By Joe Tash
A discussion of the Santa Fe Irrigation District’s budget for the fiscal year that begins July 1 triggered a lively debate over whether the agency is doing enough to cut expenses in the face of rising operating costs.
The proposed $37.47 million budget for 2014-15 includes no water rate increase for the second year in a row, but district officials said they will not be able to make a previously planned $1 million contribution to the district’s capital improvement reserve fund.
The reserve contribution was part of the rationale given in late 2012 when the district’s board approved a 6 percent rate increase for customers that took effect Jan. 1, 2013.
Director Greg Gruzdowich, who has opposed rate increases and advocated for cost-cutting since his election to the board in 2012, said he believes the district should stick by its decision to contribute to the capital improvement (CIP) reserve fund. Instead of skipping the payment, he said, the district should cut expenses.
“There’s a temptation to use the CIP reserve as a piggy bank,” Gruzdowich said, contending that his predecessors, when voting to raise rates in November 2012, said half the money from the 6 percent hike should go into capital reserves. “We basically are deviating from that.”
But district general manager Michael Bardin blamed increases in operating costs, rather than a failure to tighten the district’s belt, for the inability to make the reserve contribution.
“This budget is very, very tight,” Bardin said. “Our labor budget is lower than in 2008. We can’t get any tighter than that.
“We’ve squeezed it every which way from Sunday. This is our best cut. We don’t bring you (a budget) with any fat in it,” Bardin said.
According to Bardin and a staff report included in the board’s agenda for its meeting on Thursday, April 17, operating costs are projected to rise $810,000 next year, due to a number of factors, including expected rate increases from the district’s water suppliers. Also adding to the increased costs are maintenance projects, conservation efforts and a cost-of-service study that will look at the district’s revenue requirements for the coming years.
Other board members said they were satisfied with the district’s efforts to contain costs, such as leaving five vacant staff positions unfilled.
Director Alan Smerican said Gruzdowich’s comments imply that Bardin and his staff have not already worked hard to contain costs, when in fact they grapple with such issues every day.
“Your approach is there’s always something left to cut and that isn’t necessarily true,” Smerican said.
However, Gruzdowich charged Bardin and his staff with looking for further savings. “I’d like to see them sharpen their pencils in another iteration.”
Bardin said staff will scrutinize the budget before the board’s May meeting for opportunities to cut expenses, but didn’t expect the budget proposal to change significantly.
The district’s proposed spending plan includes operating costs of $23.1 million, capital projects totaling $13 million, and debt service of $1.3 million. Of the operating costs, the biggest items are imported water purchase for $8.4 million and labor costs of nearly $6.2 million.
Between 2004 and 2013, the district raised rates each year from 6 and 20 percent. Water bills in the district — and across the state — have basically doubled during that period. One factor in the increase has been hikes in the rates charged by the district’s suppliers, the San Diego County Water Authority and the Metropolitan Water District of Southern California.
No increase was imposed in 2014; instead, district officials pulled $1 million from a rate stabilization reserve fund to balance their budget. The district does not propose to tap into that fund again next year.
A cost of service study will soon be undertaken to determine the district’s revenue needs over the next five to 10 years, said Jeanne Deaver, the district’s administrative services manager. While no rate increase is currently proposed for 2015, “It could change based on the results of the cost of service study,” she said.
If the district does decide to seek a rate increase for next year, it will have to provide advance notice to its customers and hold a public hearing, Deaver said.
The Santa Fe district serves 22,000 customers in Rancho Santa Fe, Solana Beach and Fairbanks Ranch.