Mitigating the effects of higher water rates

This week, the Southern Nevada Water Authority board will vote to raise water rates. The rate increase will, absent modification, significantly increase water rates on businesses, in some cases 15 to 300 percent higher than what they are paying today.

As proposed, the rate changes would result in serious, disproportionate impacts on the employers of this valley, most of which are small businesses with fewer than 50 employees. The brunt of this increase is being placed on those who are creating the jobs in this still-uncertain economy, and that it could further impede our economic recovery.

A dependable water supply is a vital concern given the scarcity of the resource in Southern Nevada. Yes, the water authority needs to finish building and financing the third intake "straw" at Lake Mead. Originally, funding for the third straw project was through connection fees to new housing and businesses. Because of the recession, this funding source has nearly dried up.

Both residents and businesses need to have confidence that a stable water supply will exist into the future. That confidence is critical to attracting new businesses and encouraging existing ones to expand, as well as ensuring that Southern Nevada is a good place to buy a home and relocate. Unfortunately, the authority's current rate increase proposals place the cost burden disproportionately upon job creators at a critical time in our economic restoration.

Three different rate increase options are being considered by the authority board, which is scheduled to vote Wednesday:

-- Option 1: A three-year commodity charge based on water usage.

-- Option 2: A three-year fixed infrastructure surcharge based on meter size.

-- Option 3: A three-year blend of Options 1 and 2: a commodity rate increase and infrastructure surcharge.

Option 2 appears to be the one preferred by the authority staff at this time. Under this plan, the vast majority of residential users (more than 455,000 of the 517,070 total meters in Southern Nevada) would incur a fixed surcharge of $5 per month based on their meter size, regardless of the amount of water they use.

Compare that to many businesses, which nearly always have at least one regular meter and at least one fire meter. They may see hundreds or even thousands of dollars in monthly increases because the new rates will be assessed on both regular meters and fire meters.

Consider these examples: A small business that has two 1-inch water meters and a 6-inch fire meter will see a rate increase of $360.79 a month, or $4,329.48 annually. An office that has a 2-inch water meter and an 8-inch fire meter will likely see a rate increase of $577.25 per month -- $6,927 annually on top of its current bill.

Ask yourself, if I were the employer, how would I cover this steep increase? Would I have to cut back on my employees' hours? Cut compensation or benefits? Refrain from hiring a new employee? Lay someone off? Where will the money to cover this increase come from?

There is a proposed resolution that is fairer and more balanced -- a modification of Option 2.

Under this option, residents would pay an amount that more closely reflects their fair share of the infrastructure costs: less than $10 per month for most residential consumers. At that amount, residential water prices still will be markedly lower than major cities in the West.

A price increase of this nature would be less harmful to the businesses that employ people and more supportive of job creation and the economy.

Under this modification, the small business with two 1-inch water meters and a 6-inch fire meter would see a rate increase of $202.66 per month, or $2,431.92 annually. The office with a 2-inch water meter and an 8-inch fire meter would pay an additional $324.24 per month, or $3,890.88 annually.

While these are still large increases, they would be more manageable for employers than the current Option 2 proposal.

Raising rates on anyone right now, in light of our fragile economic recovery, is something we should do cautiously and with great thought.

Yet, securing the construction of the third straw to ensure we can access water from Lake Mead is essential to the long-term vitality of Southern Nevada.

While the reality is hard to embrace, there is an opportunity to share these costs in a way that is more just and reasonable than currently proposed so our community's job creators are not hindered in their ability to do what is so badly needed now: produce more jobs.

Kristin McMillan is president and chief executive officer of the Las Vegas Chamber of Commerce.