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What's At Stake In San Diego Water Rate Vote

An engineer fills a container with recycled water at the Advanced Water Purification Facility at San Diego's North City Water Reclamation Plant, May 8, 2015.
Associated Press
An engineer fills a container with recycled water at the Advanced Water Purification Facility at San Diego's North City Water Reclamation Plant, May 8, 2015.

What's At Stake In San Diego Water Rate Vote
What's At Stake In San Diego Water Rate Vote GUESTS:David Alvarez, councilman, city of San Diego Lani Lutar, executive director, Water Reliability Coalition

Coming up, a public hearing will take place tomorrow on the city's proposed water rate hike. You are listening to KPBS Midday Edition . This is KPBS Midday Edition. I am trying to. San Diego's a city leaders are read for a big public hearing tomorrow the city Council is opening its doors to hear from citizens on proposed water rate hikes. The proposal includes a 17% rate hike next year with incremental rate increases over the next four years. The whole package represents eight The whole package represents 836% increase for the city of San Diego. Among those protesting the rate hike package are officials from the South Bay who are looking at a more than 200% increase in the rate's San Diego charges for purple pipe recycled water. Joining me is San Diego City Councilman David Alvarez. David welcome to the program. Lonnie Plutarch, the executive director of the water reliability coalition, welcome to the show. We invited the city water Department to join us, but a representative was not available. Lonnie, what is your understanding about why the city needs this big boost in water rates? Tuesdays of votes is going to be a vote for water infrastructure. The city of San Diego is reliant on a significant portion of water that is imported. This imported water is expensive. It is not the most environmentally friendly source of water supply. City of San Diego is proposing to have a package of the funding that will pay for the new desalination project that is coming online at Carlsbad. It is going to pay for peer water San Diego which will ultimately provide one third of the city's water supply. We have all of the important infrastructure that we needed to continue to maintain and invest in. If we don't invest in this infrastructure, we are going to go back to the days of water main pipes breaking at an excess of rate, which disrupts communities and businesses and result in wasted water and a lot of runoff. That is not good at all for San Diego. David Alvarez, do you agree that a water rate hike is needed? The premise that Lonnie puts forward is absolutely true. We have a need in the city for infrastructure. It goes beyond our water Department. It is everywhere in the entire city. You have to find a way to ensure that you maintain that infrastructure and you keep it running directly. And investments now is much too or than investment in the future. The problem with this water rate structure and the one that is being proposed is that it looks at not continuing to incentivize conservation. We have asked people over the last several months, and they've been among those who have been saying to cut back on the water use. We are in the drought situation, let's not use water as much. Make sure you are very careful with your water use. A lot of people have responded positively. We thank them for that. They have done the right thing. They have conserved. Now, the city is basically going to say to them thank you for conserving. Here is an increase to your water a. That is where I have said that we need to come forward with a different pricing structure so that those who are conserving water can continue to not see an increase in their water rates. Those who are being wasteful, because there are still people who use water in ways that are a luxury, they should be paying substantially more for that very expensive water that is coming in from the California water project and from out of state. Those people should be paying for it. Is a possible, Lonnie, for us to have the kind of rate increase that David Alvarez is saying? With that pay for what we need if we only increased the rates on people who are using too much water? That is precisely the problem. Even if we would have a restructuring or reforming of the existing rate structure, we still have to increase water rates. Nothing prevents that because of the amount of funding that we are talking about. I think that over the long run, we can look at reforming rate structures, but right now, what we know is that rejecting this rate increase is not a viable or responsible option for the city Council. Immediately, we would see his $345 million of the general fund at risk. What I mean by that is that if the rate increase does not pass, the general fund is going to be making up for some of the shortfalls. Over the five-year period of the rate increase that is proposed, we know that $345 million would have to come out of somewhere, and the only place that the city has available as an alternative option