News Archive

Poor planning and processes are costing ratepayers millions

AWA has spent millions of dollars on projects for expansion. Some of the projects are never built, but the costs for the studies can be extensive. Due to cost overruns and/or little help from future customers, the projects that are built cost the ratepayers more than they expected.

The AWA spends tens of millions of dollars researching and building projects that will increase capacity on the systems within AWA. Some are engineered to double or triple capacity of the system. At current growth rates, tripling capacity would take about 140 years. Yet most of these projects are designed with a 30-50 year useable life. AWA uses poor or unrealistic engineering assumptions to justify the large increase in size (for example, 3% growth rate). Inevitably, when an oversized project is built based upon these bad assumptions and the growth doesn’t come, ratepayers end up paying for a project that is 3 times larger than needed -- and their rates need huge increases to pay for it.

AWA has a cookbook formula for these wasteful projects: They start off with a low engineering estimate of the project cost. The low estimate makes the project look affordable. So the Board approves spending to study the project. As more is learned about the project, the cost estimate increases. As more funds are spent on the studies, it becomes more difficult to back off and accept that the project is not feasible. So, AWA continues its pursuit.

It is important to realize that projects are not presented to the Board in an objective manner that gives equal and realistic assumptions to alternate projects (if there are any alternatives offered). For example, staff may state that an alternate to the “chosen” project may not qualify for a grant, when in reality grants for the alternate were never pursued.

After the project is complete and the debt service payments for the project begin, AWA needs large rate increases. Because the project is complete, it cannot be undone and the burden falls on the ratepayers to pay the debt service for a project that is much larger than needed. To make matters worse, AWA also offers special discounts for special interests. As an example, in August 2011 AWA gave JTS Communities (Castle Oaks developer) a $500,000 discount on connection fees. These fees are used to reimburse ratepayers for infrastructure expenses that the developer will use. A discount on the fees amounts to a giveaway of ratepayer assets. AWA staff claims the discounts are justified, but they never updated their fee study, so there is no evidence to support their claim.

AWA builds oversized expansion projects and then gives discounts on those assets to new customers. Current ratepayers make up the difference, and that is an enormous disservice to the public. Ratepayers would be better served with more reasonably sized projects and by AWA following their own fee study findings.

Here is a list of some enormous wastes of ratepayer funds (there are many more):