For the first time in eight years, water rates will not rise.
The Santa Clara Valley Water District directors decided to keep
groundwater charges at their current level for the upcoming year
and adopted a budget that cuts more than $100 million in
expenses.
For the first time in eight years, water rates will not rise. The Santa Clara Valley Water District directors decided to keep groundwater charges at their current level for the upcoming year and adopted a budget that cuts more than $100 million in expenses. At the same time, they cautioned that another year of drought, a growing state budget deficit, and the deferral of some expensive local projects could lead to even higher costs for rate payers in the future.
The board of directors voted unanimously at a meeting Monday not to raise groundwater extraction charges for South County, North County and agricultural users. South County water retailers and well owners will continue to pay $275 per acre foot of water for the next year. Agricultural users will pay $16.50 per acre foot; and in the northern part of Santa Clara County, the charge will remain at $520 per acre foot. An acre foot is enough water to supply two families of five for one year.
Also approved Monday was a $305-million budget for fiscal year 2009-2010, which begins July 1. That’s down from a $411 million budget for the current year.
Board Chairman Sig Sanchez said after the meeting that the stumbling economy and its impact on consumers played a “major role” in the board’s desire to keep water charges at their current rate.
“We thought it would have been inappropriate to raise rates, even though we could have justified raising rates more than usual, based on the fact that we’re losing revenue,” Sanchez said, referring to an expected loss of $9.5 million from lower water sales this year.
That loss is due to the projection that people will use at least 15 percent less water this year, as the board requested in a call for mandatory conservation in response to the ongoing drought in March. Plus, the district will spend about $4.4 million more for imported water than it did last year because of pumping restrictions in the San Joaquin Delta, District Spokeswoman Susan Siravo said.
In fact, Director Richard Santos suggested that if the current statewide drought continues through next year, water charges could go up steeply in June 2010 because of even more lost revenue.
The fees levied on the county’s 4,000 well owners who extract water from the underground water basin are a key annual source of revenue for the water district. Monday’s vote marks the first time since 2001 that the board elected not to raise water rates for South County.
Revenue projected from the groundwater charges amounts to $61 million, as opposed to $71 million collected this year.
Most of the budget cuts – about $94 million worth – are in the district’s water utility fund, and are largely related to the postponement of certain projects and maintenance of infrastructure. Budget Services Officer Ron Mayorga said many of those projects can be deferred because they are only in the planning stages. But because they will eventually reach the more expensive construction phase, the cuts are not necessarily permanent, he said.
Director Rosemary Kamei, who represents the board’s South County electoral district, noted at Monday’s meeting that when these projects become necessary and can no longer be postponed, rate payers could be in for a rude awakening.
“There are some very large investments that are not included in this budget,” Kamei said. Those include long-term projects such as the potential improvement of Anderson Dam for seismic safety and the district’s contribution to studies at San Luis Reservoir.
Another potential cost that was not discussed at Monday’s meeting is an award of up to $5 million to Great Oaks Water Co., who won a tentative ruling against the water district from Santa Clara County Superior Court in April. In that case, the court ruled that the district’s water charges were illegal in 2005 because they were not secured by voter approval. Also, the judge found that the district violated its own governing guidelines, the SCVWD Act, by using revenue collected from the charges for unauthorized purposes.
District Senior Project Manager Darin Taylor said following the meeting that such an award, which the court could determine this summer, would be disbursed from the water utility fund. He said the budget approved Monday does not include a possible expense for litigation damages, and directors have said they plan to appeal the judge’s ruling.
Great Oaks CEO John Roeder did not immediately respond to a telephone message requesting comment.
And the board warned of the lurking possibility that the state of California, which is struggling to overcome a $24 billion deficit for its 2009-2010 budget, could borrow money from the water district.
“We may have to be here in December rather than next June if they come after our property taxes,” said Director Larry Wilson, alluding to the possibility of mid-year budget cuts.
That could be one use of the district’s reserve fund, Sanchez said. Total district reserves budgeted for next year are about $244 million, roughly equal to the current reserves.
Still, board members Monday lauded district staff for producing a more efficient budget this year. The staff initially recommended that the board adopt a groundwater charge increase of 3.6 percent per acre foot in South County to provide the expected lost revenue. That recommendation included about $12.5 million in budget cuts other than scheduled water utility deferrals.
However, the directors wanted more cuts and no rate increase because of the uncertain future impact the double-whammy economic and weather situation could have on rate payers. The budget approved Monday cut another $5 million on top of the original target.
“I’m happy that the staff came in with a zero (water rate) increase, but the level of service won’t be affected,” Sanchez said.
And Santos praised the staff for making reductions without laying off any employees.
About $10 million in operations cuts will be ongoing into future years, District Chief Financial Officer Deborah McClain said.
These include eliminating 29 staff positions that are already vacant but would have been funded if the board had not asked for more cuts. Plus, the staff salary increase in the upcoming year will be reduced from 3.3 percent to 1.2 percent, according to Taylor.
Other operations cuts are reductions of the staff cell phone budget by half, streamlining the district’s auto fleet by 25 vehicles, and reductions in temporary help, interns, consultants, travel and training budgets.
In response to a question from Sanchez, Taylor noted at Monday’s meeting that households in Morgan Hill and Gilroy pay “among the lowest” retail water rates in the state. The city of Morgan Hill pays the water district for the water it sells to about 12,000 customers. The median monthly bill for a single family household in Morgan Hill is $22.18, according to deputy finance director Tina Reza.
