South Tahoe Public Utility District’s board of directors agreed Wednesday to propose five years of 6 percent sewer rate increases and four years of 6.5 percent water rate increases with a 5 percent increase in the fifth year.
Proposed rates still must go through a customer notification and objection period before the board formally considers them June 5. Any rate increase would take effect in July.
Money from the rate increases would help pay for tens of millions of dollars in capital improvement projects over the next 10 years. Some of the work is required by law, including a $21.5 million project to install water meters on every service connection in the district. Other projects, if not done, would leave the utility at greater risk of sewage spills or with undersized lines and inadequate water flows to protect roughly 1,500 properties from fire.
Board members supported the string of 6 percent sewer rate increases proposed by South Tahoe PUD staff. About $58.5 million in sewer improvements are targeted for the next 10 years.
Major projects include pump station upgrades, generator replacements and improvements to Diamond Valley Ranch operations in Alpine County, where the district disposes of treated wastewater that regulations require to be pumped out of the Tahoe Basin.
Higher water rate increases were proposed by South Tahoe PUD staff. They would have increased rates 9.5 percent in year one, 9 percent in years two through four and 5.5 percent in year five, but were not supported by a majority of the board, who eventually settled on the lower rate increases.
About 2.7 percent of the water rate increase is to accept and pay back over 20 years a no-interest $21.5 million loan from the state of California. It would allow the utility to retrofit about 8,000 service connections with water meters. State law requires a fully-metered system by 2025.
Other targeted work would upgrade undersized water lines to provide adequate water flows for fire protection. About 10 percent of the district does not meet fire flow standards.
With the lower water rates being proposed, priorities will remain the same. It will just take longer to do the work. Board members Chris Cefalu, Randy Vogelgesang and Kelly Sheehan opposed the higher water rates, which were supported by Jim Jones and Eric Schafer.
“I understand we have to raise rates at least to cover the debt service for the water meters, but I am not comfortable with 9 percent,” Cefalu said.
Vogelgesang questioned customers’ abilities to pay the higher rates, which would have gradually increased combined water and sewer bills by about $100 per quarter over the next five years.
“All these projects will have to be done, and it is a valid point that, if put off, costs will only get higher, but $100 a quarter is a lot,” Vogelgesang said.
Schafer and Jones questioned that view, arguing higher rate increases are needed after years of no increases or increases that barely kept pace with inflation.
“You’re willing to put it on ratepayers down the road, but not ratepayers now,” Schafer said.
Jones also supported pursuing the initial increases proposed, if not larger increases, calling the lower rates “kicking the can down the road.”
“I think we have to push ahead. I’ve talked to a lot of people, too, and they understand the idea of replacing the system as you go on a gradual basis,” Jones said.
Proposition 218 notices to inform customers of the proposed rates will be mailed out in early April. Customers can return the notices to formally protest the proposed rates. The notices set a ceiling for possible future rate increases, which still would have to be approved by the board each year.
Notices also will propose changes in the ratio of fixed base charges and usage-based consumption charge that make up water bills, a measure that would affect metered customers. The change would increase the base charge from 70 percent to 80 percent of the total bill to more accurately reflect the district’s actual costs to deliver water. That would mean higher bills for people who use less water and lower bills for people who use more water, but would help prevent the need to raise rates to cover overhead costs if water usage declines.
“For the district it produces income stability,” said Richard Solbrig, general manager of South Tahoe PUD. “By closely matching our actual expenses, fixed versus variable, if for whatever reason water consumption goes down we’re still covering our fixed costs.”