Board tables proposal to reduce rates due to skimpy reserves
By Jonathan Goetz
March 9, 2017 (La Mesa) -- Two Helix Water Board incumbents who voted for multi-year double digit water rate increases were ousted in November. But that didn’t prevent water rates in this district serving 270,000 people from increasing 10.1% earlier this year, as the prior board had approved.
On Wednesday, the board held a special meeting at the request of new member Dan McMillan, who wanted to see if rates could be reduced mid-cycle. But the board tabled that proposal, after staff advised against the rate reduction. Staff provided analysis that showed if the Board were to approve a 5% rate reduction, in just four months the water district’s 58 day reserve, already two days below what rating agencies consider a bare minimum of two months, would be cut to just 23 days.
McMillan pressed; his number corresponds with a six months operating expenses in the bank, and six months more if you count the water from recent deluge that Mt. Helix captured and now no longer needs to buy.
Lisa Stoia, Director of Administrative Services, responded that the two-month reserve is not supposed to include money for projects already considered spent.
Carlos Lugo, General Manager, noted that there are limitations on use of local runoff because it is high in organics, so it needs to me mixed with imported water, allowing the district to use only 1,400 acre-feet of rainwater this year.
Thanks to the rain, next year’s rate increase for Helix Water District customers has been revised downward from 11.2% to 9.1%.
Lugo and Stoia’s report claimed if the Board of Directors were to cut rates by 5% mid-cycle, next year’s increase would be 29.3% instead of 11.2%, in order to replenish its reserves.
Director Mark Gracyk, who represents Helix’s southernmost customers, expressed disappointment that staff’s proposal only included a shifting of money from next year’s budget to this year’s budget, and asserted they should have compiled a list of cuts instead. “We need to have information that doesn’t already revolve around an assumed increase,” said Gracyk.
About the report, McMillan said “I think it’s a very good presentation if you’re trying to stay the course, but if you do that you’ve got an island of ratepayers and you’re going to run right into them.”
DeAna Verbeke, who represents central Helix customers, said, “There is nothing I would like to do more than reduce rates. We would do that if it were a responsible decision but this is not a responsible decision.”
Ultimately the board tabled McMillan’s proposal to lower rates, for now.
Board President Joel Scalzitti said he felt the board should focus on getting the board’s infrastructure in place and not rush into a rate change. “I am the first person who wants to come up with a rate decrease,” he said, but added, “My recommendation is to hold off, work on our board and our structure and our citizens committee and put some things together… think that pushing and trying to get this 5% decrease by April 1st is just going to get everyone frazzled.”
Tabling the motion ends any hope of a mid-cycle rate reduction.
In the next few months the board will be setting rates for the next fiscal year, so the question now is how much will next year’s rate increase be?
Discussion on next year's rates begins in April, followed by a preliminary budget in May and budget workshops in June. In August, the board will consider proposed rates for fiscal year 2017-18.