How much excess profits and excess costs does the Salt Lake City Water Monopoly cost residents of Salt Lake City and Salt Lake County?  Up to an extra $25 million per year indirectly and directly in excess water fees, Big-Government waste, and inefficiencies? The math is below.

How much additional money is the SLC water department proposing in 5 consecutive compounding rate increases?  An estimated $36.44 million over the next 5 years. (Math is on page 1.)

Monopolies are like lumbering elephants.  It is difficult to turn them into competitive racehorses.

Big-Government waste and inefficiency or economies of scale and operations.  It’s a management decision.

Salt Lake City Public Utilities water rates just too high?

Monopolies can exploit the Public by charge what the market will bear or provide an essential service with the highest efficiency and lowest cost.  It’s a management decision.

What could Salt Lake County residents do for themselves with up to an extra $25 million dollars per year?

A fair question:  If there is no excess profit in 24,788 County connections outside Salt Lake City corporate limits, then why would the Salt Lake City water department want to keep these estimated 72,381 “customers”?

“Revenue neutral” is code for spending all the revenue taken in by increasing programs and costs to meet or exceed revenue.  The issue is not being “revenue neutral,” but costs per gallon compared with other Utah cities not compared with states in the west like California, Nevada, and Arizona.  Because there is little or no competition for public water suppliers, the public is at the mercy of the water provider to be efficient and not gouge the public with hidden costs, personal agendas,  and programs of little or no benefit.

Imagine the temptation to a public water supplier which sends out 1 million bills per year.  Every extra $1.00 per bill generates an extra $1 million in annual revenue. If an extra $5 or $10 more per bill is squeezed in, then that’s an extra $5 million to $10 million of mad money for a city.

How much is the estimated monthly excess profit per Salt Lake County connection?  As much as $17.13 per month or $205.55 per year per connection?  How does one get a perspective on this issue?

The following is a study of real data to determine how much excess profit Salt Lake City may make on its $20 million of water sales outside Salt Lake City limits in Salt Lake County. An estimate indicates the amount may be as much as $5 million per year.

Salt Lake City charges higher rates to non-city customers and justifies this practice on the basis that these customer do not pay Metropolitan Water District (MWD) taxes which City customers pay.  We take no issue with this.  However, it appears that this reasoning has been used to charge non-city customers additional amounts in excess of the MWD water tax offset.

1-In response to a GRAMA request, the Salt Lake City Public Utility Department stated:  “Public Utilities Amount of Charges FY 2006/2007 City $29,894,939.83 County $19,948,096.39 Cubic Feet Consumed FY 2006/2007 City 2,438,245,300 County 1,135,235,200.” Note: 1 Cubic Foot of water is 7.48051948 Gallons.

2-According to the Salt Lake City Corporation Comprehensive Annual Financial Report for the year ended June 30, 2007 (SLC 2007 CAFR):

• Salt Lake City’s 2007 population was “178,858.”
• The taxable value of property in Salt Lake City was “$15,190,797,000,000.”
• The 2007 MWD water tax rate was: “.000350″ and the CUP water tax rate was “.000357″.
• The number of Salt Lake City water connections was “53,220″ with “24,788″ Salt Lake County water connections.
• Salt Lake City per capita water use by gallons per day per capita (gpcd): 1998(268 gallons)–1999(288 gallons)–2000(315 gallons)–2001(304 gallons)–2002(286 gallons)–2003(252 gallons)–2004(261 gallons)–2005(241 gallons)–2006(266 gallons)–2007(280 gallons)

3-According to data reported by Salt Lake City to the Utah Division of Water Rights, it served a 2006 Population of “319,186″ with a total annual use of “76,645″ acre-feet.

4-Multiplying the tax rates given above with the taxable value of property yields $5,316,500 as the estimated water tax levied by MWD of Salt Lake and Sandy against SLC property.  Similarly the estimated water tax levied by CUP against SLC property is $5,422,830.

5-Salt Lake City’s water department sells 68.23% of their water inside Salt Lake city and 31.77% outside city limits in Salt Lake County.

• Math: City water (2,438,245,300 cubic feet) + County water (1,135,235,200 cubic feet) = 3,573,480,500 cubic feet.
• 2,438,245,300 divided by 3,573,480,500 = 68.23% of the total water sold is City water.
• Thus, 31.77% of the total water sold is to County water customers.

6-Multiplying the 31.77% from  number five above with the $5,316,500 from  number four gives $1,689,052.05 as the estimated County portion of the MWD Salt Lake & Sandy tax.  This is Salt Lake County’s portion of the MWD water tax that Salt Lake City seeks to recoup through the higher water rates.

7-$0.20 per 1,000 gallons is the rate increase needed to generate $1,689,052.05 on County water sales.