is a general fund. That means reduction in services to police, fire, neighborhood services, libraries, and that is not an option that anyone wants to pursue. It would also lead to an immediate downgrade from the rating agencies. We don't want to go back to those days where the city had a terrible reputation. We want to move forward. We have had so much progress in recent years. Want to keep up with that. One of the major criticisms from David Alvarez and from others is how much and how quickly the water rates will increase the average water bill. For instance, a typical single-family home would increase from $71 to the water rates will increase the average water bill. For instance, a typical single-family home would increase from $71-$77. That would be on January 1. Then, it would jump up to $82 on July 1. Isn't that a rather large amount for using the same amount of water? Is not a bit of a large increase for a typical family to be able to handle? I don't think anyone is saying that it isn't going to be a difficult pill for all of us to swallow. The alternative of doing nothing is going to be much more costly to the taxpayers of San Diego. One of the things that is directly tied to this rate increase is a funding for peer water San Diego. If we don't have it. Water San Diego funded, with the vote of the Council tomorrow, what will happen is that the city will no longer have the support of the environmental community to seek a waiver for the wastewater treatment plant at Coloma. That upgrade would cost $2 billion. It would not provide an additional drop of water. The choice is quite simple when you look at it. Should we invest in a pure water which would ensure that we would not have to do these unnecessary costly upgrades at the point Loma treatment land and provide up to one third of the city's water supply? Or instead we could pursue the infrastructure project that is simply going to make the federal government happy but won't do anything to solve our water supply reliability challenge that the city has space for many years. David Alvarez, do US member of the Council have an alternative to the rate hike structure that has been proposed by the department? For extra increases, they boost rates a total of 36%. I want to start off by saying that the full city Council supports making sure that we have peer water. We make that a reality in the future, and I don't think you have a Council member that has been a stronger advocate than myself. This should have been done many years ago. That was a mistake I city in the past. We also don't here, even though there is a call for drastically reducing services, I look back at what we have seen this summer with the mayor stepping in front of the issue of keeping the charges in San Diego. If this really is that critical of an issue, and if it is that much of an emergency, where has he been on this issue? What I have told him personally is that we have to bring forward a rate structure that makes sense to those who can serve and those who continue to use water as a luxury. They should pay. I have been very clear about that from the beginning. I think that Sandy Akins want to see that. That is the right thing to do. Until we do that, there are several hundred employees that work directly for the mayor of the public utilities department. They have got consultants available. They pay them to figure this stuff out. That is what I am asking for. Bring us forward a rate that makes sense to the everyday person for potable use and for the recycling rate. Make sure that it is fair and equitable. What are your fears about this water rate hike? I have a fear that people have done everything they can. They are conserving water. Now, you're going to increase the rates. That could potentially put them in a very difficult situation going forward if that continues as a requirement from the state, we are going to have to figure out how to ensure that we are conserving water. People are not going to want to. There will be no incentive to do so. Why would they if there rate will increase anyway? That is a concern. Ultimately, Lonnie's right. We need to think about long-term sustainability of our water. Everyone is in support of whatever investment that takes. People will support that. What we can't support is an unfair rate structure. Lonnie, when you are explaining the need for this water rate hike, you talked about the expense of water and the sources of water that we are going towards. They are going to be more expensive sources, but we have been proactive in trying to get new sources of water or San Diego. That has been highly praised. Also, one of the reasons that we needed this water rate hike is because of conservation. There is not as much water -- as much money as people being generated by people using less water. The San Diego City Council asked to address this issue responsibly. What they don't have control over is what the governor has mandated earlier this year. What we do know is that imported costs have risen at a dramatic rate. What we also know is that we want to San Diego to have locally controlled water in