HIDDEN VALLEY LAKE, Calif. – The Hidden Valley Lake Community Services District is preparing to hold public meetings this month to introduce a proposed new water and sewer rate structure that the district's general manager said is necessary in order to carry out state-required projects and update aging infrastructure.
Under the auspices of Proposition 218, the district has to hold public meetings to let the community weigh in on the rates.
The main public meeting will take place at 7 p.m. Tuesday, April 21, at the district’s administration office, 19400 Hartmann Road.
Ahead of that meeting, there will be a more informal event from 6:30 to 8 p.m. Tuesday, April 7, in the Coyote Valley Elementary School multipurpose room.
District General Manager Roland Sanford said the April 7 meeting will be the opportunity for people to talk through the proposals.
“There’s actually quite a few changes going on there and it’s somewhat complicated,” said Sanford.
Last year, the district – which has just under 2,500 customers – hired a firm, NBS, to conduct a rate study in preparation for the rate increases, Sanford said.
NBS completed the rate study about a month and a half ago. It is posted below as well as on the district’s Web site, http://www.hiddenvalleylakecsd.com/2014-2015-rate-study .
Out of the rate study has come a proposal for changing the district's rate structure, and a switch from bimonthly billing to monthly billing, which Sanford said will allow the district to keep better track of water use and detect leaks.
Sanford said what's proposed for the district is not a typical rate increase. “It’s a much more complicated project,” due to the rate structure changes.
The district has identified $20 million in needed capital improvements in the water system, Sanford said.
At the same time, he said the district has a structural deficit in its water system, meaning it isn't bringing in enough revenue to cover costs.
Part of that he attributed to the recession's impact on the community, and the fact that the district did not get the number of new hookups it had projected in a loan it had taken out in the 1990s for water system upgrades.
If adopted, over the next five years the proposed water rate increases would generate an additional $2.8 million, Sanford said.
Sanford said the goal is that, over the next five years, a portion of those funds, along with state and federal loans, would be used to finance and complete approximately $6.9 million of capital improvements.
On the sewer side, where there are $15 million in needed capital improvements, if adopted, over the next five years the proposed sewer rate increases would generate an additional $1.9 million million, Sanford said.
Over the next five years the goal is to finance and complete approximately $3.6 million in sewer system capital improvements, again using a portion of the rate increase proceeds combined with state and federal loans, according to Sanford.
Explaining rate structure’s proposed changes
Regarding the proposed changes to the rate structure, Sanford explained that the district currently has a flat rate for residential customers that comes out to about $74.32 bimonthly, which covers the first 3,000 cubic feet of water.
He said that customers who use less than that amount of water continue to pay for it whether they use it or not, and one of the main criticisms of the district's current structure is that there is no incentive in its rates for conserving water.
It also comes back to issues of environmental justice and water affordability. “Right now we certainly don’t have a strong financial incentive,” he said.
In the new tiered rate structure, the new base rate would cover 700 cubic feet of water, which is billed at the cheapest rate. Sanford said that equates to about 60 gallons of water per person per day, per capita.
Three additional tiers get progressively more expensive, Sanford said. So, while people can have landscaping, it will cost incrementally more to pay for it.
He estimated that roughly half of all customers consistently will fall in the second tier rate, which will be for 800 to 1,100 cubic feet of water per month. The third tier will be for 1,200 to 2,400 cubic feet of water monthly, with 2,400 cubic feet per month and above in the fourth tier.
Sanford said the average customer is looking at a $54 increase in their annual water bill, or just under $4.50 a month.
For the district's lowest 25 percent of users – who stay within 700 cubic feet of water use per month – in their first year their water bill will decline on the order of about $40.
“This is very good for them,” said Sanford.
The proposed rate structure currently shows incremental changes to the water rates, and Sanford said it would be the board's decision every year to actually implement those rate changes.
For example, in the 5/8-inch fixed meter category – the most common single family residential meter size – the current rate monthly is $37.13. If the rate increases are approved, in fiscal year 2015-16 the base rate would roll back to $27.54.
The base residential rates would, with board approval, then rise to $30.57 for 2016-17; $33.93 for 2017-18; $36.65 for 2018-19; and $39.58 for 2019-20.
“If you're a low water user, you’ll come out ahead. If you’re a big water user it will cost more,” Sanford said. “It is simpler.”
On the sewer side, which also is now billed bimonthly, everyone plays the same flat sewer rate of a little over $100 bimonthly, Sanford said.
Sanford said the district wanted to provide a more equitable sewer rate structure based on actual usage. In order to look at the amount of sewage generated, Sanford said they are looking at winter water use to help them make an approximation.
So far, the bulk of concerns from ratepayers involves understanding the new rate structure, which Sanford said is part of the reason for the informal April 7 meeting.
“This is a much different approach that what has been done here ever before,” and as such it requires an educational component, Sanford said.
The capital projects list
Sanford said NBS performed the rate study by starting with a financial plan for the district and how it will address its capital projects over the next five to 10 years.
Suggesting that aging infrastructure may be the No. 1 issue affecting water nationwide, Sanford said that maintenance and upgrades can be put off for a time but, ultimately, they have to be addressed.
One of the key questions asked, Sanford said, was, “How much revenue do you need over this time horizon to operate the district and do all these things you want to do?” There also was the question of how to raise the funds needed in an equitable manner.
He said the district needed to decide if it was able to fund all of its projects up front. The short answer, he said, is no.
Then, the district had to consider if it would borrow money or pay for the projects as it went, he said.
On the water side, the district decided to fund a third of its capital expenditure needs over the next five to 10 years, leveraging the revenue from the rate increases with funds borrowed through a state revolving fund and low-interest, 30-year loans from other sources.
As for the projects the district is planning, on the sewer side, “Our biggest concern is our sewer collection system,” he said. “The older system is on the order of 40 years old.”
He said there are a number of cracks and leaks, with roots pushing into some pipes. When it rained heavily in early December, Sanford said the district had a “tremendous influx” of what is called “inflow and infiltration.”
While the district's infrastructure held up during that heavy storm – in which there were 7 inches of rain in one day – “Admittedly, December was pretty dicey,” Sanford said.
He added, “That very thoroughly tested the situation here.”
Sewer capital expense projects will include refurbishing the system overall and upgrading various lift stations, Sanford said.
On the water side, Sanford said the projects will be more wide-ranging and “none of them are going to be very cheap.”
Among them are system upgrades to address new government-mandated rules for handling hexavalent chromium in drinking water, which will be an expensive project to undertake, Sanford said.
In that case of that requirement, the district's choices include building new facilities and processes to remove the hexavalent chromium or dilution. He said both are expensive, with many unknowns.
The district also needs to secure its water rights. It was hit with a temporary water hookup moratorium and curtailment last year, as Lake County News reported.
Sanford said the district has to petition the State Water Resources Control Board for changes to its water rights, which he said is a fairly expensive and complicated process.
“This is a big ticket expense that we’re looking at,” he said.
Then there are other more general issues, including deficiencies on the water side resulting from marginal water pressure in some parts of the district, Sanford said.
Sanford said the district will address those matters by upgrading water tanks and fire hydrants.
The district also has as a goal expanding its investment in solar power capability on the water side, like it has done for its water reclamation plant operations.
“It’s been very successful on the sewer side,” said Sanford, noting that it's done wonders for blunting the district's power expenses.
“Right now electricity is our second-largest expense,” Sanford said.
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Hidden Valley Lake Community Services District proposes new water and sewer rate structure
- Elizabeth Larson
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