Benicians have been cutting back their water consumption since requested by the City Council and later as mandated by the state, Finance Director Karin Schnaider said. But those cutbacks are affecting water-related revenues.

The City Council and the Benicia Finance Committee will hear three options today in a 10-year forecast of two of the city’s enterprise funds, the Water Fund and Wastewater Fund. Then the panel will be asked to recommend the direction staff should take in developing new rates for both water and wastewater customers.

“The city’s customers’ response to the drought has been amazing,” Schnaider said. “Many residents have changed their landscaping and created a change to their water needs.”

However, that’s causing a shift in revenues as well, she wrote in her report.
Nor is there any certainty that after the drought, consumption will return to old numbers, because some residents have bought water-saving appliances, ripped out their lawns and are collecting their used laundry water for irrigation use on the plants and trees they still have.

“The impact of the consumption loss creates a $2.2 million annual funding gap in (Fiscal Year) 2017-18 between the 2012 rate assumptions and current revenue projections with the lower consumption,” she wrote City Manager Brad Kilger Aug. 19.

The city raised water and wastewater utilities charges in 2012, the first time prices changed since 2006. Prices were frozen that year because of a court decision requiring a Proposition 218 vote to increase municipal utility rates, she wrote. Not only did rate increases require a vote, the change triggered a requirement that older residents’ bills no longer could be subsidized by other customers.

The five year rate increase for water sales that started January 2012 were structured into both fixed and variable service charges. The fixed charge is based on meter size, and is levied no matter how much water is used. The variable, or volume charge is for every unit, — 748 gallons or 100 cubic feet — of metered water a customer uses.

Residential customers, who use 74 percent of total treated water sold, are billed in three tiers, based on the volume of water they consume; commercial and industrial customers, who make up 26 percent of the sold water, have a two-tiered rate structure.

Once the drought was declared and the State Water Project, which normally supplies the city with 70 percent or more of its water, said contractors would get but 5 percent of their allotments last year, the Council imposed a drought surcharge to help recoup revenue losses and such expenditures as a $900,000 water purchase.

Because the 2012 water rates were structured so that 61 percent of revenues were generated by the volume charge, conservation has impacted the city’s income.

But operation expenses can’t be cut back as easily, Employees make up 43 percent of the operating budget; salaries and benefits are determined by labor negotiations. Treatment plants, pumps and reservoirs use a large quantity of electricity, The city also has two outstanding debts associated with the water system, a 2002 Water Revenue Refunding Bond issue that refinanced debt incurred in 1991 and the State Revolving Fund Loan, used to assure the water treatment plant would meet state-mandated safe drinking water standards.

Among other expenses are preventive maintenance and purchases of new or replacement equipment. In addition, the fund is expected to keep reserves on hand. As an enterprise fund, both the water and wastewater funds are expected to operate as a business, with revenues covering expenses.

The Wastewater Fund gets its revenue from a flat, monthly rate for both commercial and residential sewer connections. Its expenses also are personnel, purchased supplies and services, electricity and debt — the 2005 Wastewater Refunding Revenue Bonds that refinanced a 1993 debt and the State Revolving Fund Load that financed an inflow and infiltration project.

Schnaider will present three financial models for both funds, the optimal, or most optimistic and ambitious that would cover full costs but would also create the largest revenue shortfall; the minimal, postponing repairs and capital improvements to the future, gambling that the system won’t fail; and achievable, which allows revenues to accumulate, but shouldn’t push projects to the point of system failure.

She will ask the Council to consider the three options on both funds, and she is recommending they endorse the “achievable” scenario, which would lead to the development of a new rate study.

If you go:
The study session will start at 6 p.m. August 26 in the Council Chamber of City Hall, 250 East L St.

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