Local Government

Water Rate Presentation at Library Wed, December 5, 7pm

The Water Rate Study Ad Hoc Committee is meeting Wednesday December 5 at 7 pm at the Library Conference Center. Consultants Mark Hildebrand and Benjamin Stewart will present the committee’s recommendations for public comment. The six-member committee has met six times since August to vet water rate increase scenarios proposed by the Stantec Consultants for recommendation to the City Council.

The last time the City Council approved water rate changes was in July 2014 when David Schickling was the Water System Director. It included five annual increases. The last increase went into effect on July 1, 2018. According to the table of residential rate changes since 1979 on the City website, the impact to rate payers over the last five years in total has been that the cost per one thousand gallons of water has increased by $0.42 and the water meter charge by about $10.

The three council members who had approved the 2014 increases intended for the city to be able to step up water mainline replacement from one mile to six miles per year. Over the last five years of increases, however, the City has not replaced more than two miles in any single year for several reasons.

While the price of water charged to users was going up, water users were using less water, resulting in less revenue. “Pass-through” water rate increases from OCWD and MWD and other inflationary costs, such as electricity, salaries and benefits also absorbed a portion of the gains.

In April 2015 the state implemented severe water restrictions that further reduced revenues. Without knowing when the restriction would end or whether they might be tightened, revenue was held in water fund reserves, according to the former Water System Director Hye Jin Lee. Though water mainlines were not replaced as expected, those reserves are still available and included in the proposed budget scenario to kick-start some of the crucial infrastructure needs discussed in the Early November issue of the Observer such as wells and pump upgrades to maximize the amount of less expensive groundwater that Fullerton can pump.

An additional factor affecting the city’s ability to execute water projects has been the instability of staffing. Over the last five years the city has had two city managers and one interim. But more importantly, the city has also had two different Water Directors and two interim directors. The current interim director, Bob McVicker, is consulting part-time until a new director can be hired. Recently key engineering staff, including Don Hoppe, have also left the city making it difficult to plan and coordinate projects.

The 2018 Water Ad Hoc Committee has been working with the consultants and staff to identify a feasible plan to sufficiently fund infrastructure and maintenance needs while learning from flawed assumptions in the last plan. Moreover, the proposed revisions to the fixed water meter charges and tiered water rate adjustments with automatic “pass-through” OCWD and MWD water rate increases will better comply with Proposition 218 requirements that charges not exceed the cost of providing service.

Water meter charges do not change when water consumption changes. Therefore, to stabilize revenue, a greater portion of a rate payer’s bill is proposed to be shifted from water usage rates to the fixed water meter charge with the bulk of the fixed meter charge increases proposed for the larger meter sizes, more in line with industry standards.

Low water users will see an offset to the increased meter charge with the proposed reduction to the lowest tier water rate, priced according to the less expensive water pumped by the City. Water users who reach the second tier would be charged at a rate commensurate with the higher MWD water purchase rate. Those who reach the third-tier water usage rate would be charged that portion of their usage based on the cost of water conservation improvements.

The Ad Hoc is also recommending a set of water rate increases for each July beginning with thirteen percent in 2019 and again in 2020, then ten percent in 2021 and 2022, and ending with four percent in 2023. By the fifth year, the increases are projected to fund nine miles of water mainlines per year as well as the first five years of the critical projects identified by the former Water System Manager or the projects identified by the updated Water Master Plan that is yet to be completed. The rate increases will also cover a thirty-year payback of $5 million in bond sales to complete two new deeper water production wells.

As this process moves forward the City Council will need to schedule a public hearing by late May to facilitate proposed increase by July 2019. There will be public notices mailed to each rate payer as required by Prop 218. In the meantime, the committee needs input to know whether their conclusions thus far are in line with the community’s vision before the committee’s recommendations go to the City Council.




Categories: Local Government