Victory for Rate Payers

Victory for South Bend Rate Payers

On Monday, January 13, 2003, the South Bend Common Council voted 8-1 to raise water/sewer rates for the first time in 15 years.

Although raising rates was a victory for the City and the environment, the big victory is the way the new rates are structured.

Large users will no longer receive massive subsidies for water consumption and treatment in South Bend.

Heading toward fair and equitable

In the past the City granted deep discounts to large water/sewer users in the commercial and industrial sectors.

On average all classes of users paid 32% less than homeowners and small businesses. And the average industrial user paid 37-42% less than a homeowner or small business.

But average figures hide the huge discounts granted to the largest users of all. The considerable discounts come to light when the largest users' rates were increased to close the gap with residential rates.

According to the South Bend Tribune (Jan. 20, 2003, A7) the City's original rate proposal would have raised Notre Dame's rate 400%.

This means the largest users were receiving water and sewer services up to 400% below the cost of providing the service.

The rates the Common Council adopted are much less than the City originally asked for and represent a significant compromise with the largest users.

The South Bend Municipal Sewage Works estimates the I/N Tek steel factory in New Carlisle will pay 81% more under the new rates, and the University of Notre Dame will pay 79% more.

Both increases are considerably less than 400%. So the large users are still not paying their fair share of costs.

According to the City of South Bend Municipal Sewage Works the largest users are:

I/N Tek steel plant
University of Notre Dame
New Energy Company of Indiana
AlliedSignal Aerospace Co.
Memorial Hospital
Holy Cross Services (St. Mary's College)
South Bend Community School Corporation
Kokoku Wire Industries
St. Joseph Medical Center
Aramark Uniform Services
Williams, Ralph M.

Corporate welfare South Bend style

95% of South Bend rate payers use 2000 cubic gallons or less of water per month. This huge majority of users paid more per unit for their water and sewer services than the top 5% of rate payers.

In effect small users have subsidized the large users for at least 15 years, if not longer. This subsidy is a transfer of wealth from 95% of rate payers to the top 5% of rate payers, from residential and small business customers to the biggest corporations in the county.

Voices of ecological sanity

The St. Joe Valley Greens were the only public voices in favor of the new rate structure at the Common Council meeting.

Some Greens acknowledged the proposed rate structure as a useful compromise. Other Greens said the proposed structure didn't go far enough to redress the imbalance in assigning costs for use and pollution. The latter pointed out that the proposed compromise rate structure still favored the large users and created public debt which would be unnecessary if large users paid their fair share immediately.

All Greens expressed concern that the proposed structure would delay implementing plans to contain and eliminate combined sewer overflows (CSO). Greens also pleaded that the Council take into account rate payers on fixed incomes and low wages when voting on the proposed water/sewer rates.

Cost of use principle

"Cost of use" is the basis on which the City of South Bend is restructuring rates.

All Greens spoke in favor of the "cost of use" principle which removes the consumption subsidy for large users.

In cost of use accounting all users pay the same unit rate for water consumption. Additional costs are assigned only to the users who cause the costs.

The prime example is extending City water and sewer service outside the municipal boundaries. The cost of the additional infrastructure required to reach the suburbs would increase the cost of suburban water service accordingly. A surcharge is sometimes used to amortize the additional costs.

Another example is providing large volumes of water for an industrial or commercial user. The business would pay for the additional costs in a surcharge based on the size of the water pipe.

Although cost of use is more fair than the old rate structure, the cost of use principle does not take into account hardship or low incomes.

The lower a user's income the more water costs as a percentage of income. Rates should not disproportionately burden low income users. Some relief must be built into the system.

What about pollution?

Billing according to cost of consumption (use) does not fully take into account pollution.

People and businesses are better stewards of natural resources when they can accurately monitor the cost of their resource consumption. But the new rate structure may not equitably distribute the cost of treating wastewater. If not, big users may not "internalize" the actual cost of their water use and treatment.

A truer cost structure would take into account that some users are greater and more dangerous polluters than others. Each polluter should pay the cost of removing pollutants they have introduced into the wastewater stream. Sidney, Australia, charges for water consumed and water treated.