Water Rates Likely to Rise in 2011


— Valley Road Runner, November 17, 2010

By David Ross

Water users who cut back this year and last will be rewarded by higher rates in 2011.

The Valley Center Municipal Water District (VCMWD) board at press time was expected to follow the staff’s recommendation to raise domestic (residential) rates by 12.2%, SAWR (special ag water rate) by 16.4%, M&I and IAWC (interim ag water program) by 17.7%, effective Jan. 1, 2011.

The board was due to hold a meeting on Tuesday afternoon to vote on an ordinance adopting the new rates as of the first of the year.

The board will be passing on cost increases from both the San Diego County Water Authority (SDCWA) and Metropolitan Water District (MWD).

Although wholesale water rates have increased 123% since 1995, its share of those rates has increased 29.5%.

Included in the water charges the district is required to pay its water suppliers are fixed charges for capacity, customer service and emergency storage. The district calculates the per-acre foot equivalent of these charges by dividing the total charges by projected water sales.

For the fiscal year that ended in June, the district had budgeted water sales of 33,132 AF. Actual sales were 27,837 AF. Because of that the district did not recover $247,000 of those fixed charges.

It projects even lower water sales this next year. The District Rate Stabilization Reserve that directors drew on for several years to keep rate increases lower was depleted in 2006.

The budget has a general water fund deficit of $2.29 million, meaning that capital reserves are being drawn down. According to the staff report, those reserves could be depleted by 2012.

Asked why the district needs to raise its local component Gen. Mgr. Gary Arant noted that the district has not raised its local component since 2007.

“For every fiscal year thereafter, we have cut employees, cut expenses, increased operational efficiencies, reduced reserves, and cut our major maintenance and CIP efforts. As a staff we have ran out of creative ways to balance the budget and still run an effective, reliable operation.  Compounding all of this is the fact that our water sales are down 45 percent since 2007. While all water agencies have seen reductions in sales, only the ag agencies like Valley Center have seen such dramatic drop in sales and revenues,” said Arant.

Asked what the increased revenues will be used for, Arant answered: “With our existing rate structure and water sales levels, our operation revenues, those from water sales and meter service charges fall short of meeting our operating expenses. In fact, for the current fiscal year, we used all of our 1.9 million dollars in General Property Tax and about 500,000 dollars in reserves to meet our operating costs which were down by about five percent from last fiscal year.  This rate increase along with continuing cost controls, will start us in the direction of having our operating revenues meet our operating costs, thus freeing up the General Property Tax for sorely needed capital replacements.”

What about future rate increases? “This first rate increase starts us on our way to having water operations revenues meet our operating expenses,” said Arant. “However, it will take two or three years of upward adjustments to our local rate component to fully cover all operating expenses and free up one hundred percent of our property tax for capital replacements and improvements. Once we arrive at that point financially, we will need to make the rate pass-throughs and keep adjusting our local component upward to maintain the ability to use our tax revenues for CIP.”

The board also discussed Pardee Homes’s renewed request for annexation of the Meadowood Project property at the northeast corner of I-15 and 76.

Pardee first made the request in 2008, at which time the board followed the staff’s recommendation to set the request aside until the district developed policies and procedures with respect to water demand offsets for annexing territories.

Pardee has renewed its request for annexation.





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