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Mayor’s Anti-Poverty Commission Report released today
The Mayor’s 144-page Anti-Poverty Commission Report was released today (PDF). There is a lot to take in…
Poverty Rate by Census Tract and Council District, City of Richmond 2006-10.
The stark reality is that, conservatively estimated, over 25% of the city‘s residents now live in poverty, as defined by the federal government, compared to 21% in 1990 and 18% in 1969. For children, the picture is even more disturbing: nearly 39% of the city‘s children now live in poverty, compared to 24% in 1969.
[…]
This Commission makes five Top Tier recommendations for high-impact policy actions which, taken together, have the potential to make a significant dent in poverty in the City and improve the quality-of-life of all residents.
- Investing in workforce development targeted towards low-skilled and long-term unemployed and underemployed residents, while integrating workforce development with economic development strategies.
- Developing an effective educational pipeline that prepares Richmond Public Schools graduates for either college or the work force.
- Recruiting or developing one or more major employers capable of creating hundreds of jobs accessible by underemployed Richmond residents.
- Creating a regional rapid transit system, so as to make thousands more jobs accessible to metropolitan Richmond residents by effective public transportation and better link the regional economy together.
- Achieving the redevelopment of much of the city‘s public housing stock without involuntarily displacing residents, with the aim of weakening the concentration of poverty and improving the physical and social environment of public housing residents.
[…]
North of the James River, all census tracts with a poverty population of at least 35% are located east of the Boulevard; south of the James, all such tracts are located south and east of the Midlothian Turnpike. The Council districts with the most poor residents living in highly concentrated poverty areas are the 6th (Gateway; roughly 10,000 persons), the 8th (Southside; about 4,000 persons) and the 7th (East End/Church Hill: roughly 4,000 persons).
TAGGED: Dwight Jones
“Developing an effective educational pipeline that prepares Richmond Public Schools graduates for either college or the work force.”
Is this any different than what they’ve been trying to do? If so, I’d be curious to know what the plan had been.
No mention of water or utility rates in the final report from the Mayor’s Anti-Poverty Commission. Seeing as changing the water utility service charges could possibly save EVERY Richmond household $20 or so a month, and I did speak on the subject at one of their public hearings, I have to say, I am feeling a bit let down. I mean to me, reducing the $592 annual cost on a basic necessity to Richmond households is about as ‘Anti-Poverty’ as you can get..
http://www.oregonhill.net/2013/01/17/whats-that-number/
The city offers programs for the poor to help them pay for their water. Be honest, this whole water issue outcry is coming from cheapskate middle class folks who don’t want to pay their fair share. It’s not an issue for those below poverty line.
The thing the lower service charge folks don’t tell you is that the volumetric charge will go up more than a little bit. At the end of the day, the amount of revenue DPU needs to take in wont change because you have a lower service charge.
Nice nugget of info from the report:
The social services budget for the city (in excess of $60 million) is larger than the social services budgets of Chesterfield, Hanover, and Henrico combined! Must admit I was shocked to learn that.
Alex, I strongly disagree with your assessment. There are lots of people who tell me how much they appreciate the petition. Their aging parents are struggling with bills on fixed incomes.
The volumetric charge should go up- people should pay for what they use. But what Richmond has is a regressive system. The higher burden should not be on the lowest amount users, instead there should be higher charges on the bigger amount users. We need to switch from a regressive system to one that is progressive.
Keep in mind Richmond is also selling water to water to the surrounding counties who charge their citizens lower charges. In a sense Richmond regressive water system has subsidized suburban sprawl.
Alex, I don’t think that anyone objects to paying their fair share, but it is important to acknowledge that Richmond’s minimum monthly water/sewer service charge of $49.40 is much higher than other localities in the region, state, and nation. Henrico’s minimum monthly water/sewer service charge is about a third of Richmond, and Henrico buys water from Richmond. In the 21st century it is imperative that the locality’s water rate structure encourages conservation, but Richmond recovers its fixed costs from the service charge, which forces those using the least water to subsidize those using the highest volume of the resource.
