Water and sewer bills for residents and businesses in Morgan
Hill will climb about 33 percent by 2016 as city hall’s utility
funds try to regain losses suffered when a drought and recession
drained their bank accounts.
Water and sewer bills for residents and businesses in Morgan Hill will climb about 33 percent by 2016 as city hall’s utility funds try to regain losses suffered when a drought and recession drained their bank accounts.
After hearing the results of a comprehensive study presented by a consultant Wednesday, the city council voted unanimously to approve the five-year rate increase.
The first year of increases will be the biggest, with water rates jumping by 16.5 percent and sewer rates by 10 percent. For each of the next four years, water rates will again rise by 6.25 percent, and sewer bills by 3.5 percent, according to city staff.
By 2016, customers’ average monthly combined utility bill will jump from the current price of about $57.80 to about $77.40. Sewer service, which requires significant costs associated with the use of a shared treatment facility in Gilroy, accounts for the higher of the two bills.
A number of factors combined to bring the higher rates, according to city staff. An economic recession that started in 2007 resulted in a sharp decrease in consumption, and hence a drop in revenue.
A statewide drought in which conservation was encouraged also hurt, and a lack of anticipated building activity left the city with lower-than-expected revenues from new rate payers and impact fees.
Furthermore, the city’s costs of providing water and sewer service, such as the groundwater charge imposed by its provider – the Santa Clara Valley Water District – have continued to go up as well.
“When we did the last rate adjustment (in 2007), usage was going up and up and up,” Mayor Steve Tate said. “We did the adjustment on the basis of it going up. The day that we set the rates the last time was the highest usage rate that has existed ever since. Higher income from higher usage just did not happen, and we started getting ourselves into a hole. We had to find a way to recover, and recover quickly.”
That hole was about $1.6 million going into the fiscal year that started July 1. The utility funds have maintained their current level of service by draining their respective reserves the last three years.
Some residents who were working outside their homes Thursday afternoon were unaware of the coming rate hikes, but they were not surprised.
Paul Wilkinson, 75, a resident of Farallon Drive, said he would consider joining a potential protest of the new rates under Proposition 218, the state law that requires voter or customer approval of utility rates.
A successful protest would happen if a majority of the city’s roughly 12,500 customers voted against the new rates. The council Wednesday approved the public notice and outreach schedule, setting a date of Sept. 16 to mail customers the Prop. 218 notices. Customers will have the option of voting “No” on the notice and mailing it back to the city.
After that will follow further contact with rate payers by mail and a council meeting to consider the protest results Nov. 16. If the protest is not successful, the first year’s rate increases will be effective Jan. 1, 2012.
Wilkinson, who is retired and pays about $50 a month for city water, said the rate increases by 2016 would likely have a noticeable impact on his household.
“We’re getting a little old, and we’re on a fixed income,” said Wilkinson, who added the cost of almost everything keeps going up while his military retirement payments have dropped in recent years. “If everything’s going up at the same time, it’s creeping up on us. Even the restaurants have raised prices on their meals.”
The home has already cut back on water consumption by not watering their lawn. But Wilkinson said using less water would “defeat the whole purpose of what they’re trying to do,” as vigorous conservation efforts in other Bay Area communities have done in recent years to his recollection.
“They ask you to save water, then they’re not making enough money, and they have to raise rates,” he said.
In Morgan Hill, overall consumption has declined by about 11 percent since 2007, city staff said.
George Falk, 59 of Alkire Avenue, was working on a home project in his garage Thursday afternoon when he said he hasn’t seen any work in three months. He and his wife pay about $30 a month for water and sewer.
“(The rate increase) wouldn’t hurt us as long as I’m working,” said Falk, a cabinet maker who added that his current three-month drought of jobs has been the longest in his 35-year career. “Anything that goes up doesn’t help. Anything that goes up doesn’t always come down.”
Falk said his house already watches their water use closely, but would likely cut back even more if they have to. “I’d have to stop taking showers,” he laughed.
At least the rate increases will maintain the current levels of service and avoid staff reductions in the city’s utility departments, city staff and council members said.
Every five years the city conducts a rate study such as that presented Wednesday. The study was conducted by consultant Bartle Wells.
The council made minor adjustments to the initial five-year rate increase proposal, which suggested a more varied year-to-year rate hike. But the overall five-year plan would raise the same amount of revenue, interim utilities business manager Jimmy Forbis said.
The plan will raise an extra $2.2 million in revenues from water rates by fiscal year 2015-2016, Forbis said. Those revenues are projected to bring $9.9 million in revenues to the water fund by that year, assuming the rate increases are not averted by a customer protest, and about 950 new homes are constructed by then. The revenue projection also assumes the city will continue to cut its water consumption by 20 percent by 2020.
Rising sewer rates will bring about $2.3 million more revenue, or a total of about $9.8 million from that source by 2015-2016, Forbis added. That’s based on the same assumptions as water revenue predictions.
Tate added the council wanted to make the first year’s increase the biggest and sharpest because that’s the best way to make a quick recovery from recent troubles. The option they approved Wednesday was safer than previous proposals which would have cut back on resources to make emergency repairs and other efforts to maintain current service levels.
“We decided it would be much safer to get people to pay a little more up front and make sure we can maintain our infrastructure, and have people out there to do the repairs quickly (if necessary),” Tate said.
