Victorville mulls water rate hikes (January 20, 2016)

Status quo can’t cover planned capital upgrades, absorb 28 percent conservation, consultant says

VICTORVILLE — City officials came back to the drawing board Tuesday, mulling expected water rate hikes that will support $56.7 million in planned capital improvements over the next 10 years.

The hurdle right now is that the Victorville Water District’s current rates aren’t sufficient long-term to absorb the scope of the city’s capital improvement plan and a 28 percent reduction in water use mandated by the state, representatives with consulting firm NBS said.

Additionally, while the water district maintains $29.6 million cash on hand, those reserves will be strapped by fiscal year 2020 if nothing changes.

But the situation also isn’t technically as dire as it sounds, with the city capable of pushing back less critical projects to extend reserves. About 80 percent of the planned capital upgrades are for aging pipelines.

City Councilman Ryan McEachron said the best strategy would be to balance drawing down some reserves with a modest rate increase, also rejecting the consultant-proposed option to raise rates 15 percent on April 1.

If we increase rates 15 percent this year, there are three of us that are out of a job right now, he said, referencing Mayor Pro Tem Jim Cox and Mayor Gloria Garcia’s expiring terms on the dais as well as his own.

Instead, the Council appeared to get behind a second option that would increase rates 7.5 percent beginning July 1 at the start of the new fiscal year. The hike would be followed by no increase in FY 2017-18 and then increases of 7.5 percent each year through FY 2020-21.

Yet there were also hints that the increase could be as low as 5 percent depending on what would sufficiently cover the sum impacts of capital improvements, water use restrictions, inflation and rising operating costs. A lesser rate increase would require adjustment to the capital improvement plan, City Manager Doug Robertson noted.

Councilman Jim Kennedy said that attention also needed to be paid, maybe even more so, to an effort to restructure water rates. According to NBS, the structure in place now is not defensible and rates fixed on average daily use must be shifted to be based on meter size. The rates also need to better reflect the cost of services and provide more revenue stability.

The consultant found that average water bills for most single-family residential customers would actually slightly decline under proposed changes, an effect that the city acknowledged would be difficult yet critical to get across.

The changes would also impact each customer base differently.

This is not a done deal, Kennedy warned.

The city is gearing up for a Proposition 218 vote on rate increases and restructuring, officials said.

The workshop Tuesday inside City Hall came about five months after NBS first presented a water rate study to the Council as an informational item. At the time, officials requested copies of district personnel pay figures and an audit of district equipment to determine what was being used and what had mostly been idle.

The look at water rate hikes follows a 4.1 percent increase in 2014 and a 9 percent hike in 2009, but the trend in between that time has been to defer increases. Director of Public Works Sean McGlade said in 2014 that the district had been suffering annual operating losses averaging $1 million since 2009 and rate increase talks were happening amid mounting pressure by the state to bolster declining infrastructure.

Source: Shea Johnson, Daily Press