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Higher water, sewer bills possible
Sanders to unveil proposed rate hike

By Matthew T. Hall and Mike Lee
STAFF WRITERS - San Diego Union Tribune

November 21, 2006
Mayor Jerry Sanders will tie his reputation today to water and sewer rate increases that would boost the average San Diego homeowner's bill about 35 percent between now and 2011 to pay for a spate of construction projects.

Ten months after calling an increase inevitable, Sanders will propose raising monthly rates in a press conference today. The typical single-family household bill would go from the current $78.30 to $105.53. The money is for upgrades to aging water and sewer systems that are subject to sanctions because of repeated breakdowns, the mayor said.

Residents and businesses are included in the latest proposal, which the City Council is scheduled to take up early next year. They have endured a similar round of rate increases in recent years, and the rates are likely to go up far past 2011.

“What the hell is an individual going to do about it? Not a hell of a lot. You try to conserve water,” said retired aerospace worker Andrew Manzi, who has lived in Clairemont for decades.

At City Hall, Sanders and City Attorney Michael Aguirre said the public will understand the necessity.

“If we want to continue to have a supply of clean water, we need to pay,” said Sanders, whose staff has discussed the rate proposal with various community leaders.

San Diego can allow its infrastructure “to disintegrate and have a major health crisis in our city, or we go to the people, we tell them the truth . . . and we make the changes necessary,” Aguirre said.

Despite early concerns about the proposal, Council President Scott Peters said the increase is “probably something we'll have to do.”

“There will be a lot of questions about the magnitude of these hikes, but no question really about the need to do the work,” he said.

The rate proposal is based on some $1.4 billion in capital projects and debt payments from fiscal 2008 to 2011. Those efforts largely are designed to meet court and regulatory mandates aimed at restoring San Diego's long-neglected pumps and pipes.

The city is also considering a $1 billion upgrade of its Point Loma Wastewater Treatment Plant. The project is not included in the rate projections.

The customer base is made up mostly of single-family water and sewer users, with smaller numbers of multifamily, commercial and industrial clients. About 220,000 of the 273,000 customers in each system are single-family ratepayers.

Under the proposal, San Diego's water department would increase its revenues by 6.5 percent a year for four years, starting July 1. The city would charge users a smaller base fee along with a larger fee for water use to even out billing inequities and promote conservation.

The projections for sewer budgets are more complex. The wastewater department's revenues would increase 11.8 percent May 1 and then rise by 11.8 percent, 7.6 percent and 7.5 percent in each of the ensuing years.

Many single-family ratepayers would get a sewer rebate if the city settles a lawsuit over the way those customers subsidized businesses for a decade. The net effect is that homeowners would pay about 8.75 percent for two years, followed by roughly 7 percent increases the next two years.

The city plans to use the additional revenue to borrow even more money to cover a range of projects, many of them government-mandated, to upgrade everything from pipes to pump stations to treatment plants.

The rate proposal is generating considerable scrutiny in cash-strapped San Diego due to a history of management miscues in the utility departments. Key concerns include whether the revenues from prior rate increases were spent appropriately and whether enough oversight measures are in place.

Craig Benedetto leads the infrastructure committee for the San Diego Regional Chamber of Commerce and is a lobbyist for the San Diego Building Owners and Managers Association. He said his clients are not pleased about the cost, “but if it's needed and the projects are completed, they are resigned to go along with it.”

Benedetto met with the mayor's staff yesterday to preview the rate case, but he remained unsure that the money from previous rate boosts was well-spent. Sanders' assistants are touting a financial review by an outside accounting firm, but that analysis stopped short of being an actual audit.

“Unless you have an audit, you don't know,” Benedetto said.
Around the region, utility managers are dealing with steep increases in construction costs increases. Four percent to 7 percent annual increases are common for water and sewer utilities.

In Chula Vista, for example, sewer bills are growing by about 7.5 percent a year. The fast-growing city's main water supplier is the Otay Water District, where officials anticipate a 5.4 percent increase next year.

In San Diego, council members already are tinkering with how the city runs its utilities.
Last week, the city's Natural Resources and Culture Committee voted unanimously to return to billing customers for water and sewer every other month. The proposal now heads to the full council.

At the urging of former Mayor Dick Murphy, the city switched to monthly bills in 2003. The idea was to make it easier for residents to budget after the last round of rate increases.

The project ended up costing the city more than $500,000 a year for additional paper, postage and other expenses, said Councilwoman Donna Frye, chairwoman of the resources committee. She also complained about billing errors in the new system.

“Before ratepayers are asked to consider any rate increases, we must first do everything we can to reduce costs and ensure the accuracy of the billing statements,” Frye said.