By Joe Tash
A dry winter and an expected increase in water costs from its suppliers means that the Santa Fe Irrigation District’s costs for buying water will rise by about $1.5 million next fiscal year, according to a budget presentation at the district’s Thursday, April 18, board meeting.
For now, the district is planning its budget for the fiscal year that begins July 1 without building in a rate increase for customers. Instead, the budget relies on an infusion of $1 million from reserves to cover rate increases charged by the district’s suppliers, the San Diego County Water Authority and the Metropolitan Water District of Southern California.
The district could decide to raise rates later this year or early in 2014, after it completes a planned “cost of service study,” which will help determine where the district’s rates should be set for the next three years to cover the cost of operations and capital projects.
The five-member board will have to weigh all factors before setting the rates for next year and beyond, said board president Michael Hogan in an interview. From his perspective, Hogan said, rates should reflect the increases charged by its suppliers.
Over the long term, he said, the district can’t keep dipping into reserves.
“You may get by on (reserves) one year but you find you’ve dug a deeper hole… it catches up to you,” Hogan said.
In recent years, the district has cut programs and staff, and maximized its use of local water to reduce its operating costs.
“We’re all trying to keep (rates) down as low as we can,” Hogan said.
Water customers in San Diego County have been hit with a series of rate increase in recent years, as wholesale water prices have spiked upward. The Santa Fe district has imposed annual rate increases for the past six years totaling 74 percent, including a 6 percent increase that took effect Jan. 1.
The district’s operating budget for the next fiscal year is projected at $22.6 million, a $1.5 million increase from the current year.
A staff budget report lists three factors for the increase in operating costs: an expected increase of up to 12.2 percent in imported water costs, a drop in the availability of cheaper local water and costs for meter replacement and valve maintenance programs.
For the past two years, the district has been able to meet about half of its water needs from its supply in Lake Hodges, reducing the need to buy imported water, according to the budget report on Thursday’s agenda.
However, due to a dry winter this year, the district is projected that it will only be able to meet about 30 percent of its needs from local supplies in the coming budget year. That amount could drop as low as 15 percent, the report said.
In addition to its operating budget, the district plans a capital improvement budget of $8.4 million, which includes replacing or upgrading district infrastructure such as pipes, valves and its treatment plant, as well as equipment and vehicles.
While the district could cover the increase in water costs from a corresponding increase in revenue due to this year’s rate increase, the district would be unable to fully fund its capital improvement budget, said Jeanne Deaver, administrative services manager. Therefore, the budget includes the $1 million transfer from a rate stabilization reserve fund.
The district’s labor costs are budgeted at $6.1 million next year, a 1.59 increase from the current year, resulting from increases in health care costs, as well as a new labor agreement, said the report.
The Santa Fe district serves a population of about 19,400 in Rancho Santa Fe, Solana Beach and Fairbanks Ranch. Its water supply system includes some 150 miles of pipeline.
Following this month’s budget preview, the board will receive a full budget document at its meeting in May. A public hearing will be held on June 20, after which the board could vote to approve next year’s budget.