@8 – if you assume that the water is the priciest part of the equation, what you are saying makes sense. I would argue that most of the cost here is in the fixed component. Those pipes and facilities cost a lot to maintain. Why shouldn’t all users pay their share of that. I think the city’s pricing scheme actually mirrors pretty closely their costs – high fixed costs for the infrastructure, low variable cost for water because we are on a river. Why should anyone have to pay to maintain the infrastructure that brings your water to you.
Alex,
Richmond is not the only city with an aging pipes and infrastructure, but we may have the HIGHEST minimum residential water rate in the country.
It was the Richmond public works folks that informed us that the city recoups the fixed costs of the water works from the minimum water/sewer bills.
Ideally, the city would have a rate structure like Norfolk, which charges a minimum water bill service charge of only $1 but with a higher charge for each CCF of water used. In Norfolk, the amount of your water/sewer bill is in direct proportion to the amount of water that you use. In Norfolk they recoup the fixed costs of the water works not from the minimum bill payments but from those using the most water.
This is why the City’s excuse needing high minimum bills to pay for antiquated water pipes is ridiculous: The City could receive the same amount of revenue by lowering the minimum bill but raising the cost per CCF used.
Scott,
You can’t cover fixed costs with variable charges – doing so is going to result in budget shortfalls as folks cut back on water usage. Behavior choices are not fixed. Witness the shortfall in gas taxes in the last few years. Now the state is forced to investigate other ways to raise that money or cut other services.
I get that conservation is a good goal but there are other ways to achieve it instead of setting up the city for massive shortfalls while they fine tune their usage predictions.
Also, today you have a lot of people paying the fees on second homes, vacants, etc. If you pull out the fixed component, these folks will pay nothing so bills for those of us who use won’t go down as much as you think. Some poor folks may end up paying a lot more. Restaurants will get crushed and that may cost jobs (as if the 11% food tax wasn’t already making Richmond an awful place to start a restaurant).
This really is only likely to help owners who don’t use their house much.
As I keep pointing out, water rate reform can be done in a revenue neutral manner- just charge the people and entities who are using more water more instead of burdening the citizens who use the less.
What we have now is grotesque- the HIGHEST water service charges in the country from a PUBLIC utility that also sells water to surrounding counties. The money made off these ridiculous charges are going into the general fund, which in turn is being turned into corporate welfare for things like Center Stage and the Redskins training camp.
It’s immoral and sick.
We now have the water volume figures for commercial and residential Richmond water customers for 2011. As it turns out the average commercial customer uses 10 X the water volume as the average residential customer. Richmond has kept the volume rates artificially low and kept the minimum service charge outrageously high — in effect, the residential customers are subsidizing the commercial customers through the high minimum service charge.
Here are some calculations that DO NOT include the wholesale sales, since each county has its own wholesale contract.
4,667,343 ccf residential water use in 2011; 51,825 residential customers; average annual water volume per residential customer is 90 ccf or 7.5 ccf/month.
The average residential customer using 90 ccf annually of water/sewer service will pay far more annually in water/sewer service charges ($592.80), than in charges for the actual 90 ccf of water/sewer volume ($381.07).
7,219,868 ccf commercial water use in 2011; 7683 commercial customers; average annual water volume per commercial customer is 939 ccf or 78.25 ccf/month.
[You can see from these figures that the commercial customers use roughly 10 times the volume of the residential customers on average. In essence the residential customers are subsidizing the commercial customers through the outrageous service charges, which keep the volume rates artificially low.]
At $1.63/ccf the total commercial and residential water volume of 11,887,211 generated $19,376,153 annually.
At $2.586/ccf the total commercial and residential wastewater volume of 11,887,211 generated $ $30,740,327 [assuming that the wastewater volume was the same as the water usage].
Total of $50,116,480 generated from the combined residential and commercial water and wastewater volume in 2011 [not counting the wholesale sales].
