Base rate no longer will include any water consumption
Water charges, future revenue and financial policies dominated the Idyllwild Water District’s April 18 meeting.
The board scheduled a public hearing for June 20 to consider adopting proposed new water and sewer rates, as well as a district budget for fiscal year 2018-19, which begins July 1.
For much of the meeting, the board listened to its rate consultant’s discussion of alternative water-rate schemes. Gregg Henry of NBS in Temecula made an initial presentation a week earlier and in response to directors’ comments, returned with several new options for water-rate structures. He did not modify the recommendations for the sewer rates.
After many questions, much discussion and two votes, the board ultimately recommended a policy that increases the proportion of revenues collected through a fixed monthly charge from 50 percent next fiscal year to 60 percent in fiscal year 2022-23.
The greater the proportion of revenue from a fixed charge rather than usage rates, the less vulnerable revenues would be from significant usage reductions, such as water conservation during an extended drought period.
General Manager Jack Hoagland advised the board that each of the alternatives would generate about the same amount of revenue.
One of the reasons for raising the rates is to increase the capital-improvement program and support the reserves. Henry noted that IWD should increase its capital investments.
“The district can’t take much risk [of unexpected emergencies]. With a small customer base, you have no alternative sources of revenue,” he argued. “So, you have to maintain infrastructure and stable revenue compared to other districts.”
After reviewing the budget and rates, the NBS analysis indicated that residential customers were not fully covering their costs for water supply. The recommended rate structure also shifts more of the new revenue collection to residential from commercial customers.
This policy shift starts with eliminating the provided 300 cubic feet (about 2,250 gallons) of water consumption in the residential monthly base rate. When the new rates take effect, residential customers will pay for each gallon of water consumed just as commercial customers are already doing.
In the first year, NBS estimates the average bill for a residence with a 5/8-inch meter who use 300 or fewer cubic feet will increase about $4 monthly or 14 percent.
For large-volume users, for example 1,050 cubic feet (more than 7,800 gallons), the bill for the same-size meter would increase 27 percent.
Into the future, the monthly base rate for this size meter would increase from $28.13 in the first year (2018-19) to $40.59 in the fifth year, representing almost a 45-percent growth.
“Residential and commercial customers will pay the same fixed amount, based on the meter’s size,” Henry said. “But it takes more from part-time residents.”
Overall, IWD estimates that revenue from residential water sales might increase about 40 percent with the new rates. This is largely the result of low-volume users now paying for the first 300 cubic feet of consumption. Hoagland stressed that most users (who consume 300 cubic feet or less) will only see the 14-percent increase.
Sewer rates for residential customers will increase to $40 per month (about 4.6 percent) next fiscal year from the current rate of $38.25 per one equivalent dwelling unit. The standard measure of sewer service is the EDU. Industry professionals define the EDU as the measure of volume or expected flow of sewage equivalent with what a single-family residence would normally generate.
One EDU is assigned to a normal single-family residence. Larger residences, with more bathrooms, could be assigned an EDU greater than one.
The annual increase from 2019-20 through 2022-23 is 2.5 percent, resulting in a $44.15 charge for one EDU.
When the board considered which alternative to adopt for the June public hearing, Director Peter Szabadi recommended the option that collected half the revenue from the base rate and half from usage charges, but increasing to 60 percent from the base in five years. However, none of his colleagues agreed.
Director David Hunt then recommended the option that collected 55 percent of the revenue in the first year from the base charge and increasing this portion to 65 percent in the fifth year.
The board adopted this rate alternative 3-2. Hunt and Szabadi, with President Dr. Charles Schelly, voted yes. Directors Catherine Dearing and Steve Kunkle opposed it.
However, later in the meeting after further discussion and Henry’s quick analysis of the average bills, the board reversed itself and approved the original option — half of revenue from base in first year, increasing 2.5-percent annually until 60 percent of water revenue derived from the base and usage provided the balance.
Regarding the difference between the alternatives, Henry said, “For people in the middle, there is not much difference. It’s along the edge — for those who use a little or use a lot.”
Based on the proposed rates, the fiscal year 2018-19 water budget would be about $1.7 million, which would be about $290,000 greater than the water expenses. However, the $700,000 capital budget would result in needing slightly more than $400,000 from reserves next year.
The capital budget is mostly for the cost of pipeline replacement along Village Center Drive. The sewer capital budget will be about $175,000.
While water salaries are anticipated to grow $60,000 or 12 percent, that includes the full-year salary for Hoagland. Other activities such as legal expenses are projected to decline, resulting in a net increase of only $30,000.
JP Crumrine can be reached at firstname.lastname@example.org.