Days after approval of three-year, 30 percent water rate hike, DPW shares the math behind it

In an act of belated transparency, Baltimore City’s Department of Public Works this morning released the results of a contracted study on its newly approved, 10 percent annual water rate increases extending through June of 2022.

The study, prepared by Charlotte-based consulting firm Raftelis, accounts for rising operating expenses for DPW, anticipated debt for work fixing the city’s water infrastructure and revenue projections from Baltimore’s bill payers.

It notes operating expenses for DPW, spent on things like labor, chemicals and contractors, have risen 4.45 percent on average since fiscal 2016, when the city approved the last steep three-year hike for water and sewer rates. It said those operating costs are expected to rise another 2.4 percent in fiscal 2019.

Notably, the study attributed the climbing operating costs not just to the pipe fixes and replacements happening year-round, but also an apparent change made by the city for funding its street-sweeping program. While DPW and the Department of Transportation used to share those costs, it’s now funded primarily by DPW stormwater revenues, the study said.

And all this is happening while customers are using less water, Raftelis said: “Customers have been using less metered water according to recent trends. This behavior is consistent with many utilities across the country due to the emergence of high efficiency appliances and low-flow fixtures coupled with increased customer awareness that water is a valuable resource in need of conservation.”

The consultant forecast that because households are using less water, a 9.9 percent increase in the water rate—which is what officials approved last Wednesday—would bring in, as an example, just 8.2 percent more revenue in fiscal 2020.

On the matter of debt—the city has been borrowing heavily to pay for billions in court-mandated repairs under its consent decree with state and federal regulators—the study forecast $818 million in added debt by fiscal 2022 to fund major projects. Those include replacing miles of sewer mains, upgrading equipment at the Back River Wastewater Treatment Plant in the county, remediating those pesky sewage overflows that happen whenever it rains heavily and more.

In short, Raftelis advised that hikes of 30 percent for Baltimore’s water rate, as well as 27 percent for its sewer and stormwater remediation rates through fiscal 2022, are necessary to pay for all of the improvements that are planned or already underway.

Baltimore City Council members were aware of the reasoning behind raising the rates so steeply before officials voted to approve them. They just wanted DPW to be transparent about the math behind it all, which they can now read in the Raftelis report released today.

“We need, more than ever, transparency about how we arrive at these decisions,” Councilman Kristerfer Burnett told Baltimore Fishbowl last week, after the votes had already been cast.

Councilman Zeke Cohen put it more bluntly that afternoon, post-vote: “This is a sophisticated city. People understand the need to do investment in infrastructure, but to simply jack the rates by 30 percent without demonstrating a clear analysis of the need or where the money’s going, is insulting.”

Mayor Catherine Pugh, DPW Director Rudy Chow and City Solicitor Andre Davis voted to approve the rate increases at the Jan. 9 Board of Estimates hearing. Comptroller Joan Pratt and Council President Bernard C. “Jack” Young opposed.

Cohen had already asked Chow in December to release the study’s results before the vote, but he said the DPW director never responded. “I think that Mayor Pugh is putting a lot of faith in Director Chow,” the councilman said last week, “and based on my experience of being in city government for a little over two years, I’m not sure that level of faith is warranted. I respect the director, but I think it does a disservice to the public to continuously raise rates without showing the math.”

DPW never responded to a request from for comment from Baltimore Fishbowl on why it didn’t release the rate study beforehand.

Today, Chow and Pugh touted the release of the analysis as an “unprecedented step” and a move in the “public interest.”

“I have seen and understand the need for these new water rates,” Pugh said in a statement. “I also understand the community interest in wanting more information, and applaud this step toward additional transparency.”

DPW pointed to its new H20 Assists program intended to help low-income customers with paying their bills. It applies for households within 175 percent of the federal poverty level.

Young has proposed offering broader assistance to low-income households. His bill, called the Water Accountability and Equity Act, would use a formula to calculate how much a household’s bill would be, applicable to those with incomes ranging from 50 to 200 percent of the poverty limit. (We’ve offered some examples here.)

His bill would also call for a more robust dispute process for customers dealing with billing errors, a common and sometimes severe occurrence in Baltimore City, as well as increased oversight of DPW’s handling of customer complaints.

The bill was referred to city agencies for their review in December. A committee vote hasn’t yet been scheduled.