City Council Grapples With Proposed Water Rates Increase

The South Pasadena City Council voted, 4-1, this past Wednesday to reject a recommendation from city staff to set a Dec. 4 date for a public hearing on the staff’s proposal to increase water rates for residents.

But the council agreed unanimously to direct the City Attorney to return with a revenue-raising notice as well as an alternative to it at the council’s next meeting, when the council would decide what course of action to take in the city’s longstanding effort to improve its water infrastructure.

The sole dissenting vote on the issue of not setting a Dec. 4 public hearing date on water rates came from Mayor Richard Schneider, who joined his colleagues, however, on the second part of a motion directing the City Attorney to bring back to the council a Proposition 218 notice for increased water rates as well as suggest another way to generate revenues to fix the city’s shaky and long-neglected water infrastructure.

Thorny Issue

The issue before the council at its bimonthly Oct. 16 meeting was a complicated one: A request by city staff to approve a Prop. 218 mailer to South Pas residents to increase water rates from 2014 through 2016 by a total of 19 percent in keeping with the 1996 state ballot initiative that allows local governments to collect revenue in a number of ways, including by raising fees for water delivery.

At its Sept. 18 meeting, the city council discussed a proposed increase in water rates—for the sixth time since 2009—and directed city staff to report back to the council with a Prop. 218 notice for the council’s consideration.

The idea was that after a 45-day period of notification and feedback from the community, the city council would—or wouldn’t—implement the proposed water rate increases.

But Councilmember Michael Cacciotti urged his colleagues to oppose the city staff’s recommendation to set a Dec. 4 date for a public hearing about proposed water rate increases.

Opposition to Prop. 218

Cacciotti said he was also opposed to the Prop. 218 mailer after talking to some fixed-income residents, particularly seniors, who, he said, were concerned that they couldn’t afford the water rate increases.

Councilmember Philip Putnam also expressed his strong opposition to the Prop. 218 mailer and suggested that any action that the council takes on water increases ought to be based on a public vote.

From 2009 through 2013, residents have faced a 90-percent increase, the councilmember pointed out. “If we approve these tonight, that’s basically a 100-precent increase in a four-and-a-half-year period, which is unprecedented,” he said, adding that Putnam, too, had probably mentioned this point to the council in the recent past.

Decaying Infrastructure

With the aid of a PowerPoint presentation, Cacciotti pointed out that the city has 85 miles of pipelines that are 70 years to 90 years old, “past their life cycle.” The city’s water system was installed in 1914, nearly a century ago, Cacciotti said, adding that six of the city’s seven reservoirs do not meet current seismic standards.

Further, from 2007 through 2012, the city has consistently used more water than it is allocated by the Upper San Gabriel Valley Water District, Cacciotti said, pointing out that this usage has led the city to pay hefty penalties that, according to a PowerPoint presentation he was referring to, total $2.96 million.

Water Bonds—and Water Rates

City Financial Director David Batt told the council in 2004 South Pasadena sold $8.8 million worth of bonds to fund water-related capital infrastructure projects. In 2009, the city sold a further $43.9 million in bonds to fund additional water capital infrastructure projects, he said.

The required debt coverage ratio of the bonds was 120 percent, and the city consistently raised water rates in an effort to maintain adequate reserves to meet its debt coverage, Batt said. As of Sept. 30, 2013, the balance reserve for the 2009 bond project was $26.49 million.

Batt gave an overview of the city’s debt service schedule, which was  $623,050 in 2010-11, $1.64 million in 2011-12, $2.66 million in 2012-13, and is expected to be about $3.37 million from 2013-14 onward.

In the past, the city council imposed water rate increases of 15 percent in both 2009 and 2010, 30 percent in 2011, 16 percent in 2012, and 14.5 percent in January 2013 (this year’s increase was 3.5 percentage points less than what city staff had recommended).

In January 2014, the city is proposing an 11-percent increase, and a 4-percent increase in both 2015 and 2016, which would cause a typical single-family home that uses 36 units of water to expect its bimonthly bill to increase from $160 to about $177.

“At that point we shouldn’t be anticipating any further [rate] increases,” Batt told the council.

During the public comment period, Diana Mahmud, one of the four candidates for the Nov. 5 city council elections, urged the council to create a low-income program for water sales, pointing out that the now-disbanded Water Council had advocated such a program starting in 2010 and the Natural Resources and Environment Commission NREC has continued with the same advocacy every year that the council has approved rate increases. (Mahmud served on both the Water Council and the NREC.)

Councilmember Cacciotti asked if it is true that although the city’s current balance reserves for debt coverage are roughly $26 million, the city needs close to $50 million to make capital improvements to its water projects. City Manager Sergio Gonzalez confirmed that the sum was $54 million. 

'They’re Dying With the Water Rates'

“They’re fed up with the water rates,” Cacciotti said, referring to residents he has met and talked to. “They want us to do something.” Putnam, who was the only councilmember to vote against the proposed increase in water rates at the Sept. 18 meeting, added: “They’re dying with the water rates.”

Cacciotti proposed offsetting some of the city’s debt repayment by using part of the city’s money from a so-called water efficiency fund of about $500,000, which, among other things, pays for the position of a water conservation analyst on the city staff.

But City Manager Sergio Gonzalez pointed out that the water efficiency fund was meant only for water conservation activities and projects, not for debt repayment.

Stay tuned for Patch's upcoming Q&A with South Pasadena Public Works Director Paul Toor about the city's water infrastructure.