MORGAN HILL
– The cost of using water from Morgan Hill’s faucets may go up
again and perchlorate is largely to blame.
MORGAN HILL – The cost of using water from Morgan Hill’s faucets may go up again and perchlorate is largely to blame.
The City Council will hear a report tonight that says the previously set 2 percent annual rate increase is not enough to satisfy costs through June 2007. Costs are estimated at $34.4 million, or $3.1 million more than expected.
Council approved in February an incremental rate increase of 2 percent for April 1 of this year and then annually on Jan. 1 of 2004, ’05, ’06 and ’07.
City Finance Director Jack Dilles was instructed to report to Council each September to explain the need for the upcoming Jan. 1 rate raise, and Council reserved the right to deny the increase.
Dilles reported to the Council in September that, indeed, the 2 percent rise was needed to meet obligations and received direction to perform a full analysis of water revenues and costs projected through 2007.
By June 2004 the city will have spent $1.4 million on drilling wells, building perchlorate treatment plants, removing nitrates and monitoring the perchlorate levels in its wells. By June 2007, the report said, the city expects to have spent “a whopping” $3.2 million on perchlorate-related costs.
“Dealing with perchlorate has taken a lot of our resources,” Dilles said Monday. “We have given it a high priority.”
The city hopes that Olin Corp. will accept responsibility for its Tennant/Railroad Avenue perchlorate source appearing in city wells and reimburse the costs, but that may take time.
Dilles said that, if Olin Corp. reimburses the city and if the reserves are considered adequate, ratepayers could get a credit on their bills. But he stressed the “if.”
Perchlorate is not the only culprit, Dilles said. Morgan Hill customers used less water, to the tune of $798,000 collected less from water bills, in contrast to an increasing use estimated by Hilton, Farnkopf & Hobson, the city’s consultant. The slow economy has also had an effect since companies with fewer employees, even fewer companies, translates into less water use and, hence, lower water revenues to the city.
The city also paid $214,000 more in electricity and personnel costs than expected.
According to the staff report, one way to achieve parity between income and outgoing funds is by increasing all water rates by an additional 6 percent on April 1, 2004 – or 8 percent in all – and by the same amount the following on Jan. 1, 2005, ’06 and ’07.
Council will also hear strategies to encourage and help residents conserve water, as was requested by resident Mark Grzan and by the council itself. Dilles’ report claims the existing water rate structure could be adjusted to encourage conservation, as opposed to the current method of charging, which does not.
And, finally, council may also ask city staff to propose a rate structure for commercial irrigation customers that would encourage conservation.
“If commercial irrigation usage rates for top tier users were increased more than 6 percent,” Dilles’ report said, “the 6 percent rate could be decreased somewhat for other users.”
The council is expected to set a water rate and conservation workshop, to be announced later.
