By Joe Tash
Santa Fe Irrigation District directors agreed to cut more than $800,000 in expenses from next year’s budget during a special workshop session held on Monday, April 25.
The cuts include trimming $520,000 from the water district’s operating budget, and a decision by the board not to make a $311,000 payment into a trust fund for future retiree health benefits, from the spending plan for the fiscal year that begins July 1. The current year’s operating budget, including debt service, is $22.8 million.
During the workshop, directors provided guidance to staff as they prepare next year’s budget. Among the questions the board considered was how much the San Diego County Water Authority — the district’s supplier of imported water — will increase its water rates next year, and how much local water from Lake Hodges will be available.
The district has been told by the water authority that the cost of imported water will rise between 9.5 and 17.8 percent next year, but a firm number won’t be available for about a month. In the meantime, directors told staff to build a 14 percent increase into next year’s budget.
Directors also told staff to plan for meeting about half of the district’s water needs with local water from Lake Hodges, which is full from this winter’s above-average rainfall. The district expects to need 10,750-acre-feet of water to serve its customers this year, a number that has been declining in recent years due to conservation efforts, rising water prices and other factors. (An acre-foot is about 325,000 gallons of water.)
Factors such as budget cuts, increases in the cost of imported water and availability of less-expensive local water will all figure in when the board sets 2012 rates for water district customers. In December, the board raised water rates by 12 percent for 2011, and also approved increases of up to 12 percent for each of the next two years.
At the time, the district cited the increasing costs of imported water as a key reason for the increase.
A final decision on next year’s rates will be made in November, at a time when the district knows for certain how much the water authority’s rates will rise, said General Manager Michael Bardin.
The board’s decision on next year’s rates will also affect how much money is available for capital improvements, such as replacing aging water pipes and other equipment. For the coming budget year, the district plans to carry over $7 million worth of projects from this year, as well as undertake $5.5 million in new projects.
Some board members said they are concerned the district is not setting aside enough money to pay for replacing worn-out infrastructure.
“We’ve got a lot of 50-year-old pipe in the ground,” said director Robert “Bud” Irvin, who participated in the meeting by phone because he was out of state.
Director Ken Dunford said he also believes the district is underfunding its capital improvement program. “If we’re going to maintain this system we’ve got to step up to the plate,” he said.
The $520,000 in cuts to the operating budget includes not filling three currently vacant positions: a water conservation technician and two utility workers. In addition, the district will cut water conservation programs, employees will contribute more to their retirement fund and some preventive maintenance projects will be deferred, according to a staff report.
Board members are also looking at potential savings in the cost of retiree benefits. They have asked staff to research how much the district would save if it established lower pension benefits for new hires, and also if the district could save money by changing providers for retiree health benefits.
Board member Andy Menshek suggested that the board opt out of a $311,000 payment into a trust fund for future retiree health benefits while the issue is being studied. Other board members agreed.
Directors may make an initial decision next month on rate increases for 2012, although that decision could be altered later in the year. District revenue increases by $190,000 for each 1 percent increase in water rates charged to customers.
The staff report included both worst- and best-case budget scenarios. If the county water authority raises rates by 18 percent, the district can meet only about one-third of its needs from local water supplies and the full 12-percent hike is imposed on ratepayers next year, the district’s operating budget would be short by $509,000, with the difference being made up from reserves.
Under the best-case scenario included in the report, the water authority raises rates by 9 percent, the district meets half its needs from local water, Santa Fe customers receive no rate increase next year, and the district has a $130,000 surplus in its operating budget, which can be put back into reserves.