MCWD Board approves rate changes
Board tables its discussion of water shortage surcharge.
The Mammoth Community Water District (MCWD) Board approved rate changes proposed last year by Raftelis Financial Consultants, Inc., at the Board’s meeting on January 22 (see public notice on p. 12). The Board promised at the meeting that additional revenue would go directly to a reserve for future maintenance and infrastructure improvements.
According to MCWD General Manager Pat Hayes in a December Sheet interview, the change in rates is not intended to help cover the cost of the Water District’s ongoing lawsuits against Great Basin Unified Air Pollution Control District and the Bureau of Land Management over Ormat’s Casa Diablo IV project, nor is it a direct response to the historic four-year drought. Rather, Prop. 218 requires the Water District consider rate changes every five years.
Passed in 1996, Prop. 218 is intended to ensure that rates and fees are reasonable and proportional to the cost of providing service. MCWD does not make a profit, but rather uses revenue to break even with the cost of providing services to the community.
Prop. 218 states that if 51 percent of customers reject the proposed rate increases, those increases don’t go through. Hayes said of the 9,000 letters sent to customers, the Water District received one letter in opposition.
MCWD last enacted changes in 2012. At that time, MCWD adopted an annual 2 percent increase in water rates and 1 percent increase in wastewater rates.
The MCWD Board adopted the same rate increases for 2016.
Hayes did note that because of adjustments to census data in the Raftelis Financial Consultants report, “for most of our ratepayers, there’s going to be a slight reduction” in rates the first year, before a slight increase in 2017 through 2021.
The District’s water service charges have two components: a fixed monthly base service charge, and volumetric water use sales. The base charge increases with meter size, given that larger meter sizes generally consume more water on average. A typical single family home has a monthly base charge of $14.01. That number will go down to $13.89 in 2016, before increasing again 2 percent each year.
The District’s water use sales, charged in dollars per kilogallon (kgal), are determined according to tiers. Single Family Residential (SFR) Tier 1 would have paid $1.52/kgal in 2016; now that Tier will pay $0.91/kgal. Tier 2, which would have paid $2.54, will now pay $2.12/kgal, and Raftelis recommended getting rid of SFR’s fourth tier, thereby increasing the Tier 3 rate from $4.47 to $4.66.
The MCWD Board also approved Raftelis’ proposal that Multi-Family Residential (MFR) be restructured from a tiered to a uniform rate, increasing MFR’s monthly base service charge and water use sales.
MFR monthly water base service surcharges will increase in 2016 from the $10.64 to $13.89, and increase 2 percent annually thereafter.
MFR water commodity rates will increase from $1.52 to $2.16, and increase 2 percent thereafter.
Wastewater rates will increase several cents to several dollars, depending upon the customer type.
“We understand why the rates are increasing, but when there are times of prosperity, will rates go down?” wondered David Harvey.
MCWD Board Vice President Tom Cage’s reponse: “Is a rate decrease possible [in times of prosperity]? Yes. Is it likely? No.”
Hayes noted that the Water District still needs to build up its reserves after “unexpected expenses” over the last five years, including paying the Los Angeles Department of Water and Power (LADWP) $3.4 million in a settlement granting MCWD water rights in Mammoth Creek.
Hayes also noted that the cost of benefits and health insurance increase every year regardless of revenue taken in by the Water District (Hayes’own health insurance went up by 16.5 percent this year, according to MCWD Finance Manager Jeff Beatty).
The MCWD Board did not approve a proposed water surcharge intended to recoup water rate revenue lost when MCWD rate payers cut their water use by 30 percent last year.
Hayes explained at the meeting that in drought years, revenue drops but the cost of providing water goes up. The wells and pumps are working harder to get the water up from deeper in the ground, so not only is there less revenue, but it’s more expensive to operate the system.
The goal of the surcharge, which could only be enacted during drought, “is to maintain the same net revenue as would be expected in non-drought conditions,” the Raftelis report states.
MCWD Finance Manager Jeff Beatty’s presentation highlighted that the Water District loses between $162,000 to $812,000 in revenue during Level 1 to Level 4 water restrictions. Level 1 represents a reduction in water use by 10 percent; Level 2 by 20 percent, and so on.
The surcharge would be based upon these restrictions. The surcharge would increase Single Family Residential and Multi Family Residential rates by $1.31 to $6.55 dollars per month, from Level 1 to Level 4 restrictions. Cage said the money would go toward reserves.
Danna Stroud suggested a policy in place for transparency for the public, so that when the surcharge is triggered the public knows why and is informed on where the money will go.
Cage’s response: “We don’t spend frivolously.”
The Board ultimately tabled its discussion of the surcharge until its March meeting, to give the Water District a chance to see whether El Niño does or does not deliver. If the surcharge is approved, it would be imposed 45 days later, likely in May.