• Math:  In fiscal year 2007, the County consumed 1,135,235,200 cubic feet.  This is equivalent to 8,492,283,677.33 gallons, or 8,492,283.68 thousand gallon units.
• In order to generate $1,689,052.05 on 8,492,283.68 thousand gallon units, $0.199, or 20 cents per thousand gallons is required
• $1,689,052.05 = y(8,492,283.68)  is the equation.  Solving for y gives $.199, or 20 cents per thousand gallons over 8,492,283.68 1000 gal units yields $1,689,052.05.

8-$1.64 is the average rate paid by City customers. $2.44 is the average rate paid by County customers.

• Math: Total amount of sales in $ / Total amount of water  City: $29,894,439.83 / 2,438,245,300 cubic feet of water = 0.0122606367 per cubic foot of water. 1,000 gallons is 133.68 cubic feet of water.  133.68 x $0.0122606367 = $1.64 per 1,000 gallons average City rate.  $19,948,096.39 / 1,135,235,200 cubic feet of water = $0.01757177401 per cubic foot of water. 133.68 x $0.01757177401 =$2.44 per 1,000 gallons average County rate.

9-$0.60 per 1,000 gallons is the average increased rate (the apparent excess profit rate) paid by Salt Lake County customers.

• Math: $2.44 per 1,000 gallons is the average County rate of which approximately $0.20 per 1,000 gallons is the County ratepayers pro rata portion of the 5.3 million dollar MWD Salt Lake & Sandy tax per Number 7.  Therefore, the County average rate is about $2.24 per 1,000 gallons.  County average rate $2.24 - City average rate $1.64 = $0.60 per 1,000 gallons average rate paid by County above and over City average rate.

10-$5,095,289.42 is the estimated and extrapolated excess profit made by Salt Lake City on its $20 million of County water sales outside Salt Lake City corporate limits paid by County customers.

• Math: County average rate increase of $0.60 over City average rate multiplied over County water used yields: County average rate increase $0.60 x County water consumed in 1,000 gallon units 8,492,149.03 = $5,095,289.42

11-$5,095,289.42 is the apparent water rate decrease Salt Lake County payers needed for equal treatment with Salt Lake City rate payers.

12-276 gallons per day per capita is the 10 year average of Salt Lake City per capita or approximately .309 acre-feet per capita per year. Math: 268 + 288 + 315 + 304 + 286 + 252 + 261 + 241 + 266 + 280 = 2,761 divided by 10 years = 276 gallons per day per capita average over 10 years.

13-163.44 gallons is the 10 year average of Salt Lake County per capita use in gallons per day.

• By taking the City and County 2007 population figure reported by SLC to the DWR of 321,211 subtracting the City 2007 SLC 2007 CAFR reported population of 178,858 yields a Salt Lake County service population of 142,353.
• By taking all the water consumed by Salt Lake County Customers of 8,492,149,027.98 gallons and dividing by the population of 142,353 yields the gallons per capita per year 59,655.57.
• Dividing 59,655.57 gallons per year per capita by 365 days in a year yields 163.44 gallons per day per capita (gpcd) by Salt Lake County customers outside Salt Lake City limits.

14-Something is wrong with the numbers.  It appears  SLCPUD’s 138,000 County service population figure is overstated by 65,619.

• Per capita per connection in Salt Lake City is 178,858 divided by 78,008 connections yields 2.29 per capita per connection
• Per capita per connection in outside Salt Lake City limits in Salt Lake County is 5.7 per capita per connection based on 138,000 (figured from SLCPUD) divided by 24,788 connections
• 2.48 is the average household  size in Salt Lake City (Wikipedia)
• 2.92 is the average household size in Cottonwood Heights (Wikipedia)
• 2.84 is the average household size in Holladay (Wikepedia)
• 2.86 is the average household size in Murray (Wikepedia)

It appears  SLCPUD’s 138,000 County service population is overstated by 65,619, because 24,788 connections over 2.92 average household size would yield an estimated water service population for only County customers of 72,381.

If a city is only providing water to a specific area within a city, wouldn’t the non-serviced area not be counted for population calculations.  In other words, two cities would not claim the same population which would create double counting which may lead to the overstatement of future water demands.

15-Overstating service populations distorts water demand.

• January 26,  2007, the SLC water department claimed a 2006 service population of 400,000.
• February 15, 2007, the SLC water department claimed a 2006 service population of 319,186.
• Using SLC 2007 CAFR, per capita per household data, the estimated service population was 251,239.
• 251,239 is not 319,186 nor 400,000.
• “As of 2007, Salt Lake City’s population is 178,858 people.  Since 2000, it has had a population growth of -1.59 percent.” Salt Lake City, Utah City Overview–Sperling’s.

Note: This is a working draft subject to error and/or change without notice.  Do not quote or use these numbers without verifying them for yourself.  If you have a correction, please contact us.