CCWD calls increases essential

The proposed Calaveras County Water District five-year rate increases have garnered the ire of district ratepayers as being excessive and unnecessary.

With a combination of grant funding and increased rates, the district hopes to spend $16.4 million toward water projects and another $12.2 million toward wastewater capital improvements over the next five years.

Mitch Dion, Calaveras County Water District’s general manager, claims the rate increases are necessary to perform infrastructure upgrades on countywide systems that will save ratepayers money in the long run by avoiding catastrophic failures and state fines. Dion joined CCWD last November.

“For the county to move forward, there needs to be solid and reliable infrastructure to give people confidence to make their investments,” Dion said. “It’s the backbone of economics.”

By the fiscal year 2017-’18, district water rates for a typical 5/8ths-inch residential meter are set to rise from $39.50 for 500 cubic feet of water (3,740 gallons) a month to $66.84 – a 69 percent increase.

Monthly wastewater rates would increase from $67.50 to $109.46 by the fiscal year 2017-’18, a total increase of 62 percent.

While rates had remained the same from 2000 to 2008, the district continued to reinvest in the system to the tune of more than $20 million using funds from expansion and reserve accounts along with grants. From 2008 to present, the only capital improvements made were funded by grants. That work was augmented from the district’s operating budget.

“We diverted money from operations and maintenance funds to address items that would have ordinarily been more efficient and less expensive if addressed with a capital improvement plan,” Dion said.

Since the announcement of the proposed rate increases and during a public meeting held in Arnold, ratepayers questioned whether the rate increases are warranted.

Despite assurance that the directors were hearing their concerns, many ratepayers left the meeting unconvinced.

“When they tell me nothing can be done, I can’t believe it,” said Julie Hollars of Vallecito. “This is not the only answer.”

Others were outraged with a fleet of new vehicles purchased by CCWD, hiring of expensive consultants, the construction of a $3 million new headquarters, expensive lawsuits and generous financial packages given to outgoing general managers, including Dion’s predecessor, Joone Lopez.

One former ratepayer said, “I believe the board has grown arrogant and out of touch with ratepayers. They are not carefully analyzing all options and working through creative ways to do capital replacement.”

Paul Bertini of Avery called for a “grassroots effort” among ratepayers: canvassing the streets to add protest votes and providing information to fellow district customers. Several citizens said they already had filed protests; more said they planned to do the same. If 50 percent, plus 1, of ratepayers file written protests by July 10, the rate increase will not be approved.

Dion responded to the concerns by emphasizing the need for a sustainable capital improvement plan.

“These rate increases are to create a funding mechanism for the replacement of the capital backlog,” he said. “We are on borrowed time; our infrastructure has continued to deteriorate. The district didn’t reinvest in their infrastructure in the early 2000s when they were supposed to.”

Dion hopes to turn the district around and reinvest ratepayer money into the infrastructure, which he described as “deplorable” and one of the worst he has seen in his career.

A study by the Environmental Protection Agency in 2007 concluded $384 billion needs to be spent by 2030 in the U.S. to replace deteriorating drinking water infrastructure and specifically highlighted California, Texas and New York as needing the most work.

The topography and small, spread-out population in Calaveras County present challenges many other utility districts don’t face.

“In comparison to more populated areas in the Central Valley, because of Calaveras County’s low population density, relatively long distances between customers, changes in elevation, topography and climate, CCWD is faced with additional infrastructure requirements and unique operation and maintenance challenges, which result in higher costs in providing water and sewer service,” said Charles Palmer, associate civil engineer for CCWD.

“Go to a high-density city like Sacramento, walk down a street and you have 100 customers in a block,” said Bill Perley, director of utility services and engineering for CCWD. “Here, you have 10 customers per mile. We have to pay the same amount for pipe.”

Perley said the extreme change in elevation throughout the county creates much higher pressures in the pipes, which fatigues the system faster and compels the district to install numerous pressure reducers.

“When they initially put in the infrastructure, they didn’t put in enough pressure-reducing valves,” Perley said. “If you don’t put those in, what a surprise, those things blow up.”

When asked why the rate increases could not have been extended over a longer period of time to ease the severity of the rate increases, Dion cited the economic recession.

“In our 2007-’08 study, we anticipated that we would have an additional 2,000 connections, but never got that. When the economy crashed, repairs were put on hold, and we have lived off the reserves for the last six to seven years.”

“Our board set a policy trying to minimize long term debt,” he continued. “This was the most efficient policy to minimize debt and to get the capital (money) in hand early. If we did something more moderate, we probably could not get these projects going.”

Regardless, the district knew of capital repairs in the early 2000s that needed to be replaced, but the administration before Dion decided to take little action.

“I think they were trying to be responsive and assist the community by keeping costs down in the short-term, but as a consequence we are dealing with the long-term repercussions of those decisions,” Dion said.

