On Tuesday I will cast one of my most difficult votes since joining the City Council in January 2008, made especially difficult by the economic hardship we are experiencing.
Here's the Seattle PI's take. And here's my perspective:
First a little history. Before the great Seattle fire in 1889 the city's water supply and fire hydrants were provided by private companies. Because those hydrants failed to provide adequate water pressure to fight the fire, city leaders quickly launched a public utility to manage the city's water system, and from then until 2005 our water rates funded our fire hydrants.
However, a few years ago a former city employee sued the city in King County Superior Court claiming
that paying for the fire hydrants with water rate funds was inappropriate. The city fought the lawsuit, but lost. The state Supreme Court ruled that fire hydrants should be paid from the city's general fund revenues (sales tax, business and occupation tax, real estate fees, etc.), not water fees, and ordered the city to refund just over $21 million in previously collected water rate funds. (The court had ruled in a 2005 case that the city's practice of using City Light electricity funds to pay for city street lights was also inappropriate and ordered a refund of those fees. After that ruling, the city discontinued the practice of using water rate funds for fire hydrants and began using general fund revenue.)
The Mayor originally proposed issuing the refund and imposing an immediate special surcharge to recover the refunded amount. The Council, however, believes the surcharge should be spread out over a longer period of time to lessen the impact. A majority of the Council, myself included, will likely vote on Tuesday to pay the refund immediately and spread the surcharge over a 21 month period until December 2010. The court also ordered the city to pay $4.1 million to the attorneys representing the plaintiffs who brought the legal challenge. This is one of the most frustrating parts of this whole matter. The "cure" ordered by the court is worse than the harm caused by the original error. Is this justice? Water ratepayers are being penalized for a long-standing city practice dating back to the 1890s. The only "winners" are the trial lawyers who brought the case!
Here are some rate facts that reveal what this will actually cost you and other water users. The typical residential water customer in Seattle pays a monthly bill of $27.74. Some pay more, others less. With the surcharge, this customer's monthly bill will increase to $30.57 for 21 months, from March 2009 through December 2010. That's a monthly increase of $2.83. This typical residential customer will receive a refund of $45.00 in April or May 2009. Over the entire 21 month surcharge period, this customer will pay $59.43 in extra surcharge fees. When you subtract the refund, this customer's out-of-pocket cost is an extra 69 cents per month.
The typical large industrial customer (average monthly water bill of $13,216) will pay an extra surcharge amount of $1,348 per month or a total 21-month surcharge of $28,308, minus a $20,800 refund. This all works about to an extra monthly surcharge fee of $358 per month.
So why doesn't the city just pay the refund from the general fund and call it even? Because we can't afford to do so. In April, after the first quarter, the Council and Mayor will face severe general fund cuts because of falling tax revenues caused by the economic recession. This first round of cuts in the 2009 budget could total $30 million to $40 million. We will likely face additional cuts later in the year as the recession continues. This level of cuts will force the layoffs of some city employees, will threaten additional police officer hiring, and put a severe strain on our human services funding. The city has not faced this serious of an economic crisis for many, many years. A vote to reject the water fund surcharge will compound the effects of the economic downturn, not a wise option in my opinion, and force even deeper reductions in city services.
This is not a pleasant position to be in, believe me. But I will vote on Tuesday to impose the surcharge and the relatively minor burden that will place on water customers in order to minimize what will be staggering cutbacks in city services beginning in the spring.
Finally, this whole experience has prompted me to review what I said during last fall's budget deliberations as we prepared the 2009 and 2010 city budgets. The Council should reconsider how it evaluates and approves the annual budget. Now is the time to assess how we do our budget work, how we evaluate the Mayor's recommendations, and what steps we might take to strengthen the city's financial condition. I do not favor continuing business as usual and will work hard to see that we adopt budget reforms, improve budgeting transparency, impose tighter performance evaluations, and measure the exact results we are achieving with our expenditures. Not always exciting work, but absolutely essential.