Small-business owners complain they’re drowning under Water Authority’s new surcharge

By Joe Schoenmann

Wednesday, May 30, 2012 | 2 a.m.

As chairman of the Metro Police Fiscal Affairs Committee, businessman Jim Hammer has earned a reputation as someone who is not a rubber-stamper. He questions motives for budget increases and has proven far from a Metro brass pushover.

Now he’s wondering just how much questioning the Southern Nevada Water Authority did when it voted to add a hefty new surcharge to water bills that customers began to see in May.

Hammer is one of the principals of more than 20 Storage One self-storage unit facilities throughout the Las Vegas Valley. He’s seen water bills for those facilities recently increase from $11,500 to $26,000 per month, an amount Hammer says decreased the value of the business by $2 million. It’s frustrating to him that the increase is not even due to increased water use. At those mini-storage facilities, little water is used beyond landscaping and a single on-site apartment.

The Southern Nevada Water Authority’s new “reliability” fee, however, isn’t based on water use. It is generally based on the size of water meters going into a home or business. A local consulting firm came up with the idea after the Water Authority saw hook-up fees dwindle from a high of $188 million in 2005-06 to $10.8 million last year. Meanwhile, the agency spent money on infrastructure, including a costly third intake pipeline into Lake Mead. The pipe is considered insurance in case lake levels fall below two other intakes closer to the lake’s surface.

In other words, the money has been spent; what remains is paying off bondholders who helped finance Water Authority expenses. Outstanding debt stands around $3.3 billion.

The Water Authority board voted to add the new charge to customer bills in February. Given three options, the board chose the one that affected homeowners least. On average, homes connected to the system with 3/4-inch water meters saw an additional monthly fee of $5. Casinos and golf courses saw a fee increase that came to about a 2 to 6 percent hike in their overall water bill.

But other businesses like Hammer’s were expected to see increases of up to 300 percent.

One of the Storage One sites saw an increase from $900 to $3,100 per month; another went from $600 to $2,000. The increases come mostly from the business’ fire meters, which are typically much larger than regular-use meters.

“On any given day, not a drop of water flows through them,” Hammer said. “It’s pretty horrible.”

Other business owners are in just as much or more shock.

Before the question about his water bill is fully asked, Peter Michelin launches into emotional disbelief at the $1,000-per-month increase, about 180 percent, in his water costs. Michelin owns a small office building on West Sunset Road with about 13-14 units; about half are occupied. Even before the new water hike, he had to reduce some rents because the tenant “wasn’t making it.” So there’s no way, he said, that he can pass this additional $1,000 onto his tenants.

“I knew the (third intake) had to be built; I just had no idea I’d be taking such an active role in the financing,” Michelin said.

Janine Meredith owns a contracting business in North Las Vegas. When she received her bill a few days ago, she said, “my heart sank.” Water costs at her business went from $80 to $336 per month. In a year, that’s an increase from about $1,000 to more than $4,000. Most of the increase covers the boost in the cost for fire meters.

She tried to get the fire meters unhooked, “but they said no way, it’s mandatory.”

“Honestly, I can’t afford this,” Meredith said. “It’s a warehouse where we have vehicles. It’s not a storefront where people are there all day.”

Meredith is seriously considering closing her business, even though three and sometimes four employees rely upon her for work. She is loath to pass more costs onto customers because she has to compete against some contractors who “operate out of the back of their truck” and are able to offer cut rates.

“I’m toeing the line, paying insurance and all those things, so I can’t compete with people who are unlicensed,” she said. “I haven’t made a profit in six years, and this has definitely sent me over the edge. I just don’t know how they figure they’re going to get this kind of money from someone barely hanging on.”

The Water Authority board is made up of representatives from the various water districts in Southern Nevada. Board members voted unanimously for the new fee. Before the vote, Clark County Commissioner Steve Sisolak, who sits on the Water Authority board, argued for and won a reduction in the fire-meter increase. He also recommended a losing proposition to increase the average household fee from $5 to $6.

His office has received numerous complaints as customers received bills this month.

“At every event I speak at, they ask this question: How did this happen?” Sisolak said. “The truth is, we had these discussions. It was in the newspapers. The Water Authority had public meetings, and they were not very well attended.”

It’s not as though the Water Authority is blind to complaints. It has received about 20 complaints, spokesman J.C. Davis said. Some are from businesses, he said, but most are from homeowners who have 1-inch water meters instead of 3/4-inch meters. For those with the larger meter, their bill increased about $19 per month instead of $5 for the smaller meter.

The Las Vegas Valley Water District will convert for free a 1-inch meter to a 3/4-inch, Davis noted. But that doesn’t always mean a lower bill. Water at the same tier (water is tiered, so it costs more to use more water) costs a homeowner with a 3/4-inch meter about twice as much as someone with a 1-inch meter. (The Water Authority is the water wholesaler to seven water districts. The free meter-exchange offer currently only applies to the Las Vegas Valley Water District.)

Davis added that the Water Authority has established an advisory committee whose members will represent a wide array of people and businesses. That committee will work on potential changes to the billing system when the current structure ends in three years. Also, on June 5, the Las Vegas Valley Water District will discuss a separate committee it wants to establish to look at the fee structure.

Hammer hopes something will happen soon. He wants to get as many business owners as possible to the next Water Authority meeting on June 21.

“They just picked on some businesses disproportionally,” he said. “Is it fair that hotels have a minor impact and we pay almost three times as much? It seems to be punishing some small businesses.”