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Water rate adjustments 'uncomfortable' for councilmen
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If Ceres residents think water is expensive now, check back in five years. During Monday's Ceres City Council study session, members reviewed a revised plan that adjusts monthly rates over the next five years.

The rate increases came down a little bit from what was proposed last month by a consultant.

City Engineer Toby Wells said one of the drivers of the rate adjustments is positioning the city of Ceres to set aside more funds for $8.6 million in much needed capital projects.

John Farnkopf of HF&H Consultants said the city has only been setting aside $900,000 annually for capital projects but needs to save $2.3 million annually by 2017-18 fiscal year.

Capital improvement projects planned include $1.2 million for a new north side well, $4.9 million Central Avenue main, and $400,000 to design River Bluff Park tank and pump station.

The adjustments are needed, said Farnkopf, for a number of other reasons. Ceres had lived without a water rate increase for 10 years and was only saving about $200,000 a year for capital projects.

The city is short in capital improvement project (CIP) funds because water rates remained flat for 12 years prior to 2008 rate increases designed to make the water system pay for itself. The recent move to a metered rate structure was part of a state mandate for conservation, and not intended to raise revenues.

City officials are advised to change the formula for both the monthly service or base charge, and the volumetric rate based on a cost per 1,000 gallons. A wide disparity currently exists whereby commercial users pay double the volumetric rates than do residential, said Wells.

Farnkopf said the realignment of the service charge is not designed to generate funds but makes the fees more related to the use. The consultant said Proposition 218 calls for fees to be directly related to their costs.

Any adjustment is subject to a Prop. 218 protest hearing, which inherently makes it difficult for public override since at least 50 percent plus one vote are required to reject.

Farnkopf also suggests the council add a second tier as a "warning sign" to encourage major water users to curb their use. The average Ceres household uses about 16,000 gallons of city water per month and pay 72 cents per 1,000 gallons. The top three percent of Ceres households, however, use 50,000 gallons per month, with some hitting over 200,000 gallons. He suggests billing them at a higher rate - $1.45 per thousand gallons starting next year and $2.90 per thousand by 2017-18.

Wells said it becomes tricky establishing the second tier level at lower than 50,000 gallons, because it could encourage conservation to the point that the city's revenues drop too low.

Wells said the plan would effectively raise the volumetric charge from 72 cents per 1,000 gallons to $2 per 1,000 gallons by 2017-18.

In summer, the average Ceres household now uses 19,000 gallons per month.

The average Ceres household currently pays $31.28 per month. That is based on a $20.42 per month in service charge and $10.86 per month in volumetric charges based on use of 15,820 gallons per month. Under the revised proposed rates, the average Ceres household would pay $35.57 per month next year, $39.93 in 2014-15, $44.18 in 2015-16, $47.24 in 2016-17 and $50.43 in 2017-18.

Commercial rates receiving water through a two-inch line would go from an average of $93.18 to $139.36 for the 2017-18 year. The new charges would affect schools with larger lines and could mean Ceres Unified School District pays $20,000 extra per year for water.

When compared to neighboring cities, the proposed rates are "in the middle of the pack," said the consultant.

The new rates are expected to further drive down consumption since it would be based on higher costs. Wells said the revised rates may realize a three percent additional conservation savings per year over a five-year period. Since going from a flat rate to metered rate, the city has realized a 24 percent reduction in water consumption.

None of the council members liked the idea of increasing rates but Mayor Chris Vierra said the Ceres water system needs improvements.

"The reality is the system is getting old and needs improvements," said Vierra. "You have to put money into it to maintain it."

Vice Mayor Ken Lane said he wants to see an outreach to the public to explain why the city is adjusting rates. Part of that information will be sent out for the Prop. 218 protest hearing process, said City Attorney Mike Lyions.

Dave Pratt, a Ceres resident, sees the reason for the adjustments but noted"it's going to be a tough sell to push a big increase.

Lane said the city has to provide the service. "I am afraid if we don't do these things today... somebody sitting up here in the future may say 'why didn't those guys do anything?'"

Lane added: "Whether I like it or not it's what we have to do to provide these services."

Surface water is the "wild card" in the discussion about future rates, said Vierra.

Use of treated river water will require more improvements to the existing water system because more pressure would be in introduced.

The proposal does not take into consideration what must be set aside for the city to participate in the $151 million regional surface water project, said Gerry Nakano of West Yost Associates, which was commissioned by the city to produce the water study. When the plant goes on line in 11 years, he said, Ceres and other cities plan to blend both treated river water with well water for home use. Ceres will be able to take six million gallons per day but currently uses 12 millions per day. Nakano said Ceres households may be impacted an additional $8 to $16 per month once the surface water project goes on line.

Wells said the improvements outlined will all be needed except for a north side well, which would not be needed if surface water is eventually used. Wells said the city would not make water system improvements unless there are long-term benefits.

Wells said no city will be able to escape raising rates to pay for state water quality standards set by the state. He said wellhead treatment is prohibitively expensive.

Neighboring Hughson has opted out of the surface water project but may be unable to afford treatment in the future nor be able to buy water from the rest of the cities, said Mayor Vierra.

"It's going to be a big number," said Vierra of the costs of the future surface water plant and delivery system.

Farnkopf also suggests the city increasing water connection fees for the smaller lines from the current $4,985 to $6,000. Councilman Mike Kline said he appreciated spreading those connection fee increases over the five years rather than all up front.