For the same period, $43,795,570 was generated from residential and commercial service charges. The service charges and water and wastewater charges for 2011 together generated a grand total of $93,912,050 [and this does not include the wholesale sales to the counties.]
I computed if the water volume rate were raised 90 cents, and the wastewater rate was raised 90 cents, then (if the overall water and sewer volume remained the same at 11,887,211 ccf) then the city could reduce the residential monthly water/sewer service charge to $15 and still take in the same revenue. [Here are my computations: $1.80 increase in water/sewer volume charge times 11,887,211 ccf would generate and additional $21,396,979 in revenue. The residential service charges are now generating $30,721,860 annually. Subtracting the increased volume revenue of $21,396,979 from the $30,721,860 now generated from the service charges would leave $9,324,881 that would need to be generated by the service charges. $9,324,881 divided by the 51,825 residential customers would equal $179.93 annual water/sewer service charge needed per customer, or $14.99 water/sewer service charge per month. I did not change the service charge for commercial service because they vary widely based on the size of the meter. This does not take into account additional revenue that would be generated if the volume rates were also increased on the wholesale sales to the counties.]
You’re assuming water usage would be unchanged even if costs go up that much? Isn’t this about conservation?
I do agree that the city has no business using water revenues to fund their pet projects. If your crusade were to get water revenues set aside just for water related expenses, I’d be on board.
I also agree that for us to have to pay more than the counties is BS. They should also be helping to amortize the fixed costs.
However there needs to be a lot more detailed analysis on the second order impacts before I’d be convinced that dropping the fixed portion isn’t going to bankrupt the city. What is the expected demand curve at various price points? What does this do to businesses in the city? How many would move as a result? How many lost jobs would that cause?
This is not an accounting problem. It’s an economics problem. It looks great on paper but is likely to cause a lot of unintended consequences in action.
If you charge more for water usage, then people would conserve more. Conservation should be a goal.
This would not bankrupt the CIty, but it might put less money in the General Fund.
In the end, this is a public utility. It is immoral for the City to make money off this basic necessity in this manner, while protecting big businesses from paying more. And again for emphasis, residents are paying the HIGHEST minimum residential water rate in the country.
But Alex you bring up another aspect to this that I also believe needs addressing. Also, keep in mind that the city paid $200,000 to hire a consultant to examine Richmond’s outrageous water/sewer rates (although reformers said that was not necessary). Despite requests, the consultants have not met with reform activists. In addition, there has been difficulty with getting access to the information given to the utility rate study consultant. The DPU office recently told a citizen that the information will not be put on the city’s web server unless the city receives $287.17 from the citizen.
The utility rates and service charges affect almost all residents and businesses in the city. It is sure to be an important issue during the budget review process (which looks to be extra rushed this year). It would help the Mayor and City Council if the public feels confident that all important information is being freely shared.
You’ll get no argument from me that the city wastes way too much money on useless consultants and studies. I’d also agree that utilities should not be a profit center. I’m in favor of them covering their costs though.
My problem with your case was that you are muddying the waters by dragging a bunch of other stuff in the discussion. By the end of it, one would think that dropping your water bill by $30 would make Richmond tap water start curing cancer.
City of Richmond is mismanaged. City of Richmond is cronyism at its finest. City of Richmond can’t budget worth a shit. None of that really has much to do with the water issue.
At the core of it, it sounds like you are trying to tell us that the water billing can be shifted to a more variable basis. You are saying it will be revenue neutral but that it will increase conservation of water.
1. How much will the increase in conservation be? (I.e., what will the usage be at each price point)?
2. Once you have that amount, what will the variable rate have to be in order to offset the decreased usage?
3. Now what does the average customer who uses water pay?
It also appears that some part of this includes shifting our costs to corporations. But again, I think you are oversimplifying the complexity.
1. How much more will the average restaurant in the city pay?
2. How many restaurants will fold as a result?
3. How much will that cost in lost jobs?
The current water policies are one of the few business friendly things the city does. I suspect this is unintentional but it works that way.