the future. We don't want to continue to be as exposed to the situations. We want a drought proof source of water supply. This rate increase does just that. It pays for what we have control over. What that is is ensuring that we have a reliable water supply or generations to come. It is also going to ensure that we fund infrastructure to pay for water pipes and infrastructure that ensures that we don't have the water main breaks that we used to have in the past. I remember that it was not that long ago that we used to have one sewer spill a day in the city of San Diego. It also was not that long ago that we used to have 110 water main breaks a year. If we don't fund the infrastructure, as a difficult of a vote at it is going to be, we will return to those times. We are going to have to hit the general fund and reduce additional services. This is not an easy decision for any of us to make. It is one in which we don't have an option. We must move forward if we're going to do the responsible thing for San Diego ratepayers. A rate hike like this may be needed. There is controversy about that. It is sure to hit low income families very hard. I am wondering if advocates as part of the proposal if there is anything being put forward that the city might do to mitigate that impact in some way. That is a question that a number of council members have asked. My understanding in my discussions with the public utilities department is that there are some restrictions on what the city can do because of state proposition to 18 which was passed a number of years ago. With that being said, the department is going to look at the issue very carefully in bringing forward an item to Councilman David Alvarez is committee, which he chairs. They will look at how you can best work with its customers for those that may need some help with payment of the rate increase. That might mean installment plans and so forth. That is a discussion that will be coming forward to the Council in the beginning of the year. I know the department is committed to do anything they can to provide relief for those that need a. Speaking of prop 218, David Alvarez, city residents were sent a notice. Do you think it was clear enough on that form that this notice was actually a valid -- ballot that people could vote against the water rate hike? The notice that was received was lengthy. I received it. I the customer. The one thing that was clear thanks to Council members who wanted to make sure was that on the front of the notice is said that water rate increase. It was not entirely clear because there was a lot of information. It was in there. If enough petitions are received that are against the increase, then that would be sufficient for the increase not to go forward. There is a lot of information on this particular notice. I just want to go back because there is a unique opportunity here. We are being challenged by this problem. It is a very real problem for our region. We need all of the political leadership. Just like the mayor called on the governor to move expeditiously forward on this Chargers Stadium. We need to start calling on our state leaders to let us move forward on some of these local problems. That is what we are going to do today at the hearing. We are trying to declare a state of emergency locally. We need to do that more so that we can get the solutions that we need to incentivize the conservation to charge the people who are being wasteful and have used water is a luxury. They can help pay for the infrastructure that we do need. That is very expensive water. Anything we bring from out of town is very expensive. All the costs associated with that need to be recuperated. Of individuals choose to use water as a luxury, that means that it is costing us more and they should be paying for. It is pretty simple. My final question to you, Lonnie, is there a fundamental message that is part of the overall proposed increase in water rates in the city of San Diego? Is it something along the lines of the era of relatively inexpensive water over in San Diego? I would say that what is coming forward is going to be much more cost effective than of the alternative of doing nothing. This water rate is about ensuring a reliable water supply, locally controlled for San Diego for decades to come. I do believe. Unfortunately, we're not going to see water rates go down in the future, but it is a question of if we want to pay and make sure we are addressing the issue responsibly in a fiscally prudent manner, or are we going to continue to kick the can down the road which will mean that we are going to see even higher rate increases in a matter of 15 years? That is what I believe. We need to make the responsible decision tomorrow and move forward continued funding for infrastructure. The public hearing on the proposed water rate hike will take base before The San Diego City Council and that public hearing will begin at 10 AM tomorrow. I have been speaking with San Diego City Councilman David Alvarez and Lonnie Plutarch, executive director of the water reliability coalition. Inc. you both very much.

