Who Pays What for Water and Sewer
“I’m paying too much for water,” said Mary Stephens, a former Desert Hot Springs council member protesting against the Mission Springs Water District serving her city.
“We come out as the lowest in this comparison,” said John Soulliere administrative officer for the MSWD, “What does that have to do with anything? Rates are *not* set based upon market economy drivers, i.e. competition. Each district has to address the variables within its boundaries, the management of its assets and the retention of its professional staff.”
It is no secret high desert residents pay more for water. It costs more to deliver water there.
“I understand the difference in rates and why,” said Margo Sturges of Yucca Valley, “What concerns me is how the Hi-Desert Water District is spending our money.”
The price of water can be a hotly debatable issue. Adding to the confusion of the storm are the differences in water delivery costs and the method of calculating water bills varying amongst water districts.
Stephens is behind the petition aimed at changing the way water rates are calculated in Desert Hot Springs; claiming MSWD water rates are the highest in the area. MSWD district officials cite facts claiming otherwise. Lets examine the facts.
The following are the single unit charges of six desert communities based on rates in effect as of July 1, 2011 for a standard 3/4” pipe delivering residential usage. One unit = 748 gallons (100 cubic feet) and the Base Rate is the monthly extra charge for water service added to the charges for the amount of units used.
COMMUNITY WATER SYSTEM UNIT CHARGE and BASE RATE
YUCCA VALLEY Hi-DESERT W.D. Unit Charge $3.59 Base Rate $20.80
BIGHORN BIGHORN-DESERT VIEW W.D. Unit Charge $3.00 Base Rate $27.50
29 PALMS 29 PALMS W.D. Unit Charge $2.15 Base Rate $11.00
COACHELLA VALLEY COACHELLA VALLEY W.D. Unit Charge $1.17 Base Rate $7.00
PALM SPRINGS/SKY VALLEYCOACHELLA WATER AGENCY Unit Charge $1.07 Base Rate $7.90
DESERT HOT SPRINGS MISSION SPRINGS W.D. Unit Charge $0.99 Base Rate $9.32
Rates are established for each water and wastewater utility based on the revenue requirements for that utility. Each utility has specific operating costs, capital costs and contributions to special replacement, improvement, expansion, rate stabilization, and self-insurance funds required to provide for adequate facilities, to allow for proper asset replacement and maintenance, to address debt service and coverage requirements, and to ensure that the utility is operated on a self-sustaining basis.
Most water and wastewater utilities are capital intensive. In some cases, capital-related revenue requirements (debt service, pay-as-you-go capital, reserve fund requirements, etc.) can be as high as 50 to 75% of annual revenue requirements. Under the cash-needs approach to setting rates used by many governmental water districts in California, capital costs are typically recovered through user charges that consist of: (a) principal and interest that must be repaid on bonds issued by the utility; (b) capital items financed through user charges, referred to as pay-as-you-go capital items; and (c) cash reserve fund contributions. Cash reserve funds might include the following funds:
Operating reserve to provide for working capital needs necessary for cash flow purposes;
Capital Replacement Reserve to provide for the normal repair and replacement of the infrastructure of the utility, often referred to as a Capital Improvements Program (CIP) reserve;
Capital Expansion Reserve that is often funded by system development charges and contributions for new development so that new development pays for itself and existing ratepayers are not asked to subsidize new development in the rates;
Self-insurance Reserve to provide necessary cash should an emergency occur to protect the utility and its ratepayers against uncertainties and catastrophic events;
Debt Service Reserve that is often required by bondholders to provide additional protection to the bondholder.
Myriad issues affect rates and no two districts are alike. The Water Board’s (that is, the public representatives) job is *not* to look at the “market rate” – what district A or B is doing – and then set rates according to costs of providing the service within its boundary. State law mandates that rates cover costs, fund adequate reserves and capital depreciation said Solliere.
COMPARISON OF WATER USE CHARGES AMONG DESERT COMMUNITIES IN SO. CALIFORNIA Ver. 1.5. Hi-Desert Water District (HDWD) hdwd.com/CustomerCare/RatesandFees.aspx. Bighorn-Desert View Water District (BDVWD) bdvwa.org/rates_fees.html 29 Palms Water District (29PWD) 29palmswater.org/water_fees.html Coachella Valley Water District (CVWD) cvwd.org/service/rates/RateSheet_Domestic_2010.pdf. Desert Water Agency (DWA) dwa.org/index.php?option=com_content&view=article&id=17&Itemid=87 Mission Springs Water District (MSWD) mswd.org/documents/costofwaterservice.pdf.
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