Pointing to long-term savings, Adelanto approves water rate hikes (July 27, 2017)
ADELANTO — Faced with an admittedly unpopular decision after a recent string of victories, including pulling the budget out of the red, the City Council unanimously approved raising water rates over a five-year period beginning Sept. 1.
Under the new structure, the monthly rate for a ¾-inch meter will increase by 5 percent in fiscal years 2017-18, 2018-19 and 2019-20; and by 3 percent in 2020-21 and 2021-22, according to city documents.
The average customer in Adelanto currently paying $52.90 monthly will see their bill rise each month by $1.87 under the first year, according to Doug Dove, president of consultant Bartle Wells Associates.
It’s far less than the projected $10-plus-per-month increase presented to the Council in May as a worst case scenario while the Adelanto Public Utility Authority’s financial condition worsened.
The move made late Wednesday alters the authority’s crash course with technical default. After five years since the last rate change, the APUA was likely to become non-compliant this fiscal year with its bond stipulations.
In short, while it could carry the adequate cash to meet operating costs through 2021, it was on the brink of losing the ability to stash away 25 percent of its operating revenue for capital improvements and cash reserves.
That’s a red flag for rating agencies, said Dove, who added that such agencies weigh the favorable 1.25 times debt service coverage heavily.
Now that the APUA is back on track to meet its revenue target, the city could refinance bonds at a better interest rate and realize long-term savings — a point Mayor Rich Kerr sought to accentuate Wednesday as officials separated the rate hike from concerns over water quality, which officials said was a different subject entirely and planned to be broached later.
Kerr said the Council welcomed public input before delivering a straightforward articulation of expectations.
“But come the end of the night, we’re not going to really worry about brown water, we’re not going to worry about low water pressure, we’re not going to worry about if your water doesn’t even run in your house,” he said. “That’s not what we’re here for tonight.”
Instead, Kerr and his colleagues saw the rate increase as a necessary maneuver to save the city’s ratepayers $6 million, the consultant-estimated relief over a 30-year period after bond refinancing.
But officials, who twice punted on proposed hikes within the past 10 months despite strong warnings, will still be forced to reconcile missing an opportunity to save ratepayers $7 million more.
In September, when a proposed increase was first brought to the dais, Bartle Wells projected $13 million in savings over 30 years, but that figure significantly dwindled in the period since.
The $6 million savings can be theoretically applied to rates to draw down costs for the authority’s 7,500 customers and a more robust APUA will be a boon to attempts to undertake $5 million worth of capital projects that are needed.
APUA revenues plummeted 22 percent amid conservation efforts, consultants have said, and it also faced 6-percent increases annually for augmented water purchases through the Mojave Water Agency.
Meanwhile, Dove said the city’s rates, even after the increase, will remain “right near the average” compared to other municipalities in the region. Discounts are offered for seniors and low-income residents.
The city is also now compliant with a recent court ruling declaring as illegal any tiered structures meant to encourage conservation or those which are not cost-for-service justified.
There were 34 protest letters received regarding the hike, City Clerk Cindy Herrera said.
Source: Shea Johnson, Daily Press