As a result, the district only repaired infrastructure that had to be replaced, and now, Dion said, it is in a critical stage to replace the infrastructure or potentially face catastrophic failures and large fines from the state.

“We can’t run a policy until everything breaks down; we will end up paying more,” he said. “If we can’t afford the costs of repairs, then we can’t afford the fines. Groveland Community Services District just paid (about) $400,000 in fines; we are trying to avoid that.”

Groveland was initially fined about $1 million for a sewage spill in 2010-’11. After years of negotiating, an agreement was reached this month for the utility to pay about $375,000 in fines.

“You can’t spill sewage,” said Perley said. “People don’t understand how serious these things are.”

Despite the rate increases, Dion said they have taken other measures to save money and lower costs.

Since 2008, the district reduced its staff from 74 employees to 64 and plans to continue to consolidate its workforce or eliminate outdated positions.

With an annual budget of $16 million, workforce-related expenses, including salary, pensions and retirement, cost the district $8 million each year, about half of its budget.

Coupled with workforce consolidation, the district renegotiated its loans with creditors to get a more favorable interest rate that saves the District $300,000 annually.

The district pays $2.3 million in debt annually and has an outstanding total debt balance of $13 million.

“Within the existing rate structure, the majority of that debt will be paid off by 2018,” Dion said.

Even with cost-saving measures, base charge annual bills for a water and sewer customer (about 4,300 throughout the county) are still set to rise from $1,284 to $2,115.60 by the fiscal year of 2017-'18, a 65 percent increase.

While many ratepayers view this as an unwarranted money grab by the district, they will not be allowed to opt out of the utility service.

“Under current ordinance, they are not allowed to leave,” Dion said. “Special districts are formed in order to provide services to meet their (residents) needs. Once they sign up for the service, we (must) meet our obligations. We made the investment to build the pipes and put in the infrastructure. We made an investment on their behalf.”

Customers who can’t afford to pay the proposed rate increases will have to depend on social services or else their services will be shut off.

“If people defer the program, then they are forcing their neighbor to pay their bill, which raises everyone’s rates,” Dion said.

While admitting a rate increase of this size can be hard to stomach, Dion said rejecting the increases would actually be worse for customers in the long term.

“Ultimately, if the ratepayers come back and reject the proposal … the problem is still there, and we have to go back and listen to what the ratepayers are telling us,” he said. “If we slow down the rate increase, we have to borrow more money, which is more expensive in the long term. A protest letter is a vote for a more expensive and less reliable system.”

If the rate increases do pass, Dion said, rates would never be reduced back to current levels, but the money raised would go directly into capital replacement and repair.

“We will get about $5.5 million to $6 million annually from rates,” he said. “We want to have a constant reinvestment (stream) that addresses our capital needs and a reserve that only addresses a catastrophic issue. We want the money raised to work for you and not just put it into a reserve.”

Even with the rate increases, the district will still fall $5.3 million short of completing all of its projects.

Dion acknowledged the shortfall and said the district anticipates receiving more federal and state grant money to help close the gap. If there is still a shortfall, it will prioritize which projects must get completed immediately and those that can be deferred until funds become available.

Vern Pyle, general manager of the Utica Water and Power Authority, proposed an alternative solution to raising the rates for all ratepayers.

Pyle suggested ratepayers should pay for the infrastructure that they use. For example, Copperopolis residents should have a higher rate than people of Glencoe because they have more pipe connections in the district infrastructure and a wastewater plant that services them.

Copperopolis residents’ rates could reflect their needs and would be higher than the smaller towns in Calaveras.

“Ratepayers should be subsidizing their needs,” Pyle said. “CCWD has gotten too big for its own good.”

Dion said this kind of proposal was considered, but he concluded a collective system best fit the district and the ratepayers’ interest.

“If we implemented a system like this, there would be disproportionate expenses for ratepayers,” Dion said. “For example, we have about 30 ratepayers in Sheep Ranch. If a pipe breaks and it costs $1 million dollars, then rates would be tough to swallow. We are better off working collectively as a district.”

“We have been very open and honest about the problem,” Dion said. “Society can no longer afford governance with short-term thinking.”

There will be two additional town hall meetings to discuss proposed rate increases. The next will be from 6:30 to 8 p.m., Tuesday, at Black Creek Center, 920 Black Creek Drive, Copperopolis, and the final town hall meeting will be from 6:30 to 8 p.m. Wednesday, June 26, at the Rancho Calaveras Clubhouse, 3995 S. Highway 26, Valley Springs.

Contact Dustin Weatherby at dustin.calent@gmail.com. Joel Metzger contributed to this report. Contact him at joel@calaverasenterprise.com. Send news tips to news.calent@gmail.com

 Contact Joel Metzger at joel@calaverasenterprise.com