Dixon-Solano Water Authority Talks Water Rate Increase, Examining of Expenditures

How much are Dixonites willing to pay for their water service?

This is one of the many things that Dixon-Solano Water Authority must take into account as it attempts to overcome a dire financial outlook.

For the first six months of the year, the authority is running with an $18,289 loss in operations Dixon City manager Nancy Huston told the board last week during her presentation of the Midyear Financial Update.

“Our highest cost is our utilities, they continue to go up,” Huston said.

“Since I have been working for Dixon, we have never passed on any rate increases from PG&E to customers,” Huston told the board. “We are trending pretty high on utilities.”

Getting in the black will not be easy, nor will it happen overnight. The board must make tough decisions in the coming months, which include scrutinizing each line item placed on its budget and increasing water rates to households that are served by the DSWA.

To help generate revenues, the DSWA levied a 9 percent increase in the water rates last year. Most expenses are running at budget or below it, with the exception of equipment repairs and maintenance according to a staff report. At the same time, the authority saw an increase in utility spending to the tune of $235,000, which is $10,000 to $15,000 above budget in 2011.

City Engineer Royce Cunningham, after being queried by board member Michael Ceremello, said that the city was looking at numerous ways to lower energy costs including working with energy consultants to figure out if wind and solar energy could be utilized.

A staff report said that the DSWA might be able to compete 2011 with a smaller cash loss than anticipated, but it will leave the authority with the inability to fund any of its depreciation expense and will result in continued rehabilitation fund reserves of nearly zero.

“Given the DSWA’s small cash balances, any major repair within the system could place the Authority in a precarious financial position,” the report said. “Assuming a $720,000 depreciation total, the DSWA’s financials will show a projected loss of $775,000 to $850,000 at year end.”

At least one board member said he was ashamed at the situation that the board is in.

“I think this mid year financial report represents very graphically the situation that we were very concerned about last year when we set our rate structure and our budget together,” Board member Glen Grant said. “We are not covering the financial needs of the … authority. I am dismayed and embarrassed to be responsible for an authority that is in as bad as financial situation as this one is.”

Dixon Mayor and Board Member Jack Batchelor said that the board should not talk about the past and focus on where it wants to go. According to a report by NBS, the consultants working with the Water Authority, water rates will need to increase by 79 percent within five years to get the Water Authority on track.

The board decided to put together a committee – at the suggestion of NBS Director Jeanette Hahn– that will advise it as to how much the water rates should increase. Each member on the board agreed to submit two names for consideration that will include a cross-section of water rate payers serviced by the authority.

Hahn told the board that the water rate committee should consist of two residential home rate payers from each of the water spending tiers – low, medium and high – as well one commercial rate payer and one institution or irrigation rate payer.

“We were prevented from taking action last year by a large group of motivated rate payers opposed to any change in the rates,” Grant said. “That’s not going to work (the committee) unless representatives from that motivated group are part of this group that you are talking about.”

But even so, a 79 percent increase in water rates is going to be a tough sell to the people of Dixon, board member Dane Besneatte said. Today, Dixon homes pay a rate $40 per 3700 cubic feet of water use. The increase would amount to an extra $31.60.

“We absolutely have to cut these costs, but a 79 percent increase in water rates even over five years, no matter who we put on the committee, that’s not going to happen,” Besneatte said. “The public here will not go for it. We got to find some other things and that’s why I’d like to see us scrutinize costs. “

Batchelor agreed with Besneatte and said that the board would need to look at each of its expenditures, especially administrative costs, in order to clearly inform the committee it plans to appoint about where the money is going. He said that the rate increase is not the only answer, but it will also be a comprehensive look at where the authority can save money.

But one board member, Michael Ceremello, said that he doesn’t know what to believe when it comes to the DSWA’s s finances.

“I don’t really see us going broke because frankly, I don’t know how much we have,” he said. “Last time I heard, we had $800,000 in the bank so how the hell is $100,000 in the hole going to put is in a deficit position of cash,” he said. “I don’t believe that. I’m certainly not going to believe estimates.”

Ceremello also advocated at scrutinizing utility costs and finding ways to increase revenues without increase the water rates.

“It’s going to be another long battle,” he said. “I think we have a problem and the problem is not going to be put on the backs of the rate payers at least not if I can help it.”