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Wednesday, April 16, 2014

Ratepayer Advocate Declines to Endorse/Oppose New Water District (Sort Of)

Posted by Dirk VanderHart on Wed, Apr 16, 2014 at 4:57 PM

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CUB has elected not to roar in the fight to control Portland's public utilities

Since January, the Citizens' Utility Board of Oregon—better known as CUB—has been scrutinizing the rates and finances of the Portland Water Bureau and Bureau of Environmental Services. That's a good thing. The advocacy group has long been seen as an independent, strong voice for residential ratepayers, and claims to have saved Oregon utilities customers $5.8 billion in the last three decades. And CUB has agreed to look into Portland's water, sewer and stormwater rates for free, banking on attracting more dues-paying members through the advocacy.

But, in the most-pressing issue facing the city's ratepayers, CUB leadership announced today it won't make a recommendation either way. It's taking a neutral stance on Measure 26-156, which would put the water bureau and BES under the control of a new seven-member board. The proposal is on the May 20 ballot, and has garnered tens of thousands in campaign contributions on both sides.

"CUB has made a board decision to be neutral on this particular measure," said Janice Thompson, a new staffer charged with leading the deep dive into water and sewer rates.

Instead, the organization released a list of questions and issues it says ratepayers should consider when voting on the measure.

"We’re saying: Here are questions," said Jeff Bissonnette, the group's organizing director. "We thought taking a neutral position might help ratepayers think it through."

The document released to reporters today [pdf], though, is not quite as disinterested as CUB suggests. There are frequent hints the proposed water district could create difficulties for Portland's ratepayers, and very little discussion of possible benefits.

First on the organization's list of pertinent questions: Does the structure of a utility affect rates?

Not necessarily, CUB says. All manner of utility configurations offer both high and low rates. "This raised the question of whether or not proposals that focus on structural changes are best suited to address concerns about Portland water and utility rates," the document says. CUB doesn't give its opinion.

It's more forceful on the question of whether a new utility board could harm Portland's bond ratings, a change that could lead to higher interest rates and more debt. Concerns over bonds have been raised by the City Club of Portland and the PBA.

CUB's take: "It does seem that even the perception of a problem could affect the overall credit rating of the City of Portland to the detriment of utility ratepayers..."

Or what about the possibility that a new board could scare off the city's wholesale water customers, whose payments subsidize the water rates of Portland residents? "Loss of wholesale customers is already a concern and uncertainty about the operation of a new utility structure could affect the confidence of wholesale customers to the detriment of residential and other retail ratepayers," the CUB document says.

Then there's a helpful takedown of the alarming comparisons floating around. Yes, Portland has higher rates than many other cities, but CUB points out the reasons for that are varied and complex.

A frequently cited comparison is that Phoenix has lower water rates than Portland. Analysis of this claim, however, reveals a more complicated story. Just focusing on rates misses the fact that Phoenix residents also pay for their water in the form of an underground water storage tax and a property tax dedicated to paying off $1.68 billion to the federal government for its construction of the Central Arizona Project, a significant source of Phoenix’s water. That repayment only started at the end of the 20 year construction project and is occurring on a 50 year schedule. This was a great deal from the federal government and is in sharp contrast to costs of developing Portland’s utility services. It could be that adding property taxes for water related services to Phoenix rates still costs average residents in that city less than water rates charged to Portlanders. This example, however, illustrates that it is challenging to make valid comparisons of utility rates without considering other costs and all aspects of different utility systems.

CUB may have been more forceful in its opinions, according to Bissonnette, if it felt the water district proposal stood a chance.

"If passing were a foregone conclusion, we’d probably be more concerned about raising issues about this," he said. "I think they're hoping that voter outrage around water issues are going to win the day. It’s not a bad strategy, but I’m not sure its going to work."

So the group is electing to focus its inquiry around what improved utility oversight should look like.

"It could be, over the course of time, that one superior model does develop," Bissonnette said. "A lot of people have a lot of very different ideas. There’s good, theres bad, and we’re going to have to sort through this."

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