By Joe Tash
A divided Santa Fe Irrigation District Board of Directors ordered staff to plan for a 6 percent rate increase for 2012 at its meeting on Thursday, May 19, but the public will have a chance to weigh in before the decision becomes final.
On a 3-2 vote, with directors Robert “Bud” Irvin and Ken Dunford opposed, the board directed staff to build the 6 percent increase into its budget for the fiscal year that begins July 1. The rate increase, if left unchanged by the board, would take effect on Jan. 1, 2012.
In the face of opposition from customers, the board in November approved rate increases of up to 36 percent over a three-year period. The increase tentatively approved at the May 19 meeting is for the second year of that three-year cycle. A 12 percent increase took effect earlier this year.
A public hearing on the proposed 2011-12 budget, including the 6 percent increase for 2012, is scheduled for June 16 at the district’s headquarters, 5920 Linea del Cielo.
The draft budget presented to the board last week calls for operating expenses of $20.9 million, and revenue of $22.2 million, based on a staff recommendation of a 12 percent rate increase for 2012. Under that scenario, the district would have had a projected operating surplus of $1.3 million.
District staff had recommended using the surplus to help pay off a debt to the state CalPERS pension fund — which covers the district’s pension obligations to its retirees — to save $554,000 in interest charges.
Directors voted Thursday to pay off the $2.6 million pension debt in two annual installments, also on a 3-2 vote, with directors Michael Hogan and Ken Dunford voting against the motion.
If directors approve the smaller rate increase for next year and also move forward with the debt payment, funds for at least some of the payment will have to come from district reserves.
“I’m 100 percent in support of that, it’s a no-brainer,” said director Andy Menshek regarding the debt payment.
“It’s pre-paying a loan that’s burdening you 7.75 percent (in interest) per annum,” said director John Ingalls. “You’d do that all day long if you were doing it yourself.”
But Dunford said he wanted more information about how the district came to owe the money to the state pension fund before agreeing to the payoff plan.
According to district general manager Michael Bardin, the district has two options —continue making payments and incurring interest charges through 2017, or retire the debt early and save on the interest.
In shaping next year’s budget, the district must plan for an anticipated 8.7 percent increase in the cost of imported water from its suppliers, the Metropolitan Water District of Southern California and the San Diego County Water Authority.
The district has cited the increasing cost of imported water as one of the major factors in a series of rate increases in recent years. For the fiscal year beginning July 1, the district plans to use imported water to meet about half of its customers’ needs, with the rest coming from water stored in Lake Hodges.
However, under questioning from Menshek, district administrative services manager Jeanne Deaver said a 3 percent increase in the Santa Fe Irrigation District’s rates for 2012 would cover the increase in the cost of imported water.
Menshek said he would support passing along the increased water cost to district customers, but the district should also focus on cutting internal costs and adjusting reserves to keep rates down.
While a board majority voted for the 6 percent rate increase for next year, directors Irvin and Dunford supported the full 12 percent increase recommended by staff.
Both directors said the full increase would allow the district to maintain its reserves and pay for needed capital improvement projects.
The draft budget contains some $800,000 in cuts from the current year’s budget, which include leaving three vacant positions unfilled, increased employee pension contributions, and a decision by the board not to make an optional payment to offset the cost of health benefits for future retirees.
Even if the board approves the 6 percent rate increase for 2012 at next month’s budget hearing, the panel is likely to revisit the issue later this year, when more financial information about district costs is available, said Bardin.
The district provides water to some 22,500 residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch. Under the three-year, 36 percent rate increase approved by the board in November, the bimonthly bill for the average residential customer would rise from $216 in 2010 to $303 in 2013.