Morgan Hill residents this week will start receiving “Proposition 218” notices from the city, informing water and wastewater customers of proposed rate increases over the next five years and how to exercise their right to protest the higher monthly charges.
City Hall started sending the notices in the mail late last week, after the City Council approved the five-year plan to recover more of the utility’s growing costs at the Dec. 2 meeting.
According to the Prop 218 notices, the average monthly utility bill for a single-family residential customer will go up steadily from the current rate of $90.13 to $121.24 in 2020. Each year will see a collective increase in water and wastewater rates of at least 4.5 percent, with the largest increase of 9 percent happening in 2018. The bulk of the increase is attributed to water rates, as sewer rates alone are proposed to go up only 2 percent each year from 2017 to 2020.
If approved, the rate increases would kick in April 1, 2016, and then on Jan. 1 of each subsequent year until 2020. There is a previously scheduled and budgeted rate increase coming up Jan. 1, 2016 as well.
The proposed water rates include a monthly fixed cost based on the size of each customer’s meter, plus a “volumetric” charge that would increase from $1.87 per unit (100 cubic feet of water) in 2016 to $257 by 2020.
The rates are subject to a public review process, which includes the 13,500 customers’ opportunity to mail back their protests if they choose to, as well as a public hearing scheduled for 7 p.m. Jan. 20, 2016, at council chambers, 17555 Peak Ave.
If more than 50 percent of ratepayers formally protest the proposal, the city cannot enact the new rates. Protests must be written and submitted by mail to a City Hall address listed on the notice. The “owner or customer of record of a parcel subject” to the proposed new rates may protest. Only one written protest will be counted per parcel.
Each written protest must include the owner or customer’s signature; identification of the parcel by address or assessor’s parcel number; whether the protester is the owner or the customer of the service; and a statement of the specific rate change increases (water or wastewater) to which the protester is objecting, according to the city’s Prop 218 notice.
The five-year rate adjustment plan approved by the council Dec. 2 does away with the city’s traditional tiered charging system, in which customers are charged a higher per-unit cost as they use more water. This type of system was declared illegal earlier this year in California.
The plan also strives to solidify the water and wastewater utility’s revenue base by charging customers in the hillsides—who require pumping of water or wastewater to and from their properties—a surcharge to recover the city’s electricity costs.
City staff explained the current billing system relies too heavily on the variable cost of water consumption, which residents and businesses have cut by more than 30 percent since 2013 in Morgan Hill. At the same time, the city’s costs have not gone down, and staff project the utility fund’s reserve account will be in the red by 2018 under the current charges.
Councilmember Gordon Siebert presented a plan Dec. 2 that includes a relatively static wastewater “zonal surcharge” for customers who live in lower elevations; that charge will increase annually from the current rate of $3.93 per unit to $4.25 in 2020. And the wastewater proposal would keep the monthly lift station service charge intact for these customers, increasing from the current rate of $6.16 to $9.78 by 2020.
Siebert’s plan, which the council ended up approving unanimously, also does away with three different zones for uphill water customers previously recommended by staff, and instead lumps all of the roughly 3,000 affected hillside customers served by the city water system into a single zone. Customers in this zone would pay a monthly surcharge in order to recover the electricity costs for pumping the water uphill.
“Everybody whose water is pumped uphill shares equally in the power cost,” Siebert said. “And it becomes easier administratively for staff to manage.”
These rates are based on a 150-page “Comprehensive Water and Wastewater Rate Study,” which is available on the city’s website. Aside from recovering more of the city’s costs, the proposed new rates are also intended to replenish the utility’s reserve account, and fund a capital replacement program for the water and wastewater systems.
Hillside residents lined up at the lectern Dec. 2 to encourage the council to pursue an option that does not impose a zone surcharge on them, but rather spreads the costs to deliver water uphill among all of the city’s water customers. Nearly 60 residents—mostly of the Jackson Oaks and Holiday Lakes Estates neighborhoods—signed a petition before Dec. 2 asking the council to delay a decision on a rate proposal for 90 days. The petition states that the signees feel the data presented in the rate study is flawed or incomplete and the “unprecedented discriminatory study recommendations warrant more time for residents’ analysis.” Furthermore, the zonal surcharges create “residential factions destroying city-wide community spirit.”
Jackson Oaks resident Terry Mahurin told the council he submitted an updated petition to City Hall with more than 750 names on it.
Siebert thinks the plan to be presented to the public is “fair, equitable and legal,” but at least one hillside resident continues to question the fairness of the water surcharge.
“What’s the difference between that and spreading (the cost) out over all of Morgan Hill?” wondered resident Sherry Purser. “I want to see the raw data that supports the fact they should be charging certain residents more than other residents.”
