Council Jacks Up Utility Rates

By Gene Williams
Staff Writer

June 22 -- Santa Monica residents and businesses will be paying more for water and waste collection beginning next month, after the City Council approved utility rate hikes under a $383 million budget for fiscal year 2005-2006.

In an effort to cushion the blow of a likely series of multi-year tap-water rate increases that could total as much as 47 percent, the council directed staff to begin with a 6 percent hike as soon as possible.

However, the council left the final decision of just how much to raise water rates, when and on whom to a later date.

In addition, fees for solid waste collection will also go up 10 percent beginning next month.

Staff must now crunch the numbers and come up with language for the council’s final approval.

The 6 percent hike in the water rate adds a 2.2 percent increase over the already scheduled 3.8 percent rate hike based on the Consumer Price Index set to kick in next month (CPI).

“When you see the deficit, the drop in the water fund, we know there will have to be an increase,” said Genser, who made the amendment.
He later added that a modest increase soon would get “a jump on it” and “help alleviate sharp increases.”

Council member Richard Bloom, who first floated the idea, worried that putting off action would leave the public unaware until December, which he called an “inopportune time.”

But Council member Kevin McKeown -- who made the main motion -- expressed disapproval at what he saw as an about face on the part of council members.

His colleagues, McKeown said, were at first “loathe” to raise water rates at all, yet now seemed ready to begin raising them sooner than in January, as recommended by staff.

Instead, McKeown suggested revisiting of the rate tier system in which big water users pay more per cubic foot than light users.

Rather than a flat across-the-board increase, the burden of making up shortfalls in the water fund should be placed on those who use the most, while -- perhaps -- those who use little shouldn’t see their rates go up at all, McKeown said.

Such a policy would encourage “sustainability,” he said.

Genser’s amendment passed narrowly by a four to three vote, with council members McKeown, Herb Katz and Bobby Shriver voting against it.

McKeown’s motion to conduct a rate/cost analysis to explore other options and focus on sustainability passed unanimously.

Solid waste management received a similar treatment by the council.

Under Genser’s motion, staff will conduct a rate/cost analysis based on a 10 percent hike -- 6.2 percent over the scheduled 3.8 percent CPI increase -- that will apply across the board to local residents, as well as private garbage haulers who use the City’s transfer station and recycling services.

The motion -- which Genser called a “remedial measure” -- passed unanimously. But not until after some council members voiced questions.

“I think it’s important that staff brings us a breakdown of where it (solid waste expenditures) are going, literally, program by program……so we can make an intelligent decision,” Katz said, echoing the concern of other council members.

Referring to solid waste operations, Shriver said, “We still have no really good cost accounting of what it costs to run this.”

Also, earlier in the session, Shriver acknowledged receiving memos critical of the City’s practices from a private hauling company. He was apparently referring to Southern California Disposal, which is seeking to take over the City's transfer station.

While Shriver admitted that the company had a vested interest, he said the “level of questions and analysis I’ve received in these memos are very good.” Shriver said he wanted those questions answered before he would commit to rate hikes.

Throughout a discussion Council member Bob Holbrook compared to a “runaway train” that “hit the station,” several council members said they wondered why they weren’t made aware until last month of the shortfalls in the City’s utilities funds that triggered the urgent call for rate increases.

Utility funds, which were once vast reservoirs of money, have been drained over the last three years and will run dry unless "dramatic action is taken soon," according to City finance officials.

The water fund, which in 2002 held reserves of $17.5 million, has shrunk to a small pool of only about $5 million, finance officials said.

Similarly, the wastewater fund, which held $23 million three years ago, now has only about $10 million, City finance director Steve Stark told the council last month

"Year after year of having CPI increases that haven't been as great as the cost of providing the services is the main reason we've got into this imbalance," Stark explained.

Land fill expenses have increased 40 percent in the last two years and are expected to climb an additional 18 percent in the near future, Stark said.

During the same period, wages, salaries and benefits have increased some 10 percent, as have costs for fuel and vehicles.

In May, Stark presented the council with a variety of options -- all of which would raise customers' bills by 25 to 35 percent -- to keep the money-losing utilities in the black.

The biggest proposed increase is for tap water, which would either see a sudden jump of 31 percent in January 2006, or gradually increase by 40 percent over two years, or as much as 47 percent if the increase is spread out over four years, according to the plan.

Similarly, garbage collection would go up between 20 and 30 percent, and sewer fees between 25 and 30 percent, depending on how quickly the rate hikes were put into effect.

On Tuesday, 28 members of the public showed up to speak to the council about the budget. However, the proposed utility hikes, which was a separate item, only drew two speakers, Joy Fulmer and Joe Natolie, who are regular speakers at council meetings.