Utilities: 'Substantial' hikes ahead

Colorado Springs residents' reward for conserving water will be a yearly string of rate increases beginning this summer.

That's because cityowned Colorado Springs Utilities' water operation faces a $33 million revenue shortfall, largely because of lower water usage and plummeting housing starts.

Utilities chief planning and financial officer Ed Easterlin said staffers haven't computed how much more customers will pay but added, "It's substantial. It's going to take numerous years."

The news came during a Utilities Board meeting Wednesday where the City Council, acting as the board, got a 45-minute briefing on the situation.

"We were begging people to conserve, and the community responded. They've done everything right," Councilman Scott Hente said. "I'm worried about the message. If you listen to us, we'll punish you."

Planned cuts include a hiring freeze, possible axing of positions through attrition, reassigning contract duties to staffers, a freeze on travel for which Utilities budgeted $4.2 million this year, a 20 percent cut in corporate memberships, debt refinancing and deferring consulting work and purchasing of vehicles and equipment.

Council members suggested a pay freeze and reducing the roughly $700,000 Utilities gives to local charities each year.

Councilman Jerry Heimlicher suggested the situation might delay the proposed $1 billion Southern Delivery System, because demand likely won't be there in 2012 when the pipeline is to begin delivering water from Pueblo Reservoir.

"We will be examining all projects," Easterlin said.

Mayor Lionel Rivera said it would be impossible to cut $30 million from the $100 million water operation and retain reliable service. He suggested a pay freeze and deeper cuts of corporate sponsorships.

"I don't think we should leave anything off the table," he said. "Everyone in the community is being impacted and I think we all should share" that pain.

Easterlin's explanation:

- Utilities forecast 2,100 housing starts for 2008 but recently revised it to 1,700. Housing starts translate to cash for Utilities because builders pay the city thousands of dollars per home for water and wastewater hookups. Those fees made up 28 percent of water revenues in 2004 but dipped to 10 percent this year. As of this month, development fee revenues are $23.5 million below budget.

- New customers on whom Utilities was relying to drive up water sales aren't there. While new customers grew at a pace of 2.5 percent per year for several years until mid-2006, the tempo has slowed to 1.1 percent since then, Easterlin said.

- Residential usage has declined through April by 11 percent compared with the same period in 2007. Usage has declined 18 percent in the past four years.

Commercial usage has dropped by 5 percent since four years ago and 3.2 percent compared with the first four months of 2007.

"Our customers are using water wisely," Easterlin said, noting water sales revenues are $9.5 million below budget.

He warned against trying to ride out the downturn by hoping for a hot, dry summer, because Utilities' measures of economic stability already are below forecasts and expected to drop further this year.

That's key to the city's bond rating. If the rating slips from AA to A, it could cost the city $50 million in borrowing costs through 2012, he said.