Water Authority board OKs rate increases

Get ready for a leap in your water bill.

The Southern Nevada Water Authority board used February's extra day to push through a rate hike that will boost most residential bills by about $5 a month starting in May.

After more than two hours of discussion and public input, board members settled on a flat infrastructure surcharge based on the size of a customer's water line.

The fee totals $5 a month for the average single-family home, about $35 a month for a small retail store and more than $2,200 a month for a large resort.

Small- to medium-sized businesses are taking the biggest hit by percentage. Some restaurants and storefronts could see their monthly bills jump by 80 percent or more, depending on the size of their water service and fire lines.

The Las Vegas Chamber of Commerce and other business groups criticized the flat fee, arguing instead for a consumption-based rate hike that would have divided the increase more equitably among commercial and residential customers.

But authority board members said they chose the option they did because it has the smallest impact on residents, namely those in single-family homes, trailer parks and apartment complexes.

As board member and Boulder City Councilman Duncan McCoy put it, "Everybody has to have workers, and workers live here."

Water authority officials expect the rate hike to generate about $300 million in additional revenue over the next three years to fund "critical water infrastructure," pay down construction-related debt and maintain cash reserves that protect the agency's bond rating.

The bulk of the money is needed for the "third straw," a roughly $800 million intake pipe under construction at Lake Mead.

The new intake will allow Colorado River water to be pulled from the reservoir even if it shrinks below the level of the two existing straws.

The valley draws roughly 90 percent of its drinking water supply from Lake Mead. Henderson and Boulder City get all of their water from the lake.

"What we're building now is not growth-driven, it's reliability-driven," water authority General Manager Pat Mulroy said.

Added authority board member and Clark County Commissioner Tom Collins: "If we don't have reliable water, the businesses won't be worth a thing. The resorts won't be worth a thing. The tourists aren't going to come to the Strip if the swimming pools are empty."

The authority used to pay for major construction projects with connection charges from new homes and businesses, but that stream of money all but dried up when the economy tanked and the housing market collapsed.

The agency serves as the wholesale supplier for the region's water utilities, including the Las Vegas Valley Water District and the cities of Henderson, North Las Vegas and Boulder City.

The rate increase now goes to the member utilities for final adoption. The new fees are expected to take effect in April and show up on customers' bills in May.

The discussion leading up to Wednesday's vote often pitted residents against businesses and small-business owners against some of the valley's largest commercial water users, namely resorts and golf courses.

Business owners complained about unfairly subsidizing residential water customers, and residents complained that any rate hike would hurt struggling, low-income families and seniors on fixed incomes.

Local eateries and their customers will be among the first to feel the pinch from higher rates, said Ron Smith, chairman of the Nevada Restaurant Association.

"As you probably know, we run on very narrow margins," he said. "There is a limit to what our menu prices can bear."

Another critic of the flat-fee approach noted that, by percentage, small businesses are being asked to absorb an increase 10 to 20 times larger than that of high-volume water users.

But Mulroy said that difference is mostly a function of scale. The new fees don't seem to affect the resorts and golf courses as much because they already pay the largest water bills in Southern Nevada, she said. "In real dollars, they will pay the most."

Mulroy and company also drew their share of criticism. Several audience members said the authority should cut the salaries of its managers and stop renting expensive office space downtown before asking customers to pay higher bills.

Others said they were not given enough time to look at the authority's rate hike proposals or budget for the increase.

The whole process was "fatally flawed," said Brian McAnallen, vice president of government affairs for the Las Vegas Chamber of Commerce. Instead of rushing to raise rates, the authority should be leading a broader water policy discussion about what the community may need in the future and how it should be paid for, he said.

Mulroy said she would have preferred to take it slow, but the authority could not afford to further drain its cash reserves and jeopardize an upcoming bond sale needed to finish the third intake project.

As for the broader conversation McAnallen wants, Mulroy said she hopes to return to the board in early summer with plans for a new committee to do just that.

Complaints from the business community did lead to one last-minute change: Authority officials agreed to reduce the new monthly fee on water lines used for fire protection.

Such fire lines are required by building codes but are almost never used.

The higher rates are slated to last three years, but the pain is unlikely to end there. Unless the economy improves, additional increases may be needed as more of the authority's debts come due starting in 2016.

And none of these rate hikes has anything to do with the authority's plans to build a pipeline network stretching more than 300 miles to tap groundwater across eastern Nevada. That project is expected to cost billions of dollars, and no decision has been made about how to pay for it.

After Wednesday's vote on the rate increase, much of the audience filed out of meeting room as the board breezed through the rest of the agenda.

The next item up for consideration was a resolution to borrow $360 million in bond money to complete the third intake.

The measure passed unanimously with no discussion.

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