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SAN BENITO — Residents are facing a 10-percent boost in their water rates spread out over a five-year period.
After weeks of debate, city commissioners are planning to raise commercial water rates by 8.3 percent to as much as 9.8 percent each year over five years, based on water usage, the city’s new water rate study shows.
Those rates might be going up as early as October.
Now, city commissioners are wrestling with the question of whether to raise household water rates this year or hold off increases until 2024.
If they hold off the hike, officials plan to pull $3.8 million from the city’s $9 million share of the American Rescue Plan Act to subsidize the utility system until they boost rates.
Utility system falling deeper in debt
At City Hall, officials are trying to pull the utility system out of a deepening crisis.
After years of holding off water rate hikes, the utility system has been falling deeper in the red, with last year’s deficit swelling to $2.8 million, the study by Frisco-based CAPEX Consulting Group shows.
To offset annual shortfalls, officials have been dipping into the city’s general fund budget.
Meanwhile, the utility system’s debt has bulged to $19.39 million.
During a special meeting Tuesday, officials disclosed the consultant’s study.
“We’re trying to do something but yet not hurt the people,” Mayor Rick Guerra said Wednesday, referring to the proposed rate hike. “We’re basically coming out of the pandemic. Everything’s going up — water rates now. This debt is over our necks and we’ve got to do something about it. It has to be paid.”
While consultant Jeff Snowden’s recommending holding off on boosting household rates until 2024, Commissioner Rene Garcia is questioning whether to call for the hike in October.
“We have an urgent situation that we need to address,” he said. “What if in two-and-a-half years we have more pressing situations? As elected officials, we have to make decisions — hard decisions.”
Proposed household, business rate hikes
For years, homeowners have been paying higher water rates here than businesses, commissioners said.
Now, officials are planning to turn that around.
As part of the water rate study, Snowden is proposing raising household rates by 10 percent, increasing rates 2 percent each year for five years, a plan which would boost average annual utility bills by $1.02 to as much as $1.54, based on water usage.
Meanwhile, he is recommending officials raise commercial rates over a five-year period by 8.3 percent to as much as 9.8 percent each year, based on usage.
For businesses, the proposal would increase average annual utility bills by $12.34 to as much as $160.64, based on usage.
The proposal is projected to help the utility system generate revenue which would go into a reserve fund, Garcia said.
Meanwhile, the plan would cut the system’s debt to $5.1 million by 2028, the study shows.
“I want to move out of our debt situation and make the water system self-sufficient with reserves,” Garcia said.
Years without rate increase
It’s the second time Snowden’s recommended a water rate hike in about 12 years.
The city’s last rate hike came in 2009, Commissioner Pete Galvan said in an earlier interview.
A year later, a previous administration failed to carry out Snowden’s recommendation calling on officials to steadily raise rates during a five-year period through 2014, he said.
At the time, Snowden was recommending a hike that would boost customers’ utility bills by 1- to 3-percent to offset a $1.6 million shortfall in the utility department.
Background
From 2004 to 2009, the city steadily increased its water rates to help pay a $32 million debt stemming from projects including construction of a $17.7 million water plant opened in 2009, a $13 million sewer plant, a $1.6 million water tower and other water and sewer upgrades.
During that time, previous administrations took on the projects after decades of neglect had left the city with archaic water and sewer plants.
Now, the city’s base residential water rate stands at $20.59 for up to 2,000 gallons for homes with 5/8-inch meters while its sewer rate is $29.09 for up to 2,000 gallons.
