Letter: Commercial Water Rates Too Low in Shrewsbury Relative to Residential Rates

  • Comments (2)
Letter: Town officials should defer a decision on water rate increases.
Letter: Town officials should defer a decision on water rate increases. Photo Credit: File

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The Town Manager has determined that water rates must be increased in order to generate additional revenues of about $170,000 needed to maintain the water system, but the proposed rate increases in his August 1, 2012 package to the Board of Selectmen will do nothing to address the current inequities between residential and commercial rates. These inequities should be obvious to anyone who looks at the current rate structure.

Except for the first 5,000 gallons per quarter included in the minimum charge, the current water rates for all additional consumption are substantially higher for residential users than they are for commercial. For example, for every additional 1,000 gallons over 25,000 gallons consumed residentially, the water rate is $6.00 per thousand, up to 50,000 gallons, and $7.75 per thousand over 50,000 gallons. Meanwhile, the comparable commercial water rates are only $2.50 per thousand between 25,000 and 50,000 gallons, and only $3.50 per thousand above 50,000 gallons. Thus residential rates for these consumption ranges are over 140% and 120% higher than for corresponding commercial ranges.

For examples of quarterly bills, download the PDF at the link below.

Looked at another way, while a residential user currently pays $6.00 for every 1,000 gallons above 25,000 gallons, and $7.75 for every 1,000 gallons above 50,000 gallons, the highest current rate for a commercial user is only $3.50. There are dozens of commercial users that consume over 100,000 gallons per quarter, yet they still pay only $3.50 per thousand for this additional consumption. These low commercial rates certainly do not encourage conservation.

The Town Manager tries to justify these disparities, but his arguments are weak compared to the basic inequity inherent in these rates. In mid-August I expressed my general concerns to the Town Manager, and on August 28 I met with him to discuss alternative rate schedules. He agreed to develop rate scenarios showing the effect of increasing commercial rates more substantially. However, at the August 28 Selectmen's meeting where this subject was discussed, no alternative rate scenarios were presented. Note that this is not the first time I have raised this issue. When water rates were last increased in 2008, I also communicated this same issue to town officials, but they made no effort to reduce these disparities.

Instead of raising residential as well as commercial water rates to generate the additional $170,000 revenue needed, the town could raise only the commercial rates sufficient to generate the needed amount. One example would be to increase commercial rates for consumption levels greater than 50,000 gallons from $3.50 to $5.50 per 1,000. At current consumption levels, this would generate additional revenue of about $225,000. In addition, increase commercial rates for consumption levels from 5,001 - 50,000 gallons from $2.50 to $4.00 per 1,000. At current consumption levels, this would generate additional revenue of about $25,000. Adjusting for expected lower consumption levels (72%) resulting from these higher rates, the net additional revenue would be about $180,000, which is more than the $170,000 in additional revenue that the Town Manager says he needs to generate. And note that these commercial rates would still be substantially lower than residential rates at all levels above 25,000 gallons.

There was no publicity or request for public comment on this issue prior to the recent Board meeting of August 28, and hardly any since. The public hearing date of September 11 announced at that meeting leaves hardly any time for concerned residents to review all of the rates and the revenues generated at the various consumption levels, understand the issues, and be prepared for the hearing. Do town officials care only about raising water revenues, and not about having a full public debate on how to make the water rate structure more equitable for residential users?

I believe that town officials should defer a decision on water rate increases until other scenarios that make the rates more equitable have had a full and public discussion.

Thank you,
John Lukach, Shrewsbury

Attached: Water rates (water.pdf)

  • 2

Comments (2)

a) I was not trying to makes any points on revenue - I took the Town Manager at his word when he said he needs additional revenue.
b) Yes, part of my concern was conservation, but conservation for all consumers, commercial and residential. In order to meet state guidelines and encourage residential conservation as well as raise revenue, over the last 10 years residential water rates have more than tripled for consumption above 25,000 gallons. The Town Manager has announced publically that residential accounts have reduced their average consumption levels and now meet state guidelines. Thus residences have already used their flexibility to reduce their consumption. Meanwhile, commercial rates have increased over the last 10 years by only about 40-45%. That sounds as if commercial users have been getting a great bargain.
c) Your comment overlooks the most important point of my article, namely, that the substantially lower rates for commercial users are not equitable. All other factors being equal, strict equity would require commercial users to pay the same rates as residential users for the same consumption levels. My suggestion that commercial rates at higher usage levels be increased to a level sufficient to generate the additional revenues requested by the Town Manager would still leave commercial rates substantially lower than residential rates.
d) Your comments seem to be arguing that the typical business doesn’t overuse water, but that the typical residential user still wastes water, even after all of the recent, dramatic residential water rate increases. Do you have any evidence to support both claims?
e) Protect our non-residential tax base – certainly, but Shrewsbury already does. (For example, we don’t have higher property tax rates for businesses than for homeowners.) But to give businesses preferred rates for a resource that is becoming increasingly dear, that’s just not equitable.
John Lukach

John, I would be very wary of raising rates on businesses any higher than suggested. You bring up two important, but sometimes competing concepts in your letter: a) raising revenue, and b) conservation.

If we are concerned about conservation, I think the biggest impact would be had by raising residential rates above 5,000 gallons and above 25,000 gallons. Residences often have much more flexibility to reduce water demand than a business. Often a business uses water for cooling, or process reasons that are tied directly to their output, with little room or budget to invest in lower water use technologies. (Of course, I am a conservative who does not believe in using taxes and fees for social engineering, but that is a topic for another day.)

If we are concerned about raising revenue, as we always are, it hardly makes sense to raise more revenue from tax-paying, job-creating businesses while protecting residential water over-users. If we do not remain vigilent in protecting our non-residential tax base, which is an important part of the region's economic engine, we will soon not be having this debate, as there will be nothing but residences left to pay for everything, while we all drive to Boston to work.

Besides, our lawn turns brown in the heat of summer, so I am somewhat protected from high-use water rates!