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Virginia Politics
Posted at 05:02 PM ET, 09/27/2011

Fairfax supervisors take step toward equalizing water rates for Falls Church

Fairfax County’s long-running water war opened a new front on Tuesday, as the Board of Supervisors directed staff to study enacting remedies for what its chairman says are unfair rates imposed on county residents who get their water from the City of Falls Church or other municipal utilities.

The board’s action followed a new report from the county’s Consumer Protection Commission that lends more ammo to county residents who feel as if Falls Church’s municipal water utility has imposed excessive water rates and made them victims of taxation without representation.

“That inequity is something that is just unfair,” Board of Supervisors Chairman Sharon S. Bulova (D) said.

The board’s action also sets up the possibility that the county could pass an ordinance later this year that would set rates for all county residents and create exclusive zones of county-controlled water service for future development.

Such a step could have important implications for developers in and around Tysons Corner and anywhere else residents receive water from municipal utilities, as near the City of Fairfax or the Town of Vienna.

The immediate dispute arises from the city of Falls Church’s treatment of customers who live in Fairfax County but receive water service from the City of Falls Church. The city’s water utility serves about 34,000 accounts, and 90 percent of those are in Fairfax County.

That amounts to about 100,000 county residents who receive Falls Church water. Most water service elsewhere is supplied by Fairfax Water Authority , which is a separate legal entity, with the ability to issue bonds and own land, whose members are appointed by the Board of Supervisors.

In years past, Falls Church billed customers in excess of the cost of providing service and transferred the surplus revenues to the city’s general fund. From 1981 to 2008, the City of Falls Church directed more than $58 million in surplus water revenues to its coffers.

That came to a halt in January 2010, when Fairfax County Circuit Court Judge R. Terrence Ney ruled that the Falls Church utility’s practice was, in effect, imposing an unconstitutional tax on county citizens. His order also forbid Falls Church from collecting future profits on its water.

Last year, the City of Falls Church announced that it might need to raise water rates and hired a consultant to conduct a rate study. In recent months, the City Council then moved to boost its water rates, with the first effective Oct. 1.

The Consumer Protection Commission, with help from the county’s Cable and Consumer Services Department, said it found questionable justification for a series of rate increases that would rise 30 percent more over a five years, including an 8 percent increase adopted by the City Council earlier this month.

For example, the commission said, Falls Church contracted with a consultant that calculated rates according to formulas for a for-profit utility and a public nonprofit — and then recommended rate increases that were identical from fiscal 2012 to fiscal 2016.

The city also said the new rates are necessary to create reserve funds, but failed to explain why its previous rates could not supply some of those reserves, the commission report said.

The commission also found that Falls Church continues to undercharge for new hookups to win new customers and expand its territory but then overcharges existing customers to pay for the increased costs associated with handling new business. In other words, the commission said, Falls Church’s rate schedule forces existing customers to subsidize the system expansion. Falls Church has not changed its hookup fees since 1996, according to the report.

“They’ve essentially been luring people into the Falls Church system with low rates,” Bulova said. “Then they get you on the other end.”

The commission also noted that Falls Church’s lack of cooperation hindered its ability to understand fully how the city calculated its new rates. But the bottom line, county officials said, is that under the new rate, effective Oct. 1, Falls Church’s water utility would charge a typical Fairfax County resident $62.13 per quarter — or about 60 percent more — than the $38.76 charged by Fairfax Water for the same amount of water. And the disparity will increase over time.

The commission recommended that the board use the authority, recently conferred by the Virginia General Assembly, to fix rates for all customers in Fairfax County so that no resident would pay more than the rate set by Fairfax Water — unless Falls Church, or another municipal provider within the county, could demonstrate why the higher rate was necessary.

Supervisor Michael Frey (R-Sully) said that while setting a fair rate should be the target, he also warned against taking action that would cause some county residents’ utility costs to rise in order to lower the rates on others.

“I don’t think it’s going to be very popular to sell some of these steps by raising their rates to bring others’ down,” Frey said.

The commission also recommended enacting zones of exclusive county-controlled water service for future development.

The board voted unanimously to ask County Executive Anthony H. Griffin to study the commission’s report and return Oct. 18 with a plan for possible action on a topic that has bedeviled Northern Virginia for some time.

“Someday somebody should write the book – the water wars,” Bulova said.

City of Falls Church could not be immediately reached for comment.

By  |  05:02 PM ET, 09/27/2011

 
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