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VOL. 35 | NO. 30 | Friday, July 29, 2011

Why is our water so expensive?

First, it’s really not. Second, remember that deal to get the Titans?

By Bill Lewis

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Is it worth it, you ask yourself as you look up from this month’s water bill to survey your browning, heat-parched lawn or shriveled tomato plants.

And why is Nashville’s water SO expensive. Your cousin in Chattanooga swears his bill is never more than $20. Why are you paying more than $50?

First, despite popular opinion, Nashville’s water costs about the same as other large cities in Tennessee and around the South when you combine water and sewer rates.

And it would be even cheaper if not for the Tennessee Titans.

That’s right, the Tennessee Titans.

Every time Nashville homeowners water the lawn, wash the dishes or take a shower, they are subsidizing LP Field, where the Titans play.

That subsidy, which averages a less than $2 per month for each home and business in the city, is adding up. Since Nashville built LP field for the Tennessee Titans in the late 1990s, customers of the Metro Water Services Department have paid $64 million in extra water and sewer bills, one Metro Councilman says.

By the time the final subsidy payment is made, customers of the water department will have paid $120 million. The city is using the money to help pay off the stadium’s construction debt.

“That’s how much people’s water rates went up,” says Metro Councilman Eric Crafton.

Nashville’s monthly water and sewer rates are similar to those in some other Southeastern cities, but Crafton says they could be millions of dollars lower without the stadium subsidy.

Voters approved using the water and sewer department’s money to pay for the stadium, but anyone who moved to Nashville after the May 1996 referendum may not be aware of the extra cost. It does not appear as a line item on monthly water and sewer statements. The first $4 million payment was made that year. The last payment will be in 2026.

“It will go until the bonds are retired,” Metro Finance Director Rich Riebeling says.

When the Houston Oilers expressed interest in moving to Nashville in 1995, city officials scrambled to build a stadium. The water and sewer department had a surplus at the time, and that money caught the eye of officials in Mayor Phil Bredesen’s administration.

The department makes a $4 million in-lieu-of-tax payment each year to cover the cost of services provided by the city. The administration proposed earmarking that money for the stadium for 30 years.

The water and sewer department is part of Metro government, but it also is a public utility that is expected to pay for the services in receives from the city. Since the department pays no taxes, it makes the in-lieu-of-tax payment.

“If we call 911, they come. We receive a number of benefits from the city, but because we don’t pay taxes, we make an in-lieu-of-tax” payment,” says John Kennedy, the department’s deputy director.

Metro Water pays the money to the city’s general fund, which is the part of the budget that covers the city’s operating expenses. After that, Metro Water Services has no control over how the money is used. The Bredesen administration and the Metro Council, not Metro Water Services, came up with the idea of using the money to pay for the stadium.

“It’s not like Metro Water Services decided to write Bud Adams a check,” Kennedy says, referring to the owner of the Titans. “Our water rate pays for our cost of doing business. Our sewer rate covers our cost of doing business.”

Crafton and other critics forced the administration to hold a referendum, which pitted opponents of using public money to build the stadium against a well-financed pro-stadium organization that called itself “NFL Yes!”

Nearly 60 percent of voters who lived in the city 16 years ago gave their approval.

Councilman-at-Large Tim Garrett, who along with Crafton was a member of the Council at the time, remembers the vote.

“In order to come up with the money to pay for the bonds, we had to find money from a designated revenue source,” he says.

There’s another reason Nashville’s water and sewer rates might seem higher than in some other cities, Garrett says. The department receives no tax revenue from the city.

“Nashville is one of four or five cities that doesn’t supplement its water and sewer rate with taxes or other revenues,” says Garrett, who is running for re-election.

Except for LP Field, water and sewer customers aren’t subsidizing anything not related to the department, he adds.

“Every dime that goes into water and sewer (rates) goes to water and sewer, except that $4 million,” he says.

Metro Water Services has 177,500 business and residential customers. Spread over those customers, the department’s subsidy of LP Field adds about $1.87 to each monthly bill, which adds up to approximately $22.53 per year.

Crafton, who is running for an at-large seat on the Council, says the actual cost is higher. If Metro Water Services and the city invested $4 million each year for 30 years instead of subsidizing the football stadium, they would earn millions of dollars in interest payments.

“Really, it’s $300 million,” not $120 million, he says. “That’s the opportunity cost of the interest you didn’t get.”

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