Rancho Santa Fe water district to use additional reserve funds to help cover expenses this year
By Joe Tash
An unusually dry winter in San Diego County means the Santa Fe Irrigation District will need to take an additional $700,000 out of reserves to cover its expenses this year, the water agency reported Thursday, Jan. 16.
In budgeting for the current fiscal year, which runs through June 30, the Santa Fe board opted not to raise rates on its customers in 2014 for the first time in more than a decade. Instead, the district decided to pull $1 million from its “rate stabilization fund” to cover increased costs, including the costs of imported water from its suppliers.
However, because of the lack of rainfall needed to fill Lake Hodges this winter, the district will have to buy more imported water than anticipated, meaning it will have to pull a total of $1.7 million from reserves.
District staff reported on the developments at the water board’s regular monthly meeting, during an annual mid-year budget review. While the district had budgeted for using cheaper local water for 30 percent of its needs, the actual amount of available local water will be closer to 11 percent, said the report.
That means the district will have to buy more expensive imported water at an additional cost of about $2.4 million. The added expense is partially offset by savings in the cost of treating local water from Lake Hodges, the report said, and the district’s bottom line will also benefit from higher-than-anticipated water sales. So the net impact on its budget will be the additional $700,000 it needs to take from reserves.
In a year with plentiful rainfall, the district gets as much as 50 percent of its water from Lake Hodges, and puts the savings into reserves, said district general manager Mike Bardin.
Bardin said the district established its rate stabilization fund precisely for the purpose of filling temporary budget shortfalls caused by annual variations in rainfall amounts.
“We are doing exactly what we said we would do, what we planned to do,” Bardin said. “This is exactly how we expected it to play out.”
However, the district won’t be able to rely on the rate stabilization fund to cover expenses if the drought persists, Bardin said.
Currently, the rate stabilization fund has about $2.4 million in it, which will be reduced to about $700,000 after the $1.7 million is removed this year, district staff said.
Director Greg Gruzdowich said he was concerned about relying on reserves to cover operating costs.
“What I don’t want to see us get into is taking so much from the rate stabilization funds that we are sitting on a precarious reserve,” Gruzdowich said.
Rather, he said, the district should look to cutting expenses.
But board president Michael Hogan said the district has been cutting costs for some time.
“We put the brakes on (spending) so hard we were able to put money into reserves,” Hogan said.
Bardin agreed that the district is still in “belt-tightening mode.”
Although district customers (residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch) avoided a rate increase this year, rates have not yet been set for 2015.
At their February meeting, Santa Fe directors will discuss conducting a cost-of-service study, to look at district costs and revenue, information that will be used for setting future rates.
Another factor in water costs is the statewide drought. Last year was determined the driest in California history, and last week Gov. Jerry Brown officially declared a drought emergency in the state.
Director Andy Menshek said that in light of the drought looming over the state, Santa Fe should consider charging higher rates to those who use the most water. As an example, he said, one residential property in Rancho Santa Fe uses 50-acre-feet of water per year for landscape irrigation, while water experts note that an acre-foot (326,000 gallons) meets an average family’s water needs for a year.
“I think we should look very strongly, in light of the drought we’re in… at a tier structure for high-end users to offset some of our deficit,” Menshek said.
Bardin said the district’s rates already account for usage levels. “Those big users pay dearly already under our rate structure,” he said.