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By Anita Varghese
Special to The Lookout
May 11 -- Under a proposed rate structure presented
to the City Council Tuesday, Santa Monicans could face water
rate increases every July through 2011 in order to keep Santa
Monica’s water and wastewater fund afloat.
If rate increases are not implemented, there won’t
be enough money in the fund to operate and maintain the water
system and replace or upgrade existing facilities, according
to a water rate study presented by City staff.
All reserve funds are projected to be depleted by 2008-2009,
the study warned.
“We are looking at the rates over five-year windows
and going forward on the water and wastewater sides,”
said Gil Borboa, the water resources manager.
Borboa said the City’s current practice of implementing
a Consumer Price Index (CPI), inflation-only rate increase
“is insufficient to keep our reserves and fund balances
at a healthy level.”
Santa Monica purchases 95 percent of its water from the Metropolitan
Water District and has not implemented a water or wastewater
rate increase since 1996, according to the report. Annual
CPI-based rate increases have been in effect since 2001.
The existing water rate is structured so that every single-family,
multi-family and non-residential customer pays a bi-monthly
charge based on the size of the water meter, City staff said.
Customers are also charged a usage rate based on the quantity
of water actually used in each two-month billing period.
The existing wastewater rate structure consists of a fixed
service charge based on the size of the water meter plus a
usage rate based on estimated wastewater flows during the
bi-monthly billing period. A discharge factor is applied to
the metered water consumption to represent the portion of
water that is used and returned to the wastewater system.
City staff and The Reed Group consultants identified four
rate increase options in the study, with staff recommending
that the council choose the fourth option, which equalizes
annual rate increases at 11 percent per year.
“Rate increases will be consistent across the planning
period,” the City staff report said. “All reserves
will be reestablished to target levels at the end of the planning
period.
“This option also utilizes the rate stabilization and
capital reserves, thereby providing additional financial flexibility
to respond to unanticipated occurrences during the next five
years.”
A current water rate for average single family use is $70.52
per billing cycle and would increase to $74.21 (a 5.23 percent
change) under option four. Average multi-family use is $170.23
and would increase to $176.12 (a 3.46 percent change).
Average use for non-residential buildings with water meter
sizes of one inch, two inches and four inches are $75.01,
$322.47 and $1,207.83. Estimated increases per billing cycle
under option four for those non-residential buildings would
be $81.40, $424.60 and $1,559.79 (changes of 8.52, 31.67 and
29.14 percent).
Wastewater treatment services are provided by contract agreement
with the City of Los Angeles. Santa Monica is one of Los Angeles’
28 subscribers and receives wastewater treatment services
from the Hyperion Treatment Plant in Playa del Rey.
Under the terms of the agreement with Los Angeles, Santa
Monica pays a proportionate share of the operations and maintenance
expenses as well as capital charges of the Hyperion treatment
and collection system.
The wastewater rate study outlines system expenses such as
operation and maintenance costs associated with collecting
wastewater and debt coverage on an existing capital bond.
Revenue is mainly received from wastewater service charges
collected on a bi-monthly basis from Santa Monica customers.
For this study, City staff worked with Raftelis Financial
Consultants. Together, they identified three alternate approaches
to meeting wastewater revenue requirements. The first two
approaches include multi-million dollar bond issues in fiscal
year 2008-2009 and fiscal year 2010-2011.
The third approach, a pay as you go funding scenario, was
recommended to City Council. No debt would be issued during
the five-year planning period and all capital expenditures
will be funded through available cash and wastewater rate
adjustments of 30 percent, 25 percent, 20 percent and 10 percent
between fiscal years 2008 and 2011.
“A debt funding approach will increase the overall
costs for ratepayers due to bind issuance and interest costs
that must be added onto the base principal amounts,”
stated a city staff report. “Staff believes that the
pay as you go option is the preferred alternative.”
Under the proposed pay as you go structure, a single family
customer who pays an average current bi-monthly rate of $41.37
would pay $55.34 (a 33.77 percent change). A multi-family
use customer who currently pays $173.59 bi-monthly would pay
$235.60 (a 35.72 percent change).
Non-residential use customers who currently pay $83.56, $469.75
and $2,401.13 for average wastewater system use would pay
$98.46, $616.65 and $2,864.79 (changes of 17.83, 31.27 and
19.31 percent).
City Council members expressed concerns about the effects
of the water and wastewater rate increases on renters, senior
citizens and low-income households. The council will consider
these matters when it is presented with more refined recommendations
on June 19.
The need for proposed adjustments in the two rates has been
the subject of City Council discussions since May 2005. If
the City Council approves staff recommendations next month,
rate increases would kick in this July.
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