Wonder why the recommendation at the top mentions busing as a major need? It’s because businesses are fleeing the city because of high taxes and over-regulation. These aren’t captive entities.
I get that you are passionate about this issue and have put a lot of time and energy into this cause. However, I think you are still missing some critical pieces of the picture. To portray this fairly, it’s important to be honest about these.
Alex, of course there is more to it, but my point stands- the public water utility should reduce its residential service charges. It should be part of Richmond’s war on poverty.
The argument that the utility may somehow end up in a financial hole if it doesn’t recoup all of its costs from the service charge is ridiculous. Can you even imagine the outrage if Dominion made the same argument, that it had to recoup all of the fixed costs of the utility from the monthly service charge while assuming that no electricity may be sold? It is ironic that the business community seems to be embracing the extremely poor business model that Richmond’s water rates must be set with the assumption that no water may be sold next year! I doubt too many businesses would stay in business by making such obviously incorrect assumptions in their business budgets!
The cost of water is not the cause of poverty in the city. This is a great discussion, but focusing on utilities costs does come close to identifying the reasons for povery or helping those below the poverty line move up the economic food chain.
What about our absolutely AWFUL public highschools? The schools in the most poverty stricken regions are Armstrong and Wythe. Has anyone in the last few years graduated from these schools with the skills to succeed and move into the middle class? Our highschools have been so neglected – they are just about unattendable.
What about the lack of public transportation? Most people in extreme poverty do not have cars. It is really hard to get to work, get to the grocery store, go to Dr. appointments while depending on our bus system. Any one errand could take half a day to complete. That’s more time off work and it may be impossible to make up the pay.
What about reliable and affordable daycare? It is hard to keep a job if you cannot find daycare for your children.
What about affordable housing? Someone working for minimum wage (or close to it) has to spend the majority of their paycheck on rent. That doesn’t leave much left for anything else. It’s hard to rise above when you cannot get out of the hole financially.
“The argument that the utility may somehow end up in a financial hole if it doesn’t recoup all of its costs from the service charge is ridiculous.”
I wasn’t arguing that they should recoup all of their costs from the service charge. Only the fixed part that they would incur even if there is no usage. This ensures that they aren’t going to lose money from poor forecasting – something that is all too common with government.
In fact I’d argue we might see less of a push from the city to conserve water if we go the route you are proposing. Here’s why – if you shift it so that the variable revenue exceeds the variable costs, the city has every incentive not to encourage conservation.
For a simple example of this, imagine you are the head guy at DPU and you have fixed costs of $100, and each additional gallon you sell costs you 0.10 to produce. If you make exactly 0.10 per gallon from the customers, you have no concern whether you sell 1 gallon or 1 million.
Now if I tell you that you can’t charge a service fee but you can charge 0.11 per gallon, what would you do? Assuming you have common sense, you’d realize you could make the city a lot of money if you sold more. You’d want to do whatever you could to prevent conservation or anything that would hurt water usage as it would cut your department’s budget.
If you really want to encourage conservation the best way to do so would be to argue for high variable and fixed fees.
There is absolutely no economically sound way to design this in a way that it serves as both a poverty fighting measure and encourages conservation at the same time.
I think the best case is a scenario that matches costs to revenues and stops making this a profit center for the city or even penalizes the city for continuing to produce the same amount of water and not getting behind conservation efforts. If DPU cannot take profits and any additional production beyond current levels will have to come out of the city budget, you would see less water used.
As far as trying to use this as a progressive mechanism, it’s a horrible idea. There are plenty of better ways to go about achieving income equality and this is a very backwards way to achieve it. These things are best handled transparently and centrally instead of trying to get every possible tool in the shed involved. If we want more income equality, use the tax code.
@21 – BINGO! The water issue is a “drop in the bucket” compared to the fact that our schools are broken and the city keeps turning to the same folks to fix it. If we give people the skills they need to find and keep a job, the rest solves itself.
Giving them an extra $20 a month off their water bill isn’t fixing the problem. It’s just “water down the drain” if they have no line of sight to getting a better situation in life.
