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The City Council should reject the “water rate” study
By Roy Byrnes, San Juan Capistrano City Councilman
Like you, I’m deeply concerned by the high cost of water.
On June 17 our City Council will consider a proposal to again raise the costs of water. I urged the council to reject it. Big mistake. I can assure you that the rate study we have just received does not come close to meeting the standards of adequacy.
Here is why this is true.
A valid rate study should include a serious evaluation of all costs: product (in our case, water), personnel and distribution and operational costs. Indeed, cost containment, including strategies for cost reduction, should be the starting point of any legitimate rate study.
Amazingly, the rate study we’ve been given totally ignores cost cutting or even cost containment. It’s merely a shopping list of spending projects that we’re expected to blindly approve.
In a legitimate rate-structure analysis, the last thing one considers doing is raising prices. The new city rate structure starts with unsubstantiated revenue increases. This is unacceptable. We have just finished a five-year series of water price increases totaling 49 percent. Now we are being asked to approve yet another five years of revenue increases totaling 30-plus percent.
Many of our residents have suffered through the worst recession in decades and have seen their incomes diminish with zero increase in salary and retirement checks. Yet, we are now considering increasing the cost of water far beyond the rate of inflation or consumer price index. We must not do this. We must find ways to reduce non-essential city services and city employee costs. We must find better ways to do the job at less cost. Until I can see progress toward governmental cost control, I cannot in good faith vote to levy an additional burden on our public.
About Proposition 218: California law mandates that our city must not be seen to be profiting or marking up its charges—no “hidden taxes.” This simple injunction has spawned a complex, legal structure that has a life and form of its own. That’s why the city hired a specialized firm for this rate study. I did not support that move because I knew that it was just a bureaucratic excuse for jacking up fees. After innumerable meetings and shelling out over $140,000, I am proven to be correct. We don’t even have a rate structure study in the accepted business sense. What we have is a complicated bureaucratic document designed to satisfy the arcane, legalistic requirements of some future Prop. 218 trial.
The “rate study” we’re being asked to approve is actually a traditional governmental bureaucratic “supermarket maneuver.” Here’s how it works: Go on a shopping spree at Trader Joe’s. Pull off the shelf anything that looks good—French champagne, sirloin steak, Russian caviar, etc. Never mind cost because when you get to the checkout cashier, the citizen ratepayer will be forced to pay. He has no choice since he must purchase water from us.
This approach satisfies Prop. 218, which only cares that we produce evidence that we actually spent “X” millions. Remember years ago when we learned that the government was paying $600 for toilet seats? It’s the same distorted mentality at work here. I reject this approach. It’s wrong. It’s time to get back to common sense business fundamentals.
But wait a minute. We’re being asked to increase revenue 5 percent per year for five years—for a total of over 30 percent compounded—in order to “create a surplus?” I disagree. In my view, a legitimate surplus is the result of efficient management in which operating costs are controlled and income exceeds costs. Reaching into the public’s pocket and just pulling out more money because 50 percent reserve sounds good is not prudent management. If I have my fist in your pocketbook and I like the sound of “50 percent reserve,” why can’t I just pull out more of your money and call it “100 percent reserve?” Wouldn’t that make me appear to be super-efficient manager?
I hope you can see why this rate study is not valid. Years ago, this was called “voodoo economics.” It victimizes the public. I see my job on this council as to be a reasonable advocate for the customer. Therefore, I cannot support this faulty rate study. It has too many weaknesses.
Roy L. Byrnes, M.D. is a 55-year resident of San Juan Capistrano. He was elected to the City Council December 2012. Byrnes previously served on the council from 1972 to 1976, including two years as mayor. From 1959 until his retirement in 1994, Byrnes was a certified pathologist, working with physicians, clinics and hospitals in Orange County. Byrnes was also an associate clinical professor of pathology at UC Irvine.