Fern Valley Water adopts new budget: Plans review of revenue structure

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Fern Valley Water District directors approved a 2014-15 budget at last week’s meeting and while next year’s budget is less than this year, the district wants to consider options for increasing its future revenues.

Next fiscal year, which begins July 1, expenses are projected to be about $835,000, significantly less than the actual expenses for 2013-14, the difference being about $630,000. Revenues are about half water sales and half property taxes. Actual water sales revenue will be about $100,000 less than operational costs in 2014-15.

Operational costs are expected to increase about $95,000 to a total of $682,000; the most important difference between the two budgets is that the capital improvement program will be about $730,000 less next year principally because the pipeline installation along Fern Valley Road was completed this year. In 2014-15, the district plans to extend the 12-inch pipe to its tank farm near the top of Fern Valley Road.

The projected budget surplus of $275,000 will bring FVWD’s reserves to a total of nearly $1.55 million.

Increases in other expenses include $30,000 for engineering costs, $18,000 for materials and supplies for the treatment facility, about $15,000 for salaries and benefits (about 4 percent), and about $9,000 for electricity and permits.

While the budget was adopted unanimously, the board had a heated debate over how it would examine its current rate and revenue structure, possibly resulting in proposed increases later this year.

Initially, Director Ron Korman, chair of the Rate and Revenue Committee, recommended a 10-percent-base rate increase for each of the next five years. The last rate increase was approved in June 2009.

“The latest FVWD annual Financial Report indicates that water sales are insufficient to cover the district’s operating costs,” the committee, including Director Trischa Clark, reported to the board. “Water sales are down from the projections forecast in 2009, because of the influences of the present drought and lagging economy; FVWD customers are conserving water, thus reducing revenue to FVWD.”

The proposal would increase the bimonthly service charge 10 percent from $32.70 to $35.97. This would generate about another $23,100 annually, according to the committee. A 10-percent annual increase for each of the following four years would increase the annual revenue from $231,00 in 2013-14 to $372,000, a 60-percent increase, in 2018-19.

However, Director Jim Rees questioned why the base rate was the only mechanism for increasing revenue rather than including a higher charge for water usage. He expressed concern that customers who were not full-time residents or who had limited incomes were assuming a greater share of the operational costs compared to customers actually using the water.

The board defeated the committee’s proposal 3-2 with President Robert Krieger and directors Charles Wix and Rees opposing while the two committee members supported it.

The actual debate was whether to use a consultant, Albert A. Webb Associates, to analyze the needs and justification of more revenue and its sources. Webb had submitted a $20,000 proposal that Korman adamantly opposed.

He argued that the district had the capability to conduct the study and could not afford its cost. He also emphasized a $3,600 cost for a kick-off meeting, which Krieger qualified as including research and data collection. The consultant’s time at the meeting would be less than $500.

“Spending $20,000 would be fiscally irresponsible,” Korman stressed.

Krieger disagreed with his colleague. “If you raise water service and not quantity you’re putting the burden on certain constituents.” In addition, he said that the service charge might reasonably be related to the size of the meter and establishing a standby charge should be studied, too.

“It’s important for us to do the rate study. Rather than increasing the rate arbitrarily, a study by Webb or anyone else is more creditable to the public,” Krieger stated.

Eventually, the board voted 3-2, with the same split, to negotiate the water rate study with Webb.

 

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