During the first three years of drought, Bay Area residents have endured brown lawns, shorter showers and dirty cars. Now, as the crisis stretches into the fourth year, they are about to feel it in their wallets.
Three of the largest Bay Area water agencies — the Santa Clara Valley Water District, the East Bay Municipal Utility District and the San Francisco Public Utilities Commission, which runs the Hetch Hetchy system — all are considering water rate hikes of up to 30 percent this year.
The agencies — which serve 5.8 million people, or about 80 percent of the Bay Area’s population — say they need to increase rates because they are selling a lot less water as customers conserve because of the drought.
“We don’t want to raise water rates,” said Beau Goldie, CEO of the Santa Clara Valley Water District, which provides water to 1.8 million people in Silicon Valley. “But our job is to make sure there is enough clean, safe water to sustain the economy of Santa Clara County. We can’t control the drought.”
Because they have sold less water, the agencies have lost tens millions of dollars in revenues. They also have had to spend more money on drought-related expenses such as buying extra water from outside the Bay Area to help meet demand, expanding public relations budgets to ask the public to use less water amid shortages, and offering rebates to homeowners who replace lawns with drought-tolerant plants or old, leaky appliances with water-efficient ones.
The Santa Clara Valley District’s staff has proposed a hike of up to 31.5 percent on its “pump tax” — what the district, a wholesale water provider, charges cities and private companies such as Santa Clara and the San Jose Water Co. The district’s seven-member board will discuss the proposal at its next public meeting on Tuesday; a final vote is scheduled for May.
Over the past year, Santa Clara Valley residents cut water use about 13 percent. If it hits this year’s 20 percent goal, the district will lose $20 million in water sales, Goldie said. On top of that, the district is spending millions to import more water from a groundwater bank in Kern County.
“No matter how much water we put through the pipes,” he said, “it still costs the same to run the water treatment plants and to fix the pipes and to pay the staff.”
Some water officials are fuming about the proposed increases.
“It’s shocking,” said Tim Guster, vice president and general counsel of Great Oaks Water Co., a private company in South San Jose that buys water from the district. “It’s too easy to say that their costs are all fixed. The truth is they’re not. It’s the duty of this and other government agencies to control their own costs.”
Guster said the district should consider things like delaying lower-priority construction projects or dipping into its budget reserves, which the district says total $557 million.
That’s what the Contra Costa Water District is doing. Despite losing an estimated $26 million in water sales and other costs associated with the drought, the agency will cover those costs by reducing its reserve fund and refinancing debt rather than hiking rates, said Jennifer Allen, spokeswoman for the Contra Costa Water District.
Taxpayer groups say that property owners in the districts can sometimes overturn rate hikes under Proposition 218, passed by California voters in 1996. Both Santa Clara Valley Water District and EBMUD will have to hold mail-in elections under Proposition 218 if they go forward with the rate hikes. The hikes also can be overturned in court if they are found to raise more money than it costs the agency to provide the service.
“If the water rates need to be increased to secure the water for their customers, they can probably justify that,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “If it’s just for bloated overhead, then someone should look into that. I do know that the special districts in the Bay Area have a reputation as being, shall we say, not very careful with taxpayer dollars.”
The Santa Clara Valley Water District in recent years has been the subject of several critical county civil grand jury reports that have called into question project delays, high salaries for top officials, and questionable spending — such as the district’s decision in 2008 to spend $1.4 million building a gazebo and “outdoor education center” on a vacant lot in Alviso. In January, the board gave Goldie a $10,000 raise, bringing his annual salary to $290,000. The next month, it gave him a $19,605 bonus.
For his part, Goldie said the agency has worked to cut its costs, reducing the number of employees from 903 five years ago to 731 now.
Meanwhile, the 1.3 million customers of EBMUD in Alameda and Contra Costa counties cut water use 12 percent over the past year. Along with the price of bringing in new federal water from the Sacramento and Placer County areas, that cost the district $25 million.
EBMUD, which raised rates 9.5 percent in July, will begin discussing an additional 8 percent increase at its March 24 board meeting, along with an additional “drought surcharge” of 8 to 25 percent more. The board will make a final decision April 14.
“We’ve gone through these first years of drought with minimal financial impact on our customers,” EBMUD spokeswoman Abby Figueroa said. “But with another year of drought, the water reserves are down, and the financial reserves are down. And customers are going to have to cut back and foot more of the bill.”
Reactions to the proposed water rate hikes from Bay Area residents ranged from numbing acceptance to boiling resentment.
“Honestly, it’s frustrating. We’re trying to do our best,” said Albany resident Olga Miranda, who applauds Alameda County residents for their water conservation efforts but does not think that businesses have been held to the same strict standards.
San Ramon resident Kristina Teves said she would prefer that the districts first try to trim costs but “not at the expense of jobs or impacts to service.”
The Bay Area’s largest water district, the San Francisco PUC, announced last month that it plans to increase rates 32 percent this year on the 26 cities and private companies it delivers water to along the Peninsula, the South Bay and southern Alameda County. Much of that increase would be to offset $25 million in lost water sales after residents cut water use 11 percent last year.
Steve Ritchie, the commission’s assistant general manager, said that the commission, whose board will vote on the plan in May, is looking at changing its rate structure to limit wild price swings by putting more of the costs on a fixed monthly charge, rather than having nearly all of it based on the amount of water used.
Some Bay Area residents think that higher rates may actually have an upside by forcing many of the remaining water-wasting residents and businesses to turn off the tap.
“People have to wake up and understand that their actions have a cost,” Walnut Creek resident Patricia Zuker said. “Sometimes that means charging them more. Some people won’t get it otherwise.”
RATES GOING UP?
Directors of the Santa Clara Valley Water District will discuss hiking water rates at Tuesday’s meeting, which will begin at 6 p.m. in the boardroom at district headquarters at 5700 Almaden Expressway, San Jose.
