Summary: City Council Discussion of Reclaimed Water Rates and Tiered Rates for Non-Residential Customers

The Flagstaff City Council. Top row (left to right): Jim McCarthy, Charlie Odegaard, Eva Putzova, and Scott Overton. Bottom row (left to right): Celia Barotz, Mayor Coral Evans, Vice Mayor Jamie Whelan.

The Flagstaff City Council. Top row (left to right): Jim McCarthy, Charlie Odegaard, Eva Putzova, and Scott Overton. Bottom row (left to right): Celia Barotz, Mayor Coral Evans, Vice Mayor Jamie Whelan.

March 13, 2017

Note: Many thanks to the Flagstaff Water Group for providing this summary of water-related agenda items discussed at a Flagstaff City Council work session on February 28, 2017.

During their 2-28-17 Work Session, the Flagstaff City Council addressed the three water topics described below.

Reclaimed Water Rates

Reclaimed water rates were left as unfinished business at the conclusion of the 2015 Rate Study.  The previous Council deferred action on reclaimed rates, as members were unable to reach agreement on a new rate plan (Council did set new prices for potable water, sewer, and stormwater).

Utilities staff came to the 2-28-17 Work Session requesting direction from the new Council for new reclaimed water rates.  Staff began by providing background information, including the history of reclaimed rates since 1993.  Those rates have varied widely from 75%-of-potable to 35%-of-potable to a flat 3% annual rate of increase during one five-year period.  Staff also pointed out that present Flagstaff reclaimed water rates are midway among Arizona cities and average approximately 32%-of-potable.  Staff suggested two options:

  • Option 1: Increase reclaimed water rates by policy to 35%-of-potable or higher.
  • Option 2: Increase reclaimed water rates by allocating a higher portion of wastewater treatment plant costs to reclaimed water prices.

Following extensive discussion and comments from the public, Council directed staff to:

  • Develop optional trajectories to return to 35%-of-potable pricing through one or more steps, and illustrate impacts on customers for each.
  • Quantify the financial benefit of the Off Peak reclaimed rate class to the City to determine whether the Off Peak class deserves preferential rates (the Off Peak class presently applies to two golf courses who have storage and will allow interruptions in the delivery of reclaimed water).

Key comments and questions during the discussion included:

  • A question as to why the Off Peak class should include a declining rate tier structure. This is counter-conservation and seems anachronistic in an era of scarce water (Councilmember Barotz).
  • A request for additional history and motivations for setting reclaimed rates in the past (Councilmember Odegaard).
  • Concern that Council has not decided the policy question of whether it wants to expand the use of reclaimed water (Councilmember Putzova)

Non-Recreational Use of Reclaimed Water

This topic was placed on the agenda by a request from Councilmember Putzova.  Her primary interest was to discuss whether and how to expand the use of reclaimed water for use in toilet flushing, landscaping, and other applications where potable water is not required.

In their overview, Utilities staff pointed out that recreation accounts for approximately 67% of the use of reclaimed water, including such purposes as golf courses and snowmaking.   They listed a number of potential customers that have inquired about but have not adopted the use of reclaimed water due to supply shortages (summer) or infrastructure (e.g., Warner’s Nursery has not been able to justify the use of reclaimed water due to the cost of extending reclaimed water lines to their property).

Councilmember Putzova asked whether the City should extend the reclaimed water delivery system to new developments. A NAU representative explained how NAU double-plumbs all new buildings in order to allow the use of reclaimed water in appropriate applications. Several Council members remarked that infrastructure extensions are likely most cost-effective for population-dense developments such as dormitories or apartment complexes.

Council directed to staff was to work with City Development to identify building code and other changes that might facilitate additional use of reclaimed water.

Tiered Potable Water Rates for Non-Residential Customers

This topic was placed on the agenda by a request from Councilmember Barotz.  It was based on testimony during the 2015 Rate Study that adoption of increasing tiered rates for commercial and manufacturing customers is the most powerful tool for fulfilling the water conservation objectives adopted by City Council.  Commercial tiered rates are used by two-thirds of Arizona cities.

Staff provided background in which they described that increasing tiered rates for residential customers are used in Flagstaff and have been a strong factor for residential water conservation.  However, they pointed out that development and implementation of tiered rates for non-residential customers may be expensive, time consuming, and complex.  Complexity arises from the fact that commercial users consume widely varying amounts of water and have widely varying capability to adjust their usage and respond to changing prices.  The time and expense of implementing tiered rates has to do with the fact that external consultants are required.

Following this discussion, Councilmember Barotz requested that investigation of non-residential tiered rates be deferred to the City’s next 5-Year Rate Study.  She urged that the consultant chosen for that rate study should demonstrate experience and knowledge in developing tiered rates.