Wholesale water rates in south Santa Clara County could go up by
almost 4 percent this year, and water district staff say the price
hike is needed to recover costs associated with the current
statewide drought.
Morgan Hill
Wholesale water rates in south Santa Clara County could go up by almost 4 percent this year, and water district staff say the price hike is needed to recover costs associated with the current statewide drought.
If the board of directors of the Santa Clara Valley Water District accepts staff’s recommendation, the average monthly water bill for a South County household could go up by 34 cents.
The median monthly bill for a single family household in Morgan Hill is about $22.18, according to deputy finance director Tina Reza.
Water district staff presented its recommendation to the board at a meeting Tuesday, but it won’t be until a future board meeting, probably in June, that new rates will be either rejected or adopted.
Plus, the staff recommended cutting $13.5 million in operating expenses from next year’s budget, and while the district should be able to deliver the same level of service it has been providing, the cuts could cause some existing programs to “suffer,” according to a district manager.
The district’s next fiscal year begins July 1. The budget for the current fiscal year is $411 million.
The board has raised water charges every year since 2002, when it charged $130 for an acre-foot of “Municipal and Industrial” (M &I) water.
Now the cost of an acre-foot is $275, and if the suggested new rate is approved the price would go up 3.6 percent to $285. An acre-foot of water is enough to supply two families of five for one year.
Board Chair Sig Sanchez said directors will look at different scenarios over the next few weeks, depicting projected revenue from different options of rate increases, starting with a “zero increase.”
He said the board is aware that ratepayers are having at least as difficult a time as the district is with the current economic situation, making a zero increase a “serious consideration.”
“It’s not going to be easy for the board to raise rates, even though we have less water to sell, because of the economy,” Sanchez said.
Morgan Hill Public Works Director Jim Ashcraft said the suggested increase is more modest than a projection presented to the SCV Water Commission, an advisory board of which he is a member, in February. At that meeting, staff presented six different scenarios projecting combinations of water use, budget cuts, and rate hikes needed to achieve the same service as usual. One of those scenarios projected an 11 percent increase in water rates.
“We’re happy to see the smaller increase, but that doesn’t necessarily mean we’re going to support the 3 percent raise,” said Ashcraft, noting the city will hold off on an official position until it sees exactly what will be cut from the district’s budget.
An ongoing concern for the city is the large disparity between municipal and industrial rates and the rate charged for agricultural water, which would rise from $16.50 to $17.50 per acre-foot under the staff recommendation.
“We’re subsidizing agricultural water,” Ashcraft said.
SCVWD Senior Project Manager Darin Taylor said the M & I rate increase, combined with a 4.8 percent increase in North County, would raise about $6 million in revenue, even if customers use 15 percent less water than normal as the board requested in March.
Those additional funds would pay for most of the cost of two new “big ticket” expenses next fiscal year: a $2-million publicity campaign to encourage residents to conserve water, and $4.4 million for water pumped in from an underground water bank in southern California.
Both expenses are directly related to the ongoing statewide drought that is in its third year. In March, the board voted to institute a mandatory conservation program, which includes the purchase of media advertisements and outreach to achieve a countywide 15 percent cut in water use over the next year.
District spokeswoman Susan Siravo said the need to reduce that much water use “requires a lot of education.”
And the district will take the unusual step of importing water from the Kern County aquifer, known as the “semitropic water bank,” because its usual sources of imported water have been recently subject to pumping restrictions.
The local district, which supplies drinking water to about 1.7 million customers, relies on imported water for about half its annual supply.
The staff report presented to the board Tuesday also suggests continuing water rate increases, at least until 2019 when the projected cost of an acre-foot in South County will be nearly double what it is now at $550.
Taylor said that projection is based on the continuing need for upkeep and maintenance of the district’s pipes, pumps and related water delivery and treatment facilities.
Still, at least next year some infrastructure repairs will have to be put off, scheduled studies will be postponed, and some existing programs will be leaner if the board approves $13.5 million in cuts.
“It’s going to result in some impacts,” Taylor said. “Some programs won’t be as effective anymore without those resources. We’ll be reallocating (resources) from low priority to high priority.”
He had few specific details on which programs would be cut, and those details will be presented to the board in coming weeks as budget discussions proceed.
Taylor added that based on staff recommendations, there is little else to cut. Hence the need to raise water rates.
Furthermore, ongoing debt ties up a significant portion of annual expenses. Taylor said staff predict the need to spend almost one billion dollars in capital projects and improvements over the next ten years, and nearly 70 percent of that will be funded by debt.
He said the largest piece of that price tag to be spent in South County will be seismic studies and improvements to reservoirs and dams. A “middle of the road” estimate for costs associated with all of the district’s dams in the next decade is about $300 million.
Other cuts suggested for next year’s budget include internal services and supplies such as consultants, travel, conferences, interns, temporary help, office supplies, and educational materials, Siravo added.
