Albuquerque resident Michael Jensen told the board.
“I’m not a genius,” Jensen said, “but I could tell there was going to be a substantial loss of production and loss of revenue.”
The proposed increase was formally introduced Wednesday night and will require a full vote at the board’s next meeting on May 21.
Water utility officials estimate that the rate hike will add roughly $10 million to the agency’s $200 million 2014-15 budget, but only if water use does not continue to decline.
But with water use continuing to drop, a senior official acknowledged the agency has no idea how low water use might drop in future years. Use has already dropped from 250 gallons per person per day in the mid-1990s to 135 gallons this year.
“Where’s the floor in this?” asked Hobert Warren, who oversees rates for the agency. “It could be 100 gallons per capita per day.”
In addition to the rate hike, the agency plans to borrow an additional $15 million in the next year to keep up with the need for money to replace aging pipelines and sewer plant equipment, said water utility chief financial officer Stan Allred.
The agency’s financial problems are compounded by rising debt, including money borrowed for the utility’s $500 million San Juan-Chama Drinking Water project, intended to reduce Albuquerque’s reliance on groundwater. A series of rate increases begun in the 1990s was supposed to pay for that project, but revenue has not been sufficient to cover all costs, according to water utility chief executive Mark Sanchez.