A little more money may start to dry up every month for 1.3 million San Diegans if a proposed 7.25 percent water rate hike to take effect in 2014 is passed by the City Council after a public hearing in November.
The city of San Diego’s Public Utilities Department says the increase is necessary to cover the cost of importing roughly 90 percent of all water used in the region, and is proposing an additional 7.5 percent increase in 2015.
Brent Eidson of the Public Utilities Department explained the reason behind the increase and what affected residents can do about it at last week's Downtown Community Planning Council meeting.
“Over the last number of years, the County Water Authority has been raising the rates to each of their member agencies, the city included, and at this point water purchases make up 43 percent of the water department’s entire budget,” Eidson said. “So as we looked through the cost of service study, we found that the primary drivers are those increases in water purchase costs.”
Eidson was referring to a two-year cost of service study performed by a consultant for the Public Utility Department, which found that not increasing rates for the regular water system may lead to insufficient revenue, and would affect the debt service coverage ratio. The study found no rate increase is needed on the wastewater side.
Eidson said that meeting certain revenue levels is necessary to maintain a healthy debt service coverage ratio, which is required by bond holders. A healthy debt service coverage ratio leads to better bond ratings and lower interest rates on future borrowing, meaning long-run savings.
“If you have a healthy debt service coverage ratio, you’re likely to see a better bond rating and lower interest rates on future borrowing,” Eidson said. “We’re already seeing that at least one of our rating agencies has come out and maintained our current credit rating based on this proposal alone, so they see this as a positive sign.”
Eidson said that San Diego has actually been conserving more and purchasing less water in recent years. Even so, the rate increases from water suppliers outweigh the dip in demand.
The proposed increase will vary slightly from the 7.25 percent benchmark for single-family homes because water costs in that use-class are based on a three-tier system, but the increase is more defined for other use-classes.
The current $3.92 rate per hundred cubic feet (HCF) for multifamily dwellings will increase to $4.34 in 2014 under the proposed plan, with commercial rates rising from $3.76 to $4.17 per HCF, and irrigation and temporary construction rates increasing roughly 60 cents per HCF, from $4.01 to $4.62.
If the plan is passed, these new rates will increase another 7.5 percent in 2015. If rates don’t increase, Eidson said the only way for the water utility to function without going into debt would be to reduce its expenditure on capital improvement projects, which the last cost of service study, performed in 2007, said were necessary.
Since that study, the utility has invested nearly $1 billion in the region’s water treatment systems, pump stations, pipes and water treatment plants, and $400 million more is planned for the next two years.
“As many of you are probably aware, we do have aging infrastructure in the ground and we’re actually trying to ramp up our pipeline of placement right now,” Eidson said. “We don’t want to be going backward at this point.”
Eidson said customers oppose the proposed plan can voice their concern to the City Council. If more than half of customers protest in writing, the City Council can’t even hear the action item. Even if disapproval doesn’t reach that level, the Council will still consider customers’ perspectives during the public hearing.
Only the customer whose name is on the water bill will count toward the 50 percent mark, a consideration for those living in multifamily units.