Water authority pitches second rate hike in two years

For the second time in as many years, the Southern Nevada Water Authority plans a rate increase to pay down more than $3 billion in construction debt racked up during the valley’s boom and bust.

Authority board members will hold a public hearing and could vote on the proposal Thursday afternoon.

If the rate hike is approved by the authority and its member utilities, the average monthly water bill for a typical single-family home will rise by a little more than a dollar each year for the next four years.

All customers, from the smallest home to the largest resort, will see their bills increase by similar proportions, though the exact dollar amount will vary widely based on the size of the property’s water line and how much water it uses.

To maintain some incentive for conservation, officials said, about half of the rate hike will come from a fixed monthly charge and the other half will be based on water use.

The increase is intended to bring in roughly $45 million a year by 2017 to help the authority make its principal and interest payments after 2016, when they are due to shoot up by $80 million a year.

General manager Pat Mulroy described it as the community’s mortgage payment on its water infrastructure. She said her agency did what it could to refinance debt, defer projects and cut costs, but the bill has come due.

“How are you going to do this? The banks want their money,” she said.

The board will meet at 4 p.m. Thursday at the authority’s downtown headquarters on the seventh floor of the Molasky Corporate Center at 100 City Parkway.

The authority also plans to use revenue from the rate increase to help protect its credit rating by maintaining a reserve fund of at least $280 million — about one year’s worth of debt payments for the valley’s wholesale water supplier.

Mulroy said the authority has been living off reserves since the economy tanked and the agency saw its revenue from new water hookups plummet from $188 million in 2006 to just $3.2 million in 2010.

The downturn hit in the midst of an ongoing drought on the overdrawn Colorado River, which has forced the authority to rush construction of a new $817 million intake to draw water from deep in shrinking Lake Mead.

“It was the perfect storm,” Mulroy said.

By then, the authority already carried about $2.5 billion in debt from the 20-year building binge that pushed water transmission lines into the growing communities of Summerlin, Anthem and Aliante, and added a second treatment plant and a second intake pipe and pump station to draw water from Lake Mead.

The community depends on the reservoir for roughly 90 percent of its drinking water.

If approved, the new rates will take effect in January, at about the time Mulroy plans to retire after more than 20 years at the helm of both the authority and the Las Vegas Valley Water District.

Under the proposal, she can expect to see the average monthly bill for her home on an acre near Sunset Park climb from about $232 to $249 by 2017.

Mulroy said no additional rate increases are planned, but the authority will have to take on more debt — and find some way to pay it off — if Lake Mead shrinks far enough to force construction of a new pumping station at the reservior. That roughly $300 million project was deferred when the recession hit.

The authority also has yet to find a way to pay for its controversial plan to tap groundwater across eastern Nevada and pipe it to Las Vegas, a project that could cost as much as $15 billion.

The current rate proposal was developed by a volunteer panel of representatives from various sectors of the community.

In all, 33 people served on the Integrated Resource Planning Advisory Committee and its subcommittees. The group met 14 times since June 2012 and considered 16 rate scenarios before settling on the current model.

Nevada Resort Association President Virginia Valentine represented the hospitality and gaming industry on the advisory committee. She said the group worked hard to come up with a proposal that spreads the pain as fairly as possible among all types of water users.

“Every rate class is going to go up a little bit. Everyone is going to be a little unhappy,” Valentine said.

The panel was formed on the heels of a controversial new infrastructure surcharge the authority implemented last year that disproportionally hit owners of commercial property with large water lines feeding fire sprinklers and hydrants.

Some water customers saw their water bills double or triple as a result of the new fixed fee, prompting a backlash that caused the authority to reduce the surcharge for fire lines.

The advisory committee recommended no increase in the fire line charge as part of this rate hike.

The committee wants the higher rates to be phased in gradually over the next three years to avoid the “rate shock” that could come by hitting customers with the full amount all at once.

The group’s recommendations will be presented to the authority board Thursday when the rate hike is discussed.

If approved, this will mark the seventh rate increase for valley water customers in the past decade.

Even with the proposed hike, the average monthly bill for a typical single-family home in the Las Vegas Valley will rank in the middle of the pack among Western cities.

Valley residents will be paying slightly more than metered customers in Reno but substantially less than in places such as Los Angeles, San Diego, San Francisco, Phoenix, Tucson and Santa Fe, N.M., which has some of the highest residential water rates in the region.

Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350. Follow him, @RefriedBrean, on Twitter.