Water rate increase: Only 4 percent appears to be cost of imported water
By Rankine Van Anda, Brad Burnett, Otto Dieffenbach, Greg Gruzdowich, Chris MacPhail and Sam Ursini
When it comes to our Santa Fe Irrigation District (SFID) water bills, where is our recent 12 percent ratepayer increase really going?
This is the time of year the Santa Fe Water District plans its budget for the next Fiscal Year beginning July 1. A board meeting on the subject is scheduled for April 25. Since there is little opportunity in these meetings to discuss our views from the perspective of the ratepayer, we have decided to do it here.
After three years of rate increases totaling 47 percent, water usage in FY 2010 dropped 15 percent from the prior year. No surprise. Despite that information being available, SFID budgeted a 10 percent increase in water usage, and a 30 percent increase in water cost per acre foot for the fiscal year 2011. Based on this information, the board of directors in turn voted a rate increase of up to 40 percent over the next three years. The first six months of FY 2011 show how far off course this budgeting has been, as water usage did not increase, but rather decreased another 15 percent, and water cost actually went down 4 percent.
SFID has publicly placed most of the cause for rate increases on the cost of water purchased from the County Water Authority, and has tended to closely match those increases. For example, this January the Water Authority increased 12.2 percent and SFID increased by 12 percent. What is not clearly understood is that it appears purchased water comprises 34 percent of the costs of SFID, so a 12 percent increase in the cost of purchased water should be covered by a 4 percent increase to the SFID ratepayers. Furthermore, SFID benefits from Lake Hodges water which historically comprises 35 percent of the mix. This water is almost free, but does cost more to process so the net cost saving relative to the County Authority water is about 50 percent. The thing to note is that as water usage declines in the district, the proportion of cheaper Lake Hodges water in the mix increases. Since the supply of Lake Hodges water is currently bountiful, the usage next year should exceed 50 percent of the mix. These factors should greatly mitigate the expected Water Authority increase of 11 percent next January, and the SFID board should recognize this and act accordingly.
What also needs to be addressed in the budgeting process is the decline in revenue for the district resulting from the decline in usage of water. In the private sector a business must take steps to downsize when revenue declines, and that is what SFID must do. We are not suggesting cutting the capability of delivering quality water, but to initiate a zero based budgeting process, rather than simply projecting off current expenditure levels. There are presently five unfilled positions, and each should be looked at carefully to see if duties can be consolidated, or if tasks can be outsourced, or eliminated. For example, one of these positions involves water conservation, and the whole function can be eliminated in the next budget cycle at a savings of $250,000, as the rate increases have done the conservation job very effectively. Furthermore, until State laws are changed, headcount reduction is the most effective way to deal with the unsustainable costs of the retiree health and pension plans.
Administrative costs run at a very high level and constitute 20 percent of the SFID total costs. Significant savings could be achieved if tasks such as billing, human resources, accounting, and information technology were consolidated for several small water districts instead of having each one staff these functions separately. The SFID board needs to press management to pursue cost reduction activities such as this. With a more frugal management approach, it appears that even the resulting 4 percent increase in the net cost of imported water could be offset by expense reductions.
To voice your opinion, please come to the April 25 SFID Budgeting Workshop at 8:30 a.m. at the SFID Board Room, 5920 Linea Del Cielo, Rancho Santa Fe. Or write a letter to the SFID General Manager, Mike Bardin at PO Box 409, Rancho Santa Fe, CA 92067. More information is available at their website, www.sfidwater.org.
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