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City Council to vote on rate increases for San Dieguito Water District

ENCINITAS — Residents who live in the San Dieguito Water District (SDWD) could see their bills go up as much as 16.6 percent in 13 months. 

The Encinitas City Council will hold a final vote on a double rate hike Aug. 21 at 5:30 p.m.

If passed, rates will increase 8.1 percent in September for the average SDWD customer. Following that, another rate increase, as much as 8.5 percent, would take effect July 2014. However, the second rate hike percentage isn’t set in stone.

“For the July 2014 increase, it’s up to an 8.5 percent increase,” said Bill O’Donnell, assistant general manager of SDWD. “It could be lower than that.”

A better-than-expected fiscal situation next year would lead SDWD to recommend less than 8.5 percent for July 2014, O’Donnell said.

The district bills the average residential customer $111 every two months. Under the proposed September increase, that will rise to $120.50. And if the maximum 8.5 percent increase is locked in, water bills would jump to more than $130. Those figures don’t include a roughly $5 fee imposed by the county on top of each bi-monthly bill.

Among the reasons the San Dieguito Water District is proposing a rate increase: infrastructure upgrades, including for the R.E. Badger Filtration Plant, which treats water for the district. Image courtesy of San Dieguito Water District
Among the reasons the San Dieguito Water District is proposing a rate increase: infrastructure upgrades, including for the R.E. Badger Filtration Plant, which treats water for the district. Image courtesy of San Dieguito Water District

The 8.1 percent is an average; those on the lower end of the water-use spectrum wouldn’t get hit with as high of an increase. The converse applies for those who use more water than most.

Should the rate increases pass, SDWD customers would still have the second lowest water bill among county agencies for the 2013-14 fiscal year, O’Donnell noted. However, SDWD could jump up in the county rankings given the second rate hike.

O’Donnell said the increase was put on the agenda due to SDWD having less access to local water.

Water from Lake Hodges was previously only available to SDWD and Santa Fe Irrigation District customers. But the city of San Diego recently began pumping water from the lake to its residents. Because the pie is now split three ways, SDWD will have to rely more on costly imported water.

And the pie is smaller. A dry winter and spring this year left a depleted supply for the districts to draw on.

“Potable water costs are projected to increase 38 percent this year for the district,” O’Donnell said.

The district got 65 percent of its water from Lake Hodges in the past three years. But in two years, SDWD forecasts that number will be roughly 36 percent.

Also, SDWD must pay for a joint 10-year capital improvement plan, which is projected to cost $17.8 million. Notably, the district is upgrading the R. E. Badger Filtration Plant — a facility in Rancho Santa Fe that treats most of the district’s water. As another example, SDWD is replacing a station that pumps water to the district from the San Dieguito Reservoir.

For this fiscal year, SDWD budgeted $13.9 million in revenues, which doesn’t include the proposed increase. Expenditures are expected to total $15.6 million.

If the City Council adopts the proposed rate increases, it would bring in an additional $985,000 in revenue this year. It’s unknown how much added revenue would come in for subsequent years since the percentage of the second increase hasn’t been settled.

Should the City Council vote against the rate hikes, O’Donnell said the district has a few options. It could continue with planned infrastructure projects and let reserves drop below target levels, potentially hurting SDWD’s AA+ credit rating.

“Which would mean higher interest rates should we decide to issue debt in the future,” O’Donnell said.

Or SDWD could defer scheduled maintenance throughout the city. But this could lead to water main failures and other breakdowns, he said.

SDWD customers, like most in the county, have seen their bills climb over the past five years. The average residential user was charged $81.60 by SDWD in March 2008, compared with $111.80 in March of this year.

The last SDWD rate increase was two and a half years ago. As a result, water bills went up 13 percent. The Encinitas Taxpayers Association led the fight against that rate hike, arguing the SDWD should give greater weight to pay cuts for its employees.

This time around, Bob Bonde, president of the association, said the group isn’t actively opposing the increase, because members are currently focused on fire and ambulance issues.

A subcommittee made up of councilmembers Mark Muir and Kristin Gaspar recommended the rate increases after reviewing a rate study from Raftelis Financial Consultants.

Of the alternatives presented in the study, Muir said that the rate increases are the best option in light of tough fiscal realities, including the rising price of imported water and drought conditions.

Further, he said projects like upgrading the Badger Filtration Plant are important for the district over the long term.

“Investment into key infrastructure is the best way to keep water rates down in the future,” Muir said.

Two months ago, the councilmembers tentatively backed the subcommittee’s recommendation, sending the proposed increases to a final Aug. 21 City Council vote.

SDWD serves more than 38,000 customers in the western parts of the city, including Leucadia, Old Encinitas, Cardiff and portions of New Encinitas. The Olivenhain Municipal Water District covers the eastern part of town.

More than 13,000 rate-hike notices were sent to residents. So far, SDWD has received 10 letters objecting to the proposed increase. Protest letters can be turned in up to the Aug. 21 meeting.

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