Four out of five SLVWD Board members were present at the June 18, 2015, board meeting to pass the budget for the fiscal year beginning July 1, 2016. The budget reported an expected total loss of $993,635 for the Water Fund. The Board cut an additional $32,500 from the expense side of the budget to relieve the expected shortfall.
According to slides shown during the budget discussion period, SLVWD had expected they would earn about $6.9 million in water revenues for fiscal year 2015, however $6.2 million was what they actually earned. This means that in addition to less cash brought forward, they also had more project debt to pay.
Citing drought conditions as the underlying reason for lower revenues, the Board acknowledged that the conservation methods used by their customers succeeded in terms of saving water. That success also meant that there was a substantially lower amount of water usage being billed. It is unknown how long the drought condition will last, but in addition to less water being available; it has caused an unusual operating problem, which is consistent for California water districts.
The Board explained that when the State of California mandated a cut back in water usage, many communities did so. These successful efforts to conserve water caused a shortfall in the amount of usage fees that water districts can bill to their customers. If water rates are not high enough to cover the cost of service and system maintenance, the ability to maintain service diminishes and water delivery systems decline from lack of maintenance. This is the condition that also exists for SLVWD.
The Association of California Water Agencies reports that the State Water Board wants to hear from water suppliers about their “financial, technical, political, and legal challenges associated with changing rates, surcharges, and other fees.” These are also the challenges that SLVWD is facing. The State Water Board is offering a workshop on water conservation pricing to be held July 8 at 9 a.m. in the Costal Hearing Room, CalEPA Headquarters Building, 1001 I Street, Sacramento.
With anticipated lower water usage causing less revenue, District Manager Brian Lee explained that the District “is collecting water revenue sufficient to cover operating costs.” He also said that they are “not collecting water revenue to replace its facilities when needed.” His slide presentation included an analysis of the current situation and several slides that asked the hard questions about which maintenance projects could be completed during this next year.
About the budget discussion and the tough questions, Director Randall Brown stated “it is better to be honest about the budget than to try and make it look good.” Discussing the costs brought forward for projects commenced in the previous years, President Margaret Bruce lamented that SLVWD is now “on the hook for those costs.” Amanda Robinson said “people need to know the story.”
The State Water Board is supporting the efforts of water suppliers in the “development of conservation pricing by water suppliers that have not yet developed conservation rate structures and pricing mechanisms.” The SLVWD Board recognizes that even though they will be able to operate this year, that it would be necessary to incorporate conservation rate structures in the near future. If they follow the advice of the State Water Board, they will develop a conservation pricing rate structure that will reconcile lower water usage in their ongoing rate structure. Brian Lee suggested that rate restructuring would be in the planning stages either prior to the new calendar year or the next fiscal year.
Currently, all California Water Districts must be in compliance with Proposition 218, which governs how the rate structure changes are made. The current writing of Proposition 218 provides the opportunity for qualified rate payers to protest an increase.
In anticipation of making the hard choices over which maintenance projects can be considered for the next year, SLVWD invites their customers to help prioritize the criteria upon which they will select the projects.
District Manager Brian Lee ended his slide presentation with some serious questions. He asked “Next, How do we replace our infrastructure?”
Community Television of Santa Cruz County will post a video tape of the June 18, 2015, SLVWD board meeting which can be viewed by the public at www.communitytv.org.
