Water rates may surge nearly 18 percent over next two years in San Diego

Reverse osmosis filters are stacked at the Pure Water Demonstration Facility in San Diego on Nov. 5, 2019.
(K.C. Alfred/The San Diego Union-Tribune)

A new analysis says more money is needed from ratepayers for the Pure Water sewage recycling system and other projects

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A new analysis says San Diego must raise water rates 17.6 percent over the next two years to fund the city’s Pure Water sewage recycling system and cover rising costs to buy imported water and replace aging pipes.

The average monthly bill for a customer in a single-family home would increase from $81.07 to $95.03 in November 2023, and then to $103.06 in January 2025. Bills for high-volume water users would likely climb even more.

Water rates in San Diego would jump from just below the current median for local water agencies to what is currently the top tier. The only water agencies in the county whose current rates are higher than that planned level are Rincon del Diablo, Fallbrook, Padre Dam, Rainbow and Del Mar.

San Diego’s water system serves the entire city except Rancho Bernardo, plus the cities of Del Mar, Coronado and Imperial Beach. It serves 270,000 customer accounts and roughly 1.4 million people.

City water officials stressed that the rate increases are subject to City Council approval and could be softened or delayed by the council.

They also said the jumps would be steeper without $78 million in one-time resources being used to soften them.

That money comes from the city’s sale of land in Mission Valley to San Diego State University for a new campus, a lawsuit payout the city got from the Metropolitan Water District and the city‘s move to shrink how much imported water it stores in reserve.

The proposed increases are being recommended by a city-hired consultant, Raftelis. A second consultant, Stantec, is scheduled to complete in February a similar analysis that will critique the work of the first consultant.

When that process was followed for sewer rates last year, the city imposed lower rate hikes on customers than the first consultant had recommended. The council is scheduled to finalize the water rate increases in June.

City water officials say the increases are needed to maintain and improve a sprawling and aging water system that has 3,300 miles of pipeline, 49 pump stations, nine reservoirs and three treatment plants.

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“We recognize this is a large increase,” said Adam Jones, the city’s deputy director of public utilities. “It’s really paying to make sure our system is operating effectively and efficiently and that the costs are being allocated to the correct customers.”

Jones noted that the comparison to rates in other cities doesn’t take into account that many of those cities are likely to raise their rates before San Diego’s second increase would take effect in January 2025.

In addition to infrastructure repairs and upgrades, money from the higher rates will pay for salary increases for 950 city water workers and for upgrades to the city’s customer service system, which has been harshly criticized.

The council’s budget committee gave the proposed rate spikes an initial thumbs up Wednesday.

Councilmember Chris Cate said the rate increases make sense with the cost of imported water rising by about 3 percent a year. Imported water makes up 85 to 90 percent of the city’s water supply.

Another factor is conservation, which reduces the city’s revenue from ratepayers but doesn’t lower the costs to maintain and replace aging infrastructure or to pay off bonds that helped fund projects built years ago.

Despite population increases, water usage is down about 15 percent since 2015 and is projected to be 18 percent below that benchmark by 2025.

Cate praised city officials for unveiling the proposed rate hikes nearly a year before the first increase of 9.3 percent would take effect in November 2023. A second increase of 7.6 percent would take effect in January 2025.

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When the increases are compounded, the total rise in rates would be 17.6 percent above current levels.

Council President Sean Elo-Rivera said he empathized with water customers struggling to make ends meet. But he said it’s important to look at the big picture.

“I will reiterate the importance of investing in the systems that we want,” he said. “Sustainable, reliable, healthy water systems don’t just fall out of the sky, unfortunately.”

Elo-Rivera stressed that operating the city’s water system too frugally can lead to pipe ruptures, water main breaks and other problems.

“If we don’t invest in these things, we pay for it exponentially down the road,” he said.

Councilmember Vivian Moreno said it’s important to note that the city doesn’t make a profit on its water system.

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City officials said they decided to use $78 million in one-time resources to soften and delay rate increases.

The money includes $35 million from the sale of land in Mission Valley that the water district owned. San Diego State paid the city $81 million for land in Mission Valley, but the city’s general fund owned some of the land.

The city’s successful litigation against the Metropolitan Water District over rates yielded $4 million in fiscal year 2022 and $15 million in fiscal year 2021.

And a decision to shrink the amount of imported water the city keeps in reserve saved $25 million.

The new rate analysis by Raftelis, the city’s first since 2015, was delayed partly by litigation challenging tiers in the city’s rate structure that reward customers who use less water and penalize customers who use more.

A judge ruled last year that the city’s tiered rates are illegal under Proposition 218, which says utility fees imposed by local governments can’t exceed the cost of providing the service.

Critics question costly investments in desalination given declining consumer demand. Supporters say long-term investments will bolster the region against future drought.

City officials say they still believe the tiered rates are legal, contending that it’s fair to charge higher rates to customers who use more water because the demands those customers place on the system create additional costs.

They say a hearing on the city’s appeal in the case is expected this winter and that a ruling by the appellate court is expected by the end of next year.

The decision by the appellate court could have a significant statewide impact, because many other water agencies in California use tiered rates.

The proposed rate hikes would shrink the number of tiers the city uses from four to three.

The city’s water system has $381.7 million in reserves. Annual operating costs are about $602 million.


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