Water board passes rate increase 4-1

Water board passes rate increase 4-1A larger-than-usual crowd gathers to hear new proposed water rates, approved by the IWV Water District during Monday’s meeting — Photo by Laura Austin

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By BRIAN COSNER

News Review Staff Writer

In a 4-1 vote, the board of the Indian Wells Valley Water District approved its rate increase Monday, following a public hearing. Despite concerns from the public about the equitability of the rate hikes, the first of five proposed changes will occur in January.

The public hearing was the first item on the agenda after the swearing-in of new directors Stan Rajtora and David Saint-Amand, who replaced outgoing directors Peter Brown and Chuck Griffin.

While the increase is expected to raise revenues by 3 percent (roughly 16 percent by 2022), rates are not increasing uniformly across the rate spectrum. The board will vote on each increase as it comes and can opt to defer any increases if the district is meeting its revenue needs.

The district will maintain its four-tiered system but is increasing Tier 1 use from 700 cubic feet (5,236 gallons) per month to 900 CF (6,732 gallons).

Tier-1 users can expect a 32.1-percent increase to their rates, 40.9 percent for Tier 2, .4 percent for Tier 3 and 5.8 percent for Tier 4. A decrease in the monthly fixed charge ($41.41 down to $38.08 for most residential users) may result in an overall lower payment for many customers. Proposed fixed costs will result in roughly 60 percent of rate revenues, compared to the current 66 percent.

But the rate changes may have a larger impact on other customers, mainly those connected to private fire service. According to the rate study, some $40,000 in expected annual revenue will be borne by a few dozen customers with large private fire connections.

Other concerns pertained to water haulers who will continue paying flat fees to draw from un-metered wells.

Before the public comment portion, the board and attendees heard a rate study presentation from Mark Hildebrand of Hildebrand Consulting, the private consulting firm hired by the water fistrict to perform a rate study.

Hildebrand said the goal of the study was to establish different classes of rates that would meet the district’s revenue requirements and would be justifiable based on the cost to deliver water. One reason for the increases is the district’s planned $14 million in capital improvements over the next 10 years. Also necessary is maintaining ample reserves.

“I do want to point out that 3-percent rate increases are extremely moderate compared to the other rate increases that we’re doing across California right now,” said Hildebrand. “The rule of thumb is double-digit rate increases for a lot of utilities. This district has been keeping an eye on its reserves, keeping up with its finances and making investments with its infrastructure. I commend the district for that.”

Hildebrand said that Tier-1 rates are based on the average indoor needs of single-family homes, based on 70 gallons per person per day. The number is based on the state’s anticipated mandate of reducing per capita use to 55 gallons per day, with the district adding an extra 15 gallons per person with consideration for evaporative coolers.

Tier-2 rates take into consideration the average outdoor water needs. The rates will cover peak-day capacity costs. Tier-3 rates cover peak-hour capacity costs while Tier-4 rates cover conservation programs costs.

“It is very expensive to meet peak demands,” said Hildebrand, “and we adjusted the tiers to reflect those costs.”

First to comment from the public was Sam Merk, who hauls water from one of the district’s tanks.

“We were told that we would be hooked up to water some day,” said Merk. “That was in 1981, and I’m still hauling water.”

Merk said she averages only 1,000 gallons per month for the entire year, but is charged the same flat rate as other haulers for bulk water.

“We live in an area called a disadvantaged community,” said Merk. “A lot of us are senior citizens. To raise our water rates is truly unfair and not equitable … When you say we’re going to be metered, you’ve been saying that for years. I don’t know when you’re actually going to do it if it ever occurs.”

“I would consider letting this go for a month and letting the two new board members to get familiar with the package,” said Griffin during public comment. “You’ll see that $40,000 increase in private fire to about 20 customers – the school district, the college, the hospital and some of the larger restaurants. I can’t see how that would be justifiable.

“And how can you justify somebody in Tier 4 paying $4.70, yet we sell water to a contractor who can hook up anywhere in town for cheaper? I hope you guys will review this.”

