Negative elasticity of demand is a complicated way of saying that the more something costs, the less consumers will use it. It was the leading concern expressed by councilman Bill Trotter at the May 12 meeting to asses city water rates.
Complicated is also an apt description of the new cost of service study, termed by the consultant himself as a convoluted way of getting to reasonable water rates for the island.
As consultants study a way to create a cost structure for city water bills, South Florida itself is mired in especially vicious drought conditions. From a conservation point of view, using less water should be a boon to a stressed system; however, the city is also wrestling with a drought of revenue that is draining the budget for water and sewer operations.
Jeff Poteet, acting general manager of the city’s water utility, sums up the challenge: “We have one of the most complex water systems in the state because of our location. We have no fresh water source to pump to the surface.”
Instead the island gets water from three sources: an aquifer storage and recovery system (ASR well) aka, the ‘bubble’ aquifer, 15 on-island wells that pump brackish water and convert it via reverse osmosis (RO), and a nascent reuse system that was meant to grow with the STRP and alleviate irrigation of green space with drinking water.
According to the Florida Division of Emergency Management, the state is in the middle of the largest rainfall deficit since the 1950’s. While the rest of the county goes into conservation mode, Marco Island is granted an extra irrigation day thanks to the water reserve provided by the ASR wells. It’s the cost of the water that forces many to rethink that extra sprinkle.
Inland cities like Naples have a cost advantage, explains Poteet, because they pump water directly from a freshwater source close at hand. “Using the surface water from the lake (ASR) is more economical than the water from the reverse osmosis plant.” The city pumps its first 6 million gallons (a daily average) from the surface water. Daily demand beyond the 6 million gallons is then supplied by the more expensive RO plant, an average of 2 million gallons a day, estimates Poteet.
Reuse water would ideally come to the rescue, and currently does for about 3%, mostly condo properties. The sewer system that feeds the reuse plant is not at a capacity to provide a large amount of irrigation-only water. “We are at year 5 of the 7 year sewering plan,” says Poteet. “If you have fewer people coming online, you have less water coming in.” It takes 10 average ‘indoor’ users to meet the demand of one irrigation user, he adds.
The acquisition of the water utility and the accompanying sewering of the island produced both large debt and operating costs, which were projected to be offset by a growing population and tax base. As Mike Burton, head of Burton & Associates, who produced the cost of service study, explains, water utilities statewide are now facing a shortfall in demand, and revenue, thanks to the economic crisis. His advice: Marco’s rate structure debate should come secondary to ensuring revenue sufficiency to keep the utility running.
The firm’s mandate was to assess precise water use according to each category of meters on homes, condos and commercial properties and redistribute water rates based on those findings. The study, which Burton himself labeled academic and difficult for laypersons to understand, would have been useful “when the utility was getting started,” but making such a shift mid-stream will be difficult to justify to users.
Burton recommended the city consider a simplified unitary rate approach: vary the costs in the rate design (block rates), instead of allocating different rates for different classes. “The biggest shift will happen to single family and commercial users in any approach you use,” cautioned Burton, because “usage in the multi- family, multi- unit class is very low. Potential for demand is less than a single family home and variations in the ERC should be based on use.”
Providing everyone with cheaper reuse water for irrigation is years and more expenses away. Scrapping the sewer program altogether will not eliminate the existing debt and costs that drive high bills, and frustrations.
Burton recommended that the firm finish the study and the council decide what to implement. “You’ve had two of the premier consulting firms in the state, PRMG and us, assess the data. As policymakers you have a lot of discretion.” But no easy policy path.