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Proposed water rate hike moves forward for Rancho Santa Fe, Solana Beach

A proposal to raise rates for customers of the Santa Fe Irrigation District a maximum of 9 percent per year over the next three years continues to move forward, even as a split board of directors debates the plan’s pros and cons.

Based on a decision by the board to delay sending out legally required customer notices about the proposed increase until after the first of January, the earliest the proposed rate hikes could take effect would be March 1, 2016, according to district staff.

The board voted 3-2 at its Oct. 1 meeting to move forward with the rate hike proposal. Discussion continued at the board’s meeting on Thursday, Oct. 15, although another vote was not taken.

Directors Michael Hogan, Augie Daddi and Alan Smerican voted for the rate recommendation by district General Manager Michael Bardin, while directors Greg Gruzdowich and Marlene King voted against it.

Also at Thursday’s meeting, a number of district customers who have lemon groves on their property argued in favor of a special, lower water rate for agricultural users, which the Santa Fe district does not offer.

The district provides drinking water to about 20,000 residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch.

Santa Fe directors are elected by division, and the split between the board on the rate increase proposal appears to follow the lines of the district’s geographical boundaries. Hogan, Smerican and Daddi represent divisions on the west side of the district, which fall mostly within the city of Solana Beach, where residents typically have smaller lot sizes. Gruzdowich and King represent the district’s eastern service area, including the communities of Rancho Santa Fe and Fairbanks Ranch, which have larger estate lots. The district’s largest water users generally are found in the eastern service areas.

The district’s rate increase proposal changes the way charges are assessed to customers, using a formula of tiered water prices that go up the more water each customer uses. Another part of the bill contains fixed charges, and does not change with the amount of water consumed.

While the average proposed rate increase would be 9 percent, the specific increase facing a customer on his or her bimonthly bill depends on how much water that customer uses, and the customer’s classification, such as single-family, commercial or multi-family.

A small number of customers would actually see their water bills go down, according to district officials, while most would see an increase.

Gruzdowich said Thursday that the split on the board results from that discrepancy — that in his opinion, the proposed rate increase, as structured, would unfairly impact those with larger properties, who use larger amounts of water.

Higher users, he said, “will pay way more than 9 percent, and some people will get a free ride and have no increase. That’s not right.”

Bardin said the rate proposal was crafted with the help of a financial consultant, and is intended to spread the district’s costs fairly and equitably, based on each customer’s use of district resources. He said the plan is also designed to follow state regulations and be defensible in court if challenged.

Gruzdowich’s fellow directors objected to his characterization of the reasons behind the split vote.

“I take exception to that. I represent the whole district,” said board president Michael Hogan.

“I have never voted on how something affects the division I live in, but for the district as a whole,” said director Alan Smerican. “We have to create a process that is legal. Everything else comes after that.”

At the beginning of the discussion, Bardin, the general manager, told the board that raising rates is one of the hardest decisions they will make as directors.

The rate increase is needed, he said, to keep up with rising wholesale water costs and inflation. Two common misconceptions, Bardin said, are that the district can cut costs to avoid a rate increase, and that the need to raise rates stems from the four-year California drought.

The district has not raised rates for two years, Bardin said, and has covered increased costs through budget-cutting and taking money from reserves.

“We’ve done all we can to reduce costs. At this point, there’s no more room to cut,” Bardin said. “We are raising our rates to do the mission of the district.”

Before the rate increase proposal can be considered for final adoption, the district must hold a public hearing and consider written public comment as required by state law. Each of the three years covered by the proposal, the board will have to vote on whether to raise rates by the maximum 9 percent or a lesser amount.

Several district residents — mostly lemon growers — also urged the board Thursday to adopt a lower agricultural rate, rather than requiring them to pay the higher residential rates now under consideration.

“I ask you to give us an agricultural rate. It’s essential to our survival as lemon producers,” said resident Sandra Johnson.

With water rates poised to increase steeply for growers, said resident Herb Engel, “You’re going to see people abandon their groves and dead trees all over the place. I don’t think that’s what you want.”

Only about 150 of the district’s approximately 6,500 customers are classified as agricultural users, and their total annual water usage is about 300 acre-feet, compared with the district’s total water sales this year of 11,200 acre-feet, wrote district spokeswoman Jessica Parks in an email.

During a current cost of service study that is near completion, the district considered adding an agricultural rate, “but it was determined that there is not sufficient justification at this time to create a separate (agricultural) classification based on current State law and Cost of Service principles,” Parks wrote.

A now-expired program offered by the Metropolitan Water District, Southern California’s water wholesalers, allowed farmers to purchase water at a lower rate, with the proviso that they would be the first to face cuts during a water shortage, Parks wrote.