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Rancho Santa Fe water district to do another ‘cost of service’ study

By Joe Tash

The Santa Fe Irrigation District is gearing up once again to study future cost and revenue projections, which could lead to recommendations for additional water rate increases for district customers.

The district last conducted a “cost of service study” in 2010, which led to a proposal by district staff to raise rates by up to 12 percent for three years, to a maximum of 36 percent. In fact, the district’s board of directors raised rates in increments of 12, 6 and 6 percent, with the most recent increase taking effect on Jan. 1 of this year.

At the board’s meeting on Thursday, March 21, district staff recommended hiring Raftelis Financial Consultants, which also conducted the 2010 study, at an estimated cost of $130,000. However, directors voted to put the contract out for competitive bid, which will add several months to the process, said general manager Michael Bardin.

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That means the study may not be completed in time to implement any proposed rate increase by Jan. 1, when the San Diego County Water Authority, which supplies the district’s imported water, is expected to increase its rates to member districts.

Therefore, the Santa Fe district may have to dip into its rate stabilization fund, a reserve account, to make up the difference, Bardin said.

“The wholesale water costs are going to go up and we’re going to need to generate additional revenue to cover those (costs),” Bardin said.

The cost of service study will identify current revenues and expenditures, project future revenue requirements by forecasting operating and capital needs, and propose changes to current and future rates and fees, said a staff report.

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Once the study has been completed and a recommendation is made for rate increases for coming years, the district is required by law to notify ratepayers and hold a public hearing. The water rate proposal could cover a period of one to five years, a decision that will be made by the district’s board of directors.

Bardin said he hopes to come back to the board with a recommendation to award a contract for the study in about two months, and the study itself will take six to eight months to complete.

The district has two sources of water to serve its 19,400 customers, who live in Rancho Santa Fe, Fairbanks Ranch and Solana Beach — imported water, which it buys from the county water authority, and local water, which comes from Lake Hodges and treated at the district’s treatment plant.

Increases in the cost of imported water, along with a need to pay for maintenance and upgrades of the district’s water pipes, valves and other infrastructure, have led to rate increases totaling 74 percent over the past six years.

One aim of the new rate study, said Bardin, will be to look at whether the district can provide more detail in its bills, to make it clear to customers that some of the increased costs are coming directly from the district’s suppliers, the county water authority and Southern California’s Metropolitan Water District, rather than from the district’s own operating costs.

For example, Bardin said, the district is charged a set fee from the water authority for its program to expand reservoir capacity in San Diego County, which will provide a greater local supply of water in case of an earthquake or other natural disaster.

Also, a planned desalination plant in Carlsbad will provide a more reliable local supply, but water from the plant will be more expensive, another factor in future water rate increases.

“We think if we can pull some of those (costs) out, that really expands the dialogue of what are your water rates paying for?” Bardin said.

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At the same time, the district is working to keep a lid on costs within its control, such as labor and pensions, Bardin said. Currently, he said, the district’s rates are in the lowest 25 percent of San Diego County water agencies.

“At the end of the day, we believe that’s doing a good job,” he said.

At its meeting Thursday, the board also heard a report about a draft “hazard mitigation plan” the district has prepared. This plan identifies potential risks to the district’s water supply, such as wildfires, earthquakes or dam failures, along with actions to eliminate or reduce those risks.

The draft plan was prepared with a $30,000 grant from the Federal Emergency Management Agency, or FEMA, said Bardin.

The document is available for public review and comment on the district’s website, www.sfidwater.org, and a public hearing to gather comments about the plan is set for 5 p.m. on Wednesday, April 17, at the district’s offices.

Once the plan is approved by FEMA and the district’s board of directors, the district will be eligible to seek federal grants for such projects as seismic retrofitting of district water storage tanks, said Bardin.


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