Public transportation helps but perhaps a better question might be why all the jobs are fleeing to the suburbs? It might be more sustainable to come up with plans to attract those jobs, doctors, stores back into the city rather than continuing to throw money after chasing them out to Powhatan and beyond.
Some extra thoughts:
Scott’s elaborate analysis in response no. 18 makes no sense to me. Even if the rate structure changes, the new water and sewer rates will be designed to produce the same level of revenue, ie DPU revenues are 50m now and they will be 50m if the service charge is lowered.
This essentially means the city will collect what is collecting now, but through a much higher volumetric charge instead of loading most of what it’s collecting in a service charge. The city could also shift a disproportionate amount of the burden of covering the water/sewer system to non-residential customers. That would certainly lower residential rates.
Water conversation isn’t a serious issue in our area. Per customer usage of water has been declining steadily over the last decade. Plus the systems need a minimum level of usage be effective (ask the folks in Detroit). The more important issues in my opinion are peak demand management (and public education on that issue), aging infrastructure, movement toward consolidating water systems, and maybe innovation in distribution and treatment.
@alex, isn’t DPU recovering most of their fixed cost through depreciation expense? The service charge on your bill has nothing to do with fixed or variable costs. It’s just a mechanism for collecting revenues. A higher service charge boosts revenue stability for DPU, which in turn lowers borrowing cost.
I think Alex brings up a good point. Why aren’t the medium to low wage jobs that don’t require much education (theses jobs are mentioned in the report–call center, retail, etc) setting up in the city?
@Alex. Yeah. But isn’t the underlying problem that Richmond’s split into separate jurisdictions? What’s needed is not a fix here and there but one community with one electorate, that is dissolve greater parts of Henrico, Chesterfield and incorporate them into Richmond. How else are you going to get unified policies to tackle these issues?
@26 – fair point but that’s true of pretty much every city. I don’t claim to have a great answer but some thoughts:
1. I don’t think combining with the counties to make this their problem is going to fix anything. That just pushes the opportunity out further as mobile families and employers flee. Richmond has to fix this.
2. Attracting employers is probably the first piece to solve. Lower tax rates and make permits and licenses easier to get. Cut the cronyism so existing businesses aren’t having to pay for new ones to come in. Don’t do it with sweetheart deals but rather with a low base tax rate.
3. Aggressively cracking down on blighted housing stock would also be good. If a house is vacant and has a bunch of broken windows and nobody is taking care of it, use bulldozers instead of boarding windows. This will make the city cleaner, safer and more attractive for folks to consider moving back.
4. Invest heavily in schools but only if paired with aggressive changes. Bringing more middle and upper class families back in the city helps get critical mass and parental support somewhat but these parents aren’t going to send their kids to RPS unless they have faith that things have changed. I don’t know all the answers for this but I do know that what we have now in RPS is broken and its not just a little fix. If we keep the same people in charge it won’t get better.
5. Decentralize the poverty. Break the projects up ASAP. These types of concentrated poverty areas are toxic culturally and make it even harder for folks to rise up. Even if someone there gets a job, their kids are seeing so much crap that they’ve absorbed all kinds of bad values. It’s going to take a few generations for this one to heal but the projects need to go soon.
I am watching the findings of the report related to employment and poverty in the City of Richmond and I am shocked to see that there is no mention of having a criminal background (violent or non-violent. misdemeanor or felonies)as a major factor contributing to unemployment. Furthermore VA seems to be one of the toughest states and there is no 7 year rule. Most applications ask have you EVER been convicted of a crime. In this instance I am not referring to repeat offenders but those that may have made a mistake in the past. Even after completing an Associate’s Degree graduating cum laude and being four classes away from completing my Bachelor’s Degree (3.5 G.P. A. I constantly hear, if I even get the interview, that we would hire you but you didn’t pass the background check. It is not the old story of lack of skills and education in this day and age. Maybe before completing these reports they should talk to a wide range of citizens to get the full picture.