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Mayor Charlie Hales promised to cut rates. (He hasn't.) And voters this spring contemplated a ballot measure to wrest control of the water utility away from City Hall in hopes of reining in rates. (The measure failed.)
But what most people don't know is that the city keeps a pile of money stashed away to lower water rates. The city can use that money to pay expenses so ratepayers don't have to cover increasing costs.
That money, kept in what's called a rate stabilization account, has soared in the past five years to $32.2 million, more than four times what the city's sewer utility and other cities regard as an optimal amount for such a fund.
If tapped today, the fund could finance a one-time cut to city water bills of 4.5 percent.
But the city hasn't used the fund in any meaningful way to lower rates in years—even as rates continue to climb. The Water Bureau will use $7.8 million this year to lower rates.
City Commissioner Nick Fish, who oversees the Water Bureau, defends the city's decision to protect this rainy-day fund, even if customers already feel as if it's pouring.
âWe can drain the fund,â Fish tells WW. âOr we can have a rainy-day account where we anticipate spikes in capital spending. We think our customers would rather avoid the spikes."
City water rates have climbed 43.1 percent in the past five years, largely because of $551 million in capital spending.
Fish has said he cut utility budgets to the bone to keep the Water Bureau's portion of utility rate increases to 7 percent this year. And he says water rates are projected to climb even more to cover costs of new construction projects, including a new water main running under the Willamette River.
"To use this fund annually seems to be financially imprudent, and it doesn't go very far," he says.
City budget documents show the Water Bureau is required to keep at least $2 million in the fund, but bureau officials could not say what the ideal amount for the fund would be.
But other documents show that the water utility's sister bureau, Environmental Services, which operates the city's sewers, aims to keep a balance of about 8 percent of annual operating expenses in a similar fund. That's a figure consistent with other cities'.
Yet the Water Bureau's fund is equal to 40 percent of its $80 million operating budget.
Roger Cole, the grounds sustainability manager for Oregon Health & Sciences University, used to monitor water rates on the Portland Utility Review Board. He says the size of the fund raises questions. "I would be interested in seeing what their strategy is for 40 percent," he says.
In fact, national standards for managing municipal water supplies say Portland is currently in the exact situation of a city that should tap into its reserves to lower rates.
In recent years, Portlanders have been buying less water from the city. That's meant less revenue flowing in to cover the city's expenses. But the costs of running water systems are largely fixed—overhead is generally the same no matter how much water is sold.
As a result, when water sales dip, the city must raise rates to stay in the black.
Fish and Water Bureau officials have complained that declining water use by Portlanders for more than a decade has left the city in a money crunch. "As in prior years," Fish wrote in the introduction to the bureau's 2014-15 budget, "declining demand continues to put upward pressure on rates."
That's when the city should be using its reserves to cut rates.
"A stabilization fund allows a utility to draw on the fund balance during revenue shortfalls that result from lower than expected consumption," the American Water Works Association, a national organization that provides operating standards for municipal utilities, says in its 2012 manual, Principles of Water Rates, Fees, and Charges.
Portland has done the opposite.
Water Bureau officials say using all the reserve fund now would only mean rates would jump even higher in the future.
City budget documents show the Water Bureau expects to tap the fund over the next five years to offset upcoming construction costs. Fish says he's willing to reconsider if an outside advisory group says to take another look at it.
"If any of our advisory groups says this policy needs to be updated, why not?" Fish tells WW. "We're looking at everything else, but I don't remember anyone suggesting this policy is in error."
At the moment, that's not likely to happen.
In May, voters crushed by 73 percent to 26 percent a measure transferring rate-setting authority to an elected board. Fish responded by establishing a blue-ribbon commission to look at how the Water Bureau and the Bureau of Environmental Services could make rate-setting more transparent for the public.
But no independent group is charged with looking at how the city handles its water rate stabilization account.
WW news intern Dakota Smith contributed reporting to this story.
WWeek 2015