Drought prompts Roseville water surcharge
06/03/2014 12:00 AM
10/08/2014 11:58 AM
Roseville residents will soon be paying a few more dollars on their water bill, a direct result of the state’s drought.
The city’s water utility announced Monday it would be implementing a so-called “drought surcharge” starting June 15. The temporary fee would be equivalent to 15 percent of the monthly water use charge and would apply to both commercial and residential customers. For most residents, the surcharge would average between $1 and $2 per month.
Ed Kriz, the city’s environmental utilities director, said the move is necessary to stabilize the utility’s finances in wake of increased operational costs related to the drought. The surcharge follows a push by the city for a mandatory 20 percent cutback in March, which did not come with any penalties for those who didn’t meet the target.
Roseville, like other water providers in the region and across the state, faces an unprecedented situation.
At play is basic economics. Revenues have plunged as customers reduced their water usage. Still, costs from the drought, including outreach, staff and operational expenses, have surged.
“This is a unique business we’re in here,” Kriz said. “Our revenues are based on a product that we sell. But we actively go out and encourage people to buy less of this product.”
The surcharge will apply only to Roseville water customers, which includes most of the city’s 127,000 residents. A small portion of residents are serviced by neighboring water districts.
Officials said the decreased revenues and increased expenses will result in a projected deficit of $660,000 for the fiscal year ending June 30. The surcharge is expected to generate $110,000 to offset the shortfall. The rest of the money will be made up through the utility’s $1 million rate stabilization reserve fund.
“The rationale is to find a stable mechanism. If you aggregate (the surcharge) over 50,000 residential customers over several months, it’s the scale that gives you the money,” said city spokesman Brian Jacobson. “The alternative would be higher rate increases later on.”
Officials are not anticipating further hikes but noted that the fee will last indefinitely. Preliminary projections for next year show the surcharge will be able to offset most of the revenue shortfall.
The city held back on a price hike, in part because of economic concerns. “We didn’t want to charge people more than we had to,” Jacobson said.
But as the financial picture grew bleak, the utility was in jeopardy of reneging on its bond requirement of generating 20 percent more revenues than expenses, according to Kriz.
“The bond covenant says that if we don’t meet the coverage ratio, we need to increase rates for the security of the bond payment,” Kriz said.
The water utility has an annual bond payment of $4 million.
Current targeted cutbacks of 20 percent citywide have been well received by residents who are generally meeting that goal. Two specific outdoor bans for residential customers are in place: No washing cars without a nozzle or rinsing hard surfaces unless necessary for health and safety reasons. For commercial customers, outdoor irrigation must be reduced by 30 percent.
For now, officials don’t plan to expand the water reductions. However, if conditions worsen, residents may see mandatory cutbacks of up to 40 percent and a surcharge for 45 percent of water usage.
“We hope to make it through the summer with 20 percent cutbacks,” Kriz said.
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