Southern Nevada water rates may go up

If your New Year's resolution was to pay more for water -- and whose wasn't? -- you may be in luck.

The Southern Nevada Water Authority is considering a rate hike to help cover pricey construction projects that were once paid for with the spoils of growth.

Five different options for raising rates will be presented to water authority board members at their Jan. 19 meeting. If approved, the proposed increases would show up on local water bills starting in May and remain in effect for the next three years.

The options range from a new fixed fee of $5 a month for most single-family homes to a consumption-based rate hike that would add nearly $10 a month to the average residential bill but could be trimmed by cutting water use.

Authority spokesman Scott Huntley acknowledged that the proposed rate hike comes at a bad time for residents, but he said the projects it will pay for are crucial for keeping local taps flowing.

"The valley's not going to exist without a water supply," Huntley said.

The bulk of the money is needed to pay down debt associated with the "third straw," a roughly $700 million intake pipe under construction at Lake Mead.

Roughly 90 percent of the valley's drinking water supply comes from the Colorado River by way of the lake.

The new intake will allow water to be pulled from the reservoir even if it shrinks to the level of the two existing straws. But the massive tunneling project is more than a year behind schedule, and most of the contingency funds built into its budget have been spent.

The proposed rate increase also will fund improvements to the valley's water treatment and transmission infrastructure, including work already completed but not yet paid off.

The additional revenue is not being sought for the authority's controversial, multibillion-dollar plan to tap groundwater across rural eastern Nevada and pipe it to Las Vegas.

Huntley said the authority has put off a rate hike as long as it could by trimming 226 employees and more than $56 million in operational costs, restructuring existing debt and deferring more than $395 million in new construction, most of it growth-related.

More than 60 percent of the authority's annual budget goes to construction and debt-service payments.

The authority hopes to raise almost $260 million in additional revenue over the next three years to halt the depletion of cash reserves it uses to maintain a favorable bond rating.

The region's wholesale water supplier has been siphoning off its reserve fund since it topped out at $620 million in April 2007, mostly thanks to revenue from new homes and businesses connecting to the water system.

The flow of connection charge revenue all but dried up when the economy tanked and the housing market collapsed.

In 2007, the authority collected more than $121 million in connection charges. By 2010, that figure fell to about $3 million.

To protect its bond rating, the authority needs to maintain $280 million in cash reserves, enough to cover one year's worth of principal and interest payments on its existing debt, chief financial officer William Fox said.

Here are the five options up for consideration later this month:

■ Option 1 would increase the monthly commodity charge from 30 cents to $1.06 per 1,000 gallons of water used. That would mean an average monthly increase of $9.88 for the typical single-family home with a ¾-inch meter. A small retail store would see an average increase of $34.20, while a large resort would see its monthly bill jump by more than $31,800.

■ Option 2a would create a new infrastructure surcharge based on meter size. That would mean $5 more a month for the average home, $36 more a month for a small retail store and $2,200 a month for a large resort.

■ Option 2b is the same as 2a but would phase in the monthly fee for most single-family homes, starting at $4 the first year, $5 the second year and $6 the third year.

■ Option 3a blends a commodity charge increase with the flat infrastructure surcharge, resulting an average monthly increase of $5.65 for most homes, $31.04 for small stores and $3,855 for large resorts in the first year.

■ Option 3b is the same as 3a but would phase in the infrastructure surcharge for most single-family homes the same way it would be done under Option 2a.

The consulting firm Hobbs, Ong & Associates developed the five options with the authority's finance department and its member utilities, which include the Las Vegas Valley Water District and the cities of North Las Vegas, Henderson and Boulder City.

The firm's managing partner, Guy Hobbs, said the options were culled from a list of 50 to 70 different variations.

Huntley said the authority's management team won't be recommending one rate hike over the others.

It's unclear when -- or if -- the board might vote on the proposals, but Hobbs warned that some sort of action must be taken soon.

"If you didn't do any of this ... by the end of the third year, you would be out of cash," he said.

Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350.