Full Text
City of Modesto, California News Release For Immediate Release Contact: Larry Parlin, [PHONE REDACTED] Release Date: Monday, May 9, 2016, 9:25:00 AM City of Modesto Water Rate Increases As many other cities throughout California and most in the central valley have done recently, the City of Modesto needs to increase water rates soon. Why do we need water rate increases? Unfortunately, water rate increases are very typical, primarily to fund repairs and replacement of aging infrastructure, construction of new infrastructure (such as pipes, tanks, wells and treatment facilities), and the cost of compliance with new regulations designed to protect public health and deliver safe and reliable drinking water. Limited supply and increasing demand due to drought and growth also affect the need for revenue to adequately fund the water systems. Why do water rates need to be increased now? The State emergency water conservation regulations required the City of Modesto to comply with a 36% reduction in water use beginning in 2015 versus water use in the year 2013. State water conservation mandates have resulted in Modesto water sales revenue declining by $6.1 million for 2015 versus 2013. Recently the State reduced that mandate to 33%. If Modesto successfully reduces water use by 33%, that equates to lost water sales revenue of approximately $8.5 million annually. • Without a rate increase, the Water Fund will be in default of bond covenants in FY16/17. • Rates are legally required to cover the “cost of service.” • Cost of service includes funding adequate water supply and water quality to protect public health. • Cost of service includes providing for and funding existing and future needs for all customers. Why not just reduce expenses? We have exercised and explored many ways to maximize efficiencies. We have consolidated staff positions and deferred some projects and maintenance. Additional cuts would greatly jeopardize our mission and ability to deliver necessary service. Furthermore, there simply aren’t cuts that could bridge the budget gap we face as a result of the governor’s mandates. What has the City done to minimize the cost of service to ratepayers? • Sold the Waterford and Hickman water systems in 2015 for $2.6 million • Withdrew from participation in the Stanislaus Regional Water Authority project in 2015 avoiding future capital costs in excess of $30 million and continuous Operation & Maintenance costs • Reduced water staffing by two positions in the FY16/17 budget • Entered into settlement negotiations over litigation of the Modesto Regional Surface Water Treatment Plant with MID to assure a reliable supply of surface water at a stable cost The City has an unwavering responsibility to protect public health and public safety. Public trust in the quality of the water cannot be compromised. Ensuring a safe, healthy, and reliable water supply requires elaborate infrastructure, sophisticated tools and highly trained, certified professionals, none of which we can do without. The costs of providing water and wastewater service do not significantly change whether a customer uses one unit of water or 100 units of water. We pay for water service, just as we pay our phone or cable bill, whether we make a single call or whether we are even home to turn on the TV. What if we do not increase water rates? Page 1 of 2 City of Modesto - Newsroom - Press Releases 6/7/2016 http://www.modestogov.com/newsroom/releases/city/prdetail.asp?id=2377&print=true ---PAGE BREAK--- The City’s Water Fund solvency would come greatly into question. The 33% reduction required by the state mandates is having a crippling effect on the Water Fund’s finances. The State Water Code requires water providers to collect rates that cover their costs, protect their assets, and establish responsible reserves. Failure to maintain economic stability could result in rates that would increase more, and rate payers could also lose local control over the water supply. City officials here in Modesto are very proud to point out the foresight and investments that have been made in providing trusted and reliable water service. However, all of the prudence and thoughtful planning have not been able to shield us from the governor and the State Water Resources Control Board as they decided to “manage” this drought, years after its onset. In Modesto, we are reusing our wastewater by selling it to farmers on the west side of the county, and growing fodder crops on a City-owned ranch at the Jennings Road Wastewater Plant. We have protected our groundwater supply by constructing the Modesto Regional Water Treatment Plant that provides surface water and prevents groundwater overdraft. In spite of the fact that we’ve already gone to great to conserve, the state treated everyone the same. This “one size fits all” mandate also puts in jeopardy the mission of every water agency to protect public health and public safety. No two service areas are the same. No two water systems are the same. Each needs to be managed differently to ensure water quality. Urban water suppliers have made these pleas to the state on multiple occasions. However, no compromises have been made. The governor’s Executive Order and the State Water Resources Control Board regulations shifted the mission of water agencies from providing water service, to allocating water. Everyone is being judged the same, with no regard for agencies that have been ahead of the curve in the ways of conservation, water reliability, groundwater protection, and wastewater recycling as we have here in Modesto. These imposed regulations essentially forced our City to push fast forward on our plans to protect the fiscal solvency. The City of Modesto’s water infrastructure is valued in excess of $753 million. The cost of maintaining and replacing this infrastructure (which delivers water to your home, and removes wastewater), remains essentially the same regardless of how much water is used by the community. This cost of service must be recovered. In the past high water use funded the majority of these costs. However, we no longer have the revenue we need to continue the service required. We do not want to see City of Modesto pipes blowing geysers in the air on the evening news, or read about sewers backing up into homes. Part of responsible governance is maintaining the City’s reserve balances to fund maintenance and replacement of aging infrastructure and to better weather potential disasters in the future. We must consider the “what ifs”. What if a disaster occurred like a major earthquake, which greatly compromised the City’s water delivery system? What if the drought continues for several more years and the state were to impose greater restrictions next year, taxing water suppliers even further? It is imperative that Modesto maintain financial stability - especially now, in uncertain times for the public drinking water industry. Using less water, and paying more for it, is a tough pill to swallow. However in reality, we are using less water, and paying more to ensure it is there when we need it. So far, the people of Modesto have responded favorably to this Drought State of Emergency, and yes, our yards are suffering. Hopefully our landscapes will recover. Right now though, it’s more important to have water to drink than lush lawns. It’s also more important for the professionals who manage the water system to be able to continue to do so and not have to rely on others for our water supply. Page 2 of 2 City of Modesto - Newsroom - Press Releases 6/7/2016 http://www.modestogov.com/newsroom/releases/city/prdetail.asp?id=2377&print=true