Affordability: A Multifaceted Approach

As the Parker Water Board Treasurer for the past two years, I have focused on affordable rate and fee setting as a foundation of our utility.

I have been active on this front, including the recent completion of a research project to help the Board understand how to approach affordability issues. This is on top of the 10+ year policy embraced by previous and current Board members to keep annual rate increases below relevant Consumer Price Index measures. As such, the average annual bill has increased an average of 2.5% over the last ten years. Of note, this compares to a 10-year average increase in Social Security COLA of 2.76% (a very good barometer of living-cost increases). Also of note, from 2001 to 2024, national water and sewer annual rates have increased an average of 5.21% and 5.6% respectively (compounded annual rate of change basis). The board continues to deliver on our bedrock policy commitment to keeping rates as low as responsibly possible.

Comparison of Parker Water’s average costs show that over time and today, we are ‘middle of the road’ compared to our neighbors. Not the highest—by far—but not the lowest, either, as our systems are young by comparison to older or less sophisticated water providers. We are committed to cost-of-service principles, only billing what it takes to deliver and maintain the services we provide in a reliable, high quality manner. Rate growth has been and continues to be below relevant CPI measures for the last 10+ years, including through the pandemic economic aftershocks.

As I performed my affordability research and analysis, however, I realized that considering affordability by only examining utility cost trends may offer too narrow a view. It is also important to view affordability in the context of residential customers’ cost of living - i.e., in the relationship to customers’ income and other essential costs such as housing, food, and medicine. Additional insight can then be gained by looking at water costs as a percentage of household income for the community. The Median Household Income for the Town of Parker area is $126,615 (2023); using an estimated annual bill for water and sewer of $1,527 (2023 rates), the water utility bill is 1.3% of median household income. By this measure, the cost can be considered affordable. 

This is no solace, however, for households with income below the median. Using $1,301 as an estimated annual bill for only essential water and sewer service (no or minimal irrigation), a households with an annual income of $32,525 would spend 4% of their income on water service—a commonly viewed water affordability threshold. Also, at this income level there are likely pressures across the spectrum of cost of living: food, housing, transportation, childcare and the like. Affordability is an issue for these neighbors as they work every day to make ends meet. Approximately 7.8% of households in the Town of Parker have incomes below $35,000.

So we face bit of a conundrum as the utility seeks to balance our customers’ financial needs and health while paying the price of providing water and wastewater services necessary for public health. In this balancing act, the current board has adopted the following policy:

1.     Evaluate affordability by looking at demographic data with an expanded, customer-facing view of living wage and household cost considerations;

2.     Evaluate and analyze increased revenue recovery with consumptive charges, with a goal to keep fixed fees in check for better affordability across all households;

3.     In conjunction with Water Efficiency and Conservation Plan development, evaluate added emphasis on a stronger price-signal approach to reducing excessive outdoor consumption;

4.     Use rigorous rate modeling to more effectively manage the impact of our rate structure with the goal of being less regressive, providing the opportunity for customers to manage consumption to help manage their cost, while still ensuring full cost recovery;

5.     As an entity, adopt a strategy to fully understand the circumstances of struggling households, use referrals to aid agencies for assistance, and show enforcement patience. 

Ensuring that essential water and sewer charges are affordable for every customer is a complex and multi-layered strategic challenge. Greater efficiency, cognizance of the impact of fixed charges, and an effort toward more progressive pricing can all help address affordability issues. Most importantly, balancing predictable and affordable costs with an ongoing commitment to ensure drinking water quality and sustainable sewer services will continue to provide the most value across all households.