By Joe Tash
Santa Fe Irrigation District directors approved a $20.98 million operating budget for the fiscal year that begins July 1 at their meeting on Thursday, June 16, which includes a 6 percent water rate increase.
However, directors stressed they plan to reevaluate the district’s financial situation later this year to determine if the rate increase should be adjusted before it takes effect Jan. 1.
The budget is based on a number of assumptions, including the amount of water the district will sell to its customers, how much of that water comes from local sources, and anticipated rate increases charged by its suppliers, the San Diego County Water Authority and the Metropolitan Water District of Southern California.
Under a rate plan approved by the board last year, water customers could see rate hikes of up to 36 percent over three years. A 12 percent increase took effect in February. At last month’s meeting, the board voted 3-2 to direct staff to prepare next year’s budget by building in a 6 percent rate increase, rather than the maximum 12 percent hike permitted under the rate plan.
District officials have said a key reason for a series of rate increases over the past several years has been the cost of “imported” water, which is purchased by the district from the County Water Authority.
Some district customers believe the rate increases have been larger than necessary to cover water costs, and they have urged the district to cut costs for labor and operations.
Along with increasing water costs, the district faces declining revenue, due to conservation by water customers and heavier than normal rainfall last winter.
“There needs to be a down-sizing of the operation commensurate with the decline in revenue,” said a letter sent to the district June 15 by Brad Burnett, Greg Gruzdowich, Sam Ursini and Rankine Van Anda.
The letter notes that the County Water Authority plans to raise its rates by 8.7 percent on Jan. 1, and that a 3 percent increase in the Santa Fe Irrigation District’s water rates would cover the increased cost of imported water.
According to figures provided by the district, the County Water Authority’s rate increase is expected to cost the district $181,000 next year, while a 3 percent increase in water rates starting Jan. 1 would generate $175,000, which would cover most of the cost of the water authority rate increase.
But Michael Bardin, the Santa Fe district’s general manager, said those figures assume a certain level of water sales, and also that the district can meet about half of its water needs by treating local water stored at Lake Hodges. If those assumptions don’t pan out — for example, if the district has to buy more imported water than planned — the district’s costs will be higher.
In addition, the district faces other costs, such as power, debt service and labor, that are fixed, even when water sales are down. Also, some other district costs are increasing, he said.
The district also must maintain reserves and pay for capital improvement projects, he said.
The customers’ letter also urges the board to study how other districts have cut costs. They cited the Lakeside water district, “which serves a similar number of accounts with just 14 people.”
The Santa Fe district currently has 43 full-time employees, and has trimmed $800,000 from next year’s operating budget by leaving three vacant staff positions unfilled and other cuts.
Bardin said the comparison with Lakeside is “really apples to oranges,” because the Santa Fe district operates a water treatment plant, while the Lakeside district does not.
“We have a very, very lean staff, there’s only so far you can cut,” he said.
If the district does implement a 6 percent rate increase in January, revenue for next fiscal year is projected at $21.85 million, generating an operating surplus of $869,000 for the year.
That surplus would help offset a $1.3 million payment that board members also approved at their June 16 meeting. In May, the board decided, on a split vote, to pay off a $2.6 million debt to the state pension fund in two $1.3 million installments, rather than spreading the payments over the next six years. The move will save the district an estimated $335,000 in interest costs, according to a staff report.
Director Ken Dunford voted against the payment, saying he still has questions about increases in the district’s obligation to the state CalPERS pension fund.
As part of their motion to approve the $1.3 million pension payment, directions said the savings must be placed back into district reserves.