Another water fee increase

– Wholesale water rates for South County will increase 7.5
percent beginning July 1, under the latest rate structure proposed
by the Santa Clara Valley Water District.
Gilroy – Wholesale water rates for South County will increase 7.5 percent beginning July 1, under the latest rate structure proposed by the Santa Clara Valley Water District.

The increase means a monthly bump of about 52 cents for the average South County residence. It is less than half of the 20 percent increase the district had predicted last year, but the proposal comes two months after district staff indicated they would recommend a flat rate for the next fiscal year.

District executive Walt Wadlow said Monday that a series of meetings with water retailers and city officials proved there was little support for that plan, which would have meant fewer services and delays in long-term capital investment projects, such as a $28 million recycled water project the district has undertaken with the South County Regional Wastewater Authority.

Gilroy City Administrator Jay Baksa said Monday that he and other SCRWA officials were concerned that the district’s rate structure wasn’t accounting for the reclaimed water project.

“From SCRWA’s perspective, we didn’t understand why you would have a partnership and not factor that into your rate structure,” Baksa said.

In May, SCRWA will begin work in southeast Gilroy on a reservoir, pump station and additional pipes, the first phase of a 10-year project that will dramatically boost its capacity to filter and supply reclaimed waste water.

Baksa said the rate increase will be passed on to residents who buy water from the city, but rates for residents are also based on the city’s costs to maintain and operate its delivery system.

The proposed increase comes as Morgan Hill residents are already facing scheduled increases over the next two years. The basic water rate will increase by 2 percent on January 1 in each of the next two years. A 10 percent surcharge for cleaning perchlorate from the city’s wells is tentatively scheduled to jump to 15 percent next year and 20 percent in 2007.

“This increase isn’t an automatic pass-through,” said Jack Dilles, Morgan Hill’s finance director. “Even though it’s a significant increase, it’s less than what we had predicted.”

If the district’s board of directors adopts the staff’s recommendation, water for municipal and industrial use will go up $15, to $215 an acre-foot. Last year, the district had predicted that South County water would cost $240 an acre-foot by July 1. North County rates will also go up $15, to $415 an acre-foot.

An acre-foot is equivalent to an area about the size of a football field filled to a depth of one foot. It is enough water to supply two families of five for about a year. Santa Clara County uses about 400,000 acre feet every year and South County uses roughly 15 percent of that. Water for agriculture use currently costs $20 an acre-foot.

Wadlow said the increase will generate and additional $500,000 in South County water utility revenue, but still will not cover the district’s expenses to provide water to South County.

The district is in the process of renegotiating its contract for Central Valley Project water it imports from the Sacramento-San Joaquin Delta, and Wadlow said the 14,000 acre feet of CVP water used in South County each year will cost the district an additional $700,000 annually when the new contract is finalized.

“There’s a growing gap between the amount of revenue and what it costs to run our operations, but as you look beyond one year, over the long run, it helps to pay for projects,” Wadlow said of the 10-year rate proposal that places South County water rates at $345 an acre-foot in 2014. “Over 10 years, we finally begin to generate enough money to pay for capital programs.”

In November, the district discovered it will lose $51 million in property tax revenue over the next two fiscal years. It has covered some of that shortfall by eliminating vacant positions from its budget and tapping reserves, but it must save $34 million in the 2005-2006 budget.

The district board of directors will make a final rate decision in June. Sig Sanchez, a board member who represents Gilroy, said he’ll “be taking a good, hard look at it. We’ll see what happens.”

The board will take public comment on rates on Tuesday, April 5, at district headquarters, 5700 Almaden Expressway, San Jose, at 9:40am, and Monday, April 11, at the Morgan Hill Community Center, 1700 Monterey Road, at 7pm.

On the rise

South County water rate per acre-foot since 2001 and projected through 2010. An acre-foot is equivalent to the water used by two families of five in one year.

• 2001 $130

• 2002 $140

• 2003 $160

• 2004 $200

• 2005 $215*

• 2006 $230*

• 2007 $245*

• 2008 $265*

• 2009 $285*

• 2010 $305*

*Projected. These rates have not been adopted.