What’s At Stake In San Diego Water Rate Vote
The San Diego City Council is set to vote Tuesday on a big water rate increase. But why is the increase necessary, and what will happen if it's rejected?

The San Diego City Council is set to vote Tuesday on five water rate increases that would occur between January 2016 and July 2019, ultimately raising rates by 41 percent above their current levels. Here are answers to some basic questions on the proposal.

Why is the rate increase necessary?

The common thread connecting all the reasons for the rate increase is California's drought, which is in its fourth year.

Broken down into specifics, a primary reason for the increase is San Diego's dependence on outside sources of water. The city imports 85 percent to 90 percent of its water from the San Diego County Water Authority, which in turn buys most of its water from the Metropolitan Water District of Southern California. Those wholesalers have increased their water rates recently, and the city's rate increase would pass on those added costs to local water customers.

Blue pipes hooked up to filter canisters inside the Carlsbad desalination facility on July 8, 2015.
Nicholas McVicker
Blue pipes hooked up to filter canisters inside the Carlsbad desalination facility on July 8, 2015.

Two large-scale projects to increase San Diego's water independence are currently underway. The first is the Carlsbad desalination plant, which is expected to come online before the end of the year. The plant was constructed by a private company, but the company is expect to recoup its investment by charging some of the highest water rates on the market — which will be passed onto ratepayers across San Diego County. The second project is San Diego's Pure Water recycling program, which turns sewage into potable water. The program aims to provide a third of the city's drinking water by 2035, and the city has to pay for new infrastructure to meet that goal.

The most confounding reason behind the rate increase is the state-mandated conservation. About 80 percent of the water department's costs are fixed — these include staff salaries, water treatment chemicals, electricity and infrastructure maintenance — but most of the city's revenue fluctuates depending on how much water people consume. So when people use less water, the city makes less money and is forced to raise its rates. Councilman David Alvarez has been one of the most skeptical critics of the rate increase, saying the proposal essentially punishes water customers for conserving. He has suggested increasing the water rates only for the highest users, instead.

Why does the water department get most of its money from water sales? Isn't that unstable?

Believe it or not, the system is actually designed to incentivize conservation. Most water departments charge a "base fee" that doesn't change month-to-month, along with a "volumetric fee," which depends on water usage. Having a lower base fee and a higher volumetric fee means water customers can make a bigger dent in their water bills when they cut back on usage. In fact, those who have conserved water in San Diego have likely seen significant reductions on their water bills.

The state of California encourages this kind of system by offering grants and loans to city water departments that use it. But Brent Eidson, deputy director of external affairs for the San Diego Public Utilities Department, said the state recently relaxed this requirement, and city staffers have promised to reevaluate the rate structure. They plan to present the City Council with a study of alternatives by June 2017.

What will happen if the rate increase is rejected?

City staffers give a dismal outlook if the City Council decides to keep the rates as they are. Water quality would remain the department's first priority, said Public Utilities Department Director Halla Razak, and all other non-essential spending would have to be gradually halted.

Water Rate Fact Sheet
The San Diego Public Utilities Department compiles a number of details, facts and figures on the proposed water rate increase.
To view PDF files, download Acrobat Reader.

The water department says it would be forced to reduce staff, which would in turn affect its ability to serve its customers. It says it would also have to suspend the Pure Water program, as well as the installation of "smart meters," which help customers monitor their usage.

Fiscal consequences could include dipping into the city's general fund to cover the water department's costs, which could then put the city at risk of a downgrade by credit rating agencies. But perhaps the worst consequence of not raising water rates would be the continued deterioration of San Diego's pipelines. Some of the city's pipes are 100 years old, Razak said, and breakages are not uncommon. They result in tremendous water waste, and repairing the pipes after they break is far more costly than replacing them in advance.

What if the water department ends up with more money than it needs?

The department plans on commissioning two independent audits of its finances as the rate increases are implemented. If those audits determine that the rate increases were excessive, city staffers may propose halting the future rate increases, or lowering the rates to their previous levels. The process of raising water rates can be long and politically difficult, so staffers have presented the maximum rates they expect to be necessary to avoid asking for another rate increase in the future.

Where can I watch the council meeting?

You can watch the meeting via the City TV website. Public comment on the rate proposal is scheduled for the City Council's morning session, which begins at 10 a.m. The council vote is scheduled for the afternoon session, which begins at 2 p.m.

What’s At Stake In San Diego Water Rate Vote