Customers of the Santa Fe Irrigation District (SFID) are looking at double-digit increases in their water bills next year, based on a proposed spending plan that will be considered for adoption by the district’s board of directors in June.
The rate hike, which is planned for Jan. 1, 2018, will total between 11 and 13 percent, said Jeanne Deaver, the district’s administrative service manager. This includes a 9 percent rate hike imposed by the district, plus a “pass-through” of between 2 and 4 percent based on expected rate increases by the district’s wholesale water supplier, the San Diego County Water Authority.
The district’s financial outlook is much improved for the upcoming budget year, which runs from July 1, 2017 through June 30, 2018 Deaver told the board at its meeting on Thursday, May 18. That’s due to a number of factors, including a rainy winter that filled the reservoir at Lake Hodges, which provides cheaper local water; an increase in customer demand due to the end of drought-related water-use restrictions; and two recent 9 percent rate hikes, imposed in June and January.
The district plans to use additional revenue in the coming year to build up reserves that were depleted due to financial hits the district took during the five-year California drought, Deaver said. Those reserves are earmarked for such expenses as capital improvements and rate stabilization, which helps the district keep rates down when revenues are reduced.
“Now we need to replenish what we’ve taken. This is the year we start to do that,” Deaver said.
The proposed budget for fiscal year 2017-18 calls for adding $3.2 million to the district’s reserves, according to a staff report. The district’s proposed operating budget for the year is $26 million, with $2.84 million planned for capital expenses.
Board member David Petree said he was taken aback by the proposed rate hike.
“I’ve got to tell you, I found that hard to swallow,” Petree said, suggesting that the district might consider spreading the reserve contributions over several years to reduce pressure on rates. “That kind of double-digit increase is not going to be viewed very favorably.”
Director Augie Daddi said rates are the No.1 issue in the district, which provides water to Rancho Santa Fe, Solana Beach and Fairbanks Ranch.
“Although I understand the capital issue, we need to pay attention to rates. That’s what our customers are telling us,” Daddi said.
Other directors stressed the importance of maintaining the district’s water pipes, pumping stations and other infrastructure, and said that customers are concerned about those issues as well. Director Ken Dunford said the alternative to putting cash aside for capital improvements is to borrow money, which comes with an expensive price tag for interest.
According to the staff report, the district did not contribute to its capital improvement reserve fund for the past two years.
In recent years, the district suffered losses in revenue due to state-imposed mandatory cutbacks in water use, as well as less rainfall to provide cheaper local water. Also, the district did not raise rates for a three-year period immediately preceding the latest rate increases.
SFID’s board of directors will revisit the proposed 2018 rate increase later in the year, before the hike takes effect.
Board president Michael Hogan recommended that before that discussion, the board also discuss its reserve fund policy.
Also at Thursday’s meeting, the board received a report on a 4 percent rate increase for recycled water imposed by its supplier, the San Elijo Joint Powers Authority, which will take effect July 1.
SFID will pass along the increase to its recycled water customers. Recycled water receives less treatment than potable, or drinking, water, and can be used for such purposes as landscape irrigation. It is carried in a separate water system with purple pipes.
Recycled water accounts for only a fraction of the water sold by SFID. The district’s 55 recycled water customers include Caltrans, which irrigates freeway median landscaping, as well as San Dieguito County Park and local homeowners associations.
For the coming year, the district expects to sell 9,000-acre-feet of potable water and 450-acre-feet of recycled water, said the staff report. This represents an 8 percent increase in customer demand, but the total is still lower than pre-drought demand.
An acre-foot is equal to 326,000 gallons, and an average California household uses between one-half and a full-acre-foot of water per year for both indoor and outdoor use, according to the nonprofit Water Education Foundation.