“I know you’ve been working hard on this document for a quite a number of months and I confess I haven’t come to some recent board meetings,” said Judie Decker during public comment.

“But for a member of the public, it’s like wading through the mud. You spent a lot of time and a lot of money on [Hildebrand] and his firm, but for a member of the public to go and look at it – you need to explain some of these things in your document.”

She added she was “taken aback” at seeing the state’s recommendation of daily water use when most residents use swamp coolers, which can use more than 100 gallons of water per day. She said that customers on the “lower end of the economic scale” would not be eager to purchase air-conditioning units if they’re worried about the price of water.

“You have two new board members – you need to give them the opportunity to look at it,” she said.

Member of the public Mike Neel criticized the board for meeting only the minimum requirements of a Proposition 218 hearing, which included sending out notices of the hearing. The notices included the option for customers to protest the rate changes, but didn’t include any ballot or mention that more than 50 percent of customers must protest in order to halt the rate increase.

“People need to be properly educated and noticed. It’s kind of a squirrelly vote,” said Neel. “I don’t think you should proceed with this hearing.”

According to the District CFO Tyrell Staheli, the district received only nine protests.

Laura Hickle also pointed out that the presentation reflected only $10.3 million in capital projects compared to the expected $14 million.

“Is it just that the slide wasn’t updated? Are they new projects?” she asked.

Hildebrand responded that the chart was completed a few months prior and “you just have to put the pencils down at some point.

“You can’t go back every time a number changes,” he said. “And we concluded it didn’t make a major impact on what we forecasted.”

Director Saint-Amand asked how long staff members had been working on the rate study. General Manager Don Zdeba said rate study discussions began some 18 months ago, and the district has been working with Hildebrand for the past year.

“It doesn’t sound like it was a rushed job,” said Saint-Amand.

Rajtora had several concerns, primarily with the high fixed costs. He cited a 2017 study that said fixed costs should cover somewhere between 40 and 50 percent of rate revenues.

Hildebrand said those guidelines may pertain to private utilities but “the dynamics of private utility providers are a whole different ball game.”

He continued that utilities are “highly affected” by droughts and other changes, and if your fixed costs are too low, you can “set yourself up for financial instability.”

But Rajtora said the district is in a much better place than it was the last time it took a hit because of drastic conservation

“In 2012, a lot of us remember, we raised our fixed fees from $26 to $39,” he said. “We needed to raise the rates; there was a definite reason. We got into a situation that forced us to raise our fixed costs. In any event, we’ve got a reserve of $8-9 million. Back in 2012 we had a reserve of less that $1 million. We’re in a totally different situation now.

“My feeling is we really need to look hard at lowering our fixed fee. I think we lose sight of the fact that we have a lot of people with low incomes in our community – fixed incomes where every dollar, every month makes a difference.”

He added that the district probably didn’t need to be spending $700,000 on conservation efforts when conservation has been leveled off for as long as it has.

“We’ve gotten ourselves into a culture where we raise the fee when we come across any type of issue. I have not seen a real emphasis on cutting existing costs or controlling cost increases.”

But other directors argued that the fixed rates are what have kept the district in good financial standing the last few years.

“As we conserve water, revenue goes down. We have to have the fixed part of our rates to count on to run the organization,” said Board President Don Cortichiato. He also reminded the public that the district doesn’t have to implement proposed increases if it doesn’t need the revenue.

“Our AA- credit rating is stellar,” said Director Ron Kicinski. “I’m proud of the district.”

Saint-Amand said the district had looked at the study long enough, and further evaluation could lead to “analysis paralysis.”

“At some point you have to make a decision and move forward,” he said. “I don’t see how a month’s delay would really benefit anybody.”

Board Vice President Chuck Cordell was in favor of most aspects of the increase, but had trouble with the disparity among the different tiers.

Only Rajtora voted against the increase. The other four approved it with the understanding that the study can be looked at down the road and future increases can be deferred.

“You can always re-evaluate your rate study. The board certainly has that authority,” confirmed Legal Counsel Jim Worth.

Story First Published: 2018-12-14