The Pima County Board of Supervisors voted 3-2 to pass a resolution opposing Tucson Water’s proposed differential rate increase for customers living in unincorporated Pima County during their meeting on Tuesday, April 6.
Supervisor Matt Heinz and Supervisor Adelita Grijalva voted against the resolution.
Supervisor Rex Scott said he brought forth the resolution for several reasons. Most notably, Scott believes the rate increase is based on trying to get unincorporated areas to either incorporate or be annexed by the closest municipality, not because it costs more to deliver water to unincorporated residents. A majority of the Tucson Water customers who would be affected are in Scott’s District 1.
“The city has decided as a means of generating additional revenue for the utility that they are going to charge higher rates to people who live outside the city limits, but only if they live in unincorporated Pima County,” Scott said. “Roughly 34% of Tucson Water customers live outside the city limits and about 28% of that is unincorporated Pima County, while the other 6% is in Marana, Oro Valley or South Tucson.”
Scott said the City of Tucson is pushing the higher rates because “they think it will encourage annexation or incorporation.”
The freshman Democrat, first elected in 2020, also said the proposed differential water fees not only violate the utility’s cost-of-service model on how Tucson Water sets its rates, but it would also go against a 1979 intergovernmental agreement between the city and county. Under that IGA, the city agreed to deliver water throughout the county at no extra cost as long as the county maintained the area’s wastewater services.
“Charging higher rates to people outside the city limits would set a dangerous precedent because there are some areas within the city that are at elevation levels the same as areas outside of the city limits,” Scott said. “There is really no better two words to describe what’s being proposed than ‘unfair’ and ‘inequity.’”
County Administrator Chuck Huckelberry said he also views the city’s proposed differential rate increase as a violation of the 1979 IGA. While the Tucson City Council has not yet approved the proposed differential rates, Huckelberry foresees a 30% to 50% increase for certain Tucson Water customers in unincorporated Pima County should it pass later in the month.
“This is a really discriminatory practice where you’re having two types of rates applied to the same customer class and the only differentiation is their geographical location,” Huckelberry said. “To add to its unfairness, the folks who are going to have to pay the added increase don’t even get to vote for the policymakers.”
If the city does decide to set differential water rates during their upcoming April 20 meeting, Huckelberry said the county will be looking at what options are available to oppose the increase.
“We prefer that a utility stand on its own cost basis and not be used as what some would call a cash cow. Cost of service is something really fundamental to the utility rate structures and charging a differential rate to the same customer class falls way outside the cost of service,” Huckelberry said. “This is really a way to gather additional revenues and potentially use them for other uses besides sustaining the utility, which is really inappropriate.”
Pima County Supervisor Matt Heinz, a Democrat who was elected last November, voted against the Board’s resolution to oppose the proposed differential rate increase because he believes city residents have been subsidizing the county’s water for too long.
“The vast majority of incorporated municipal residents have been subsidizing for decades the relatively lower water rates that are enjoyed by folks in the Catalina Foothills,” Heinz said. “This was probably not an appropriate policy in the first place. So, I see this as a kind of corrective action, a reasonable and equitable one that’s been done over time to kind of help balance things out.”
Interim Assistant City Manager Tim Thomure said there are three main reasons the city would want to add differential rates to Tucson Water’s fee structure—equity, loss of money and maintaining the water supply as the climate is changing. Thomure was the director for Tucson Water before moving on to the city manager’s office earlier this year.
“If something happened to Tucson Water’s finances, like a pandemic with a moratorium on shut-off, which caused revenues not to be collected, it’s the City of Tucson’s General Fund that bears that risk,” Thomure said. “Our region also loses tens of millions of dollars of state shared revenue every year because of the high percentage of residents we have in unincorporated areas. Lastly, the city has been extending its water resources outside of its jurisdiction not only with no return on investment but no revenue back to the city itself.”
The interim assistant city manager said there is a difference of opinion between the city and county in regards to the 1979 IGA. From the city’s perspective, Pima County is obliged to maintain the region’s wastewater whereas the city doesn’t have a “reciprocal requirement to serve outside this jurisdiction.”
“There’s a lot of folks who assert that there is an obligation, but there is not. Reviewing the IGA makes that clear,” Thomure said. “There is a lot of history here and I’m not saying that [the county] is completely incorrect, but it’s not an obligation.”