Water: Cities' Cash Cow
At the core of the issues is that 'water flows toward the money'
Say "water" and many people think blue, as in the Caribbean or the crystal depths of a Florida spring. But look closer at water issues around the world and the real color of water may be green -- as in money.
Water -- its management, use and protection -- floats an annual U.S. industry with revenue of $92 billion, according to a report from the Environmental and Business Journal.
Among Florida's five water management districts and the water division of the state Department of Environmental Protection, the combined annual expenses top $1.8 billion. Then there are private water bottlers, federal and local governments, consultants paid to study water and help everyone navigate bureaucratic systems and the money spent when local governments sue each other over water.
All that money influences everything from studies and science to the amount paid for water that flows from the tap. It influences the decisions of cities and utilities setting rates and making larger policy decisions.
"Water flows toward the money," said Jake Varn, an attorney involved in Florida's water industry for 47 years.
It's the biggest reason why a regional water supply authority has never been able to work in Volusia County, said Jack Hayman, a Volusia County councilman and former chairman of the Water Authority of Volusia.
It's also the reason many cities aren't aggressive on conservation, said Charles Lee, director of advocacy for Audubon of Florida. They make more money by selling more water.
"In many cases utilities have been cash cows for local governments," Lee said.
The rates local customers pay for water vary widely. For example, a customer using 10,000 gallons of water a month would pay a high of $94.24 in Flagler County or a low of $19.27 in Deltona.
Rates are based on how much it costs to treat and produce the water and on how much a utility relies on extra revenue from the utilities department to keep city coffers healthy or make bond payments for such capital costs as new treatment plants.
But local governments don't like to own up to the true cost of their water, said Bill Kerr, a consulting ecologist and former water management district board member. They don't want people to know they "supplant their taxes with revenues from the utility."
Of the utilities in the two-county area, South Daytona transfers the biggest percentage of revenue from the utility department to the city's general fund, nearly 30 percent in 2006-2007. The city buys its water from Daytona Beach.
Daytona transfers 8 percent of its utility's annual operating revenue into its general fund as payment in lieu of taxes.
Cities that make the payments in lieu of taxes say they're just replacing the money that would be paid by a private water utility if it were providing water.
To Greg Gimbert, a civic activist in Daytona Beach, it seems cities should charge only what it costs to produce water.
About half the local governments with water utilities, such as Lake Helen and Edgewater, transfer no money from their utilities.
Sometimes, even utilities that don't transfer money use utility cash for non water-related expenses, Varn said. "They do some pretty exotic things with their revenues."
Meanwhile, many local governments have adopted special water rates called conservation rates, with encouragement from regional water officials. The rates require customers who use more to pay more.
Palm Coast adopted conservation rates in May 2006, said utility director Richard Adams.
The goal is to reduce water use, but the rates complicate the financial picture for utilities. The more water the customer saves, the less money the utility gets. It costs a certain amount to run a utility no matter how much water is sold.
That leaves utilities in the position of hiking rates to cover costs. Then consumers who conserved water wind up paying more anyway, said Bruce Adams, a water use efficiency expert with the Florida section of the American Water Works Association.
"If you did all that you could do for conservation, you would send a negative signal to your customers, because you're asking them to pay more because they were using less," Adams said. It requires careful tweaking of a utility's rate structure to make sure the revenue doesn't change.
The biggest factor influencing future water rates locally may be the quest for alternative water supplies, such as desalination. By some estimates, local rates could be 5 to 10 times higher.
"We're going to have to spend tens of millions of dollars to build alternative water supplies," said Keith Riger, DeLand's city engineer. "The impact on rates is going to be astronomical."
From time to time, Riger and others argue, it would be more fair if every water user -- including farmers and people using private wells -- shared in the cost of supplementing groundwater with sea water or water from the St. Johns River.
But that thorny issue gets skirted during statewide water summits and other meetings. It would be enormously unpopular and challenge what some consider a virtually sacred right to water.
Many decisions about water in Florida are heavily influenced behind the scenes by business and agriculture, such as appointments to water management district governing boards, Varn said. "Everybody wants to make sure they get the water they need as cheaply as possible."
"Cheap water means they can deliver their products cheaper and be more competitive, which means they can make more money," he said. "If you don't have water, you can't do anything."