Modesto City Council votes 6-1 to raise water rates

Monthly water bills for the typical Modesto single-family home will rise from $41.77 to as much as $73.81 in the next five years.

The Modesto City Council approved the increases on a 6-1 vote Tuesday after about two dozen people voiced opposition to the increases. The matter drew more than 75 people to a public hearing regarding the increases. The increases also drew the ire of Del Rio, which is wrapped up in a legal dispute over water with Modesto.

Speakers said the increases were too much and would burden many residents, especially seniors, the poor and the disabled. But the city will look into a program to provide discounts to low-income seniors and families.

Utilities Director Larry Parlin said the rate increases are needed in large part because of the drought and state conservation mandates that have resulted in Modesto reducing its water use 29 percent since June 2015, which he said has resulted in an $11.2 million drop in water sales from June 2015 to June 2016. The reduction in water use is based on 2013 levels.

That rubbed several speakers the wrong way.

“This penalizes residents who have been good neighbors to Modesto,” one speaker said. “We’ve let our lawns die. Our children cannot play outside. Now we are paying a penalty for it (through higher rates).”

Councilman Bill Zoslocki blamed the state for putting Modesto in this predicament by mandating draconian, one-size-fits-all water reductions, even though Modesto has a good groundwater supply. It also gets drinking water from the Toulumne River.

About half of the audience members were from Del Rio, the affluent community of a few hundred homes north of Modesto that is part of the city’s water system.

Its property owners association sued Modesto in 2005 over water rates and reached a settlement in the same year that called for Modesto to improve Del Rio’s stand-alone water system, which consists of three wells. The improvements were to be completed in eight years and included replacing one of the wells and adding a fourth well for new development and a storage tank.

The city has not put in the wells and storage tank.

“We want our government to be effective and accountable, and we are concerned in this matter that it is not,” Del Rio Property Owners Association board member Joyce Parker said. “... We are still living with poor water pressure and inadequate water flows (for firefighting) that jeopardize our safety. And now you are raising our rates.”

City officials say the work has been delayed because of litigation brought against the city by nearby property owners outside Del Rio, where the city wants to put the fourth well. But Parker has said the litigation is related only to the new well, and the city should have put in the replacement well.

An attorney representing the property owners association sent the city a letter Monday saying that in respect to Del Rio, the rate increases violate Proposition 218, the state law that governs how local governments raise water rates, because the city is charging residents more than the cost of providing them with water.

The letter also says the city is violating the terms of the 2005 settlement and asked the city to postpone the rate increases to give Modesto and Del Rio time to discuss their longstanding issues.

The City Council did not do that. Zoslocki cast the “no” vote over the rate increases. He said after the meeting he wanted the council to exclude Del Rio from the increases for 90 days so lawyers for the city and Del Rio could try to reach a resolution.

“I think they have some valid points,” he said about the Del Rio residents, adding he wants to avoid Del Rio taking more legal action against the city. Assistant City Attorney Jose Sanchez said lawyers for Del Rio and Modesto are talking in hopes of resolving the differences.

Some Del Rio residents in the audience were upset with the city and at times challenged what council members and city officials said. Councilwoman Kristi Ah You — who was elected in November — responded with this: “We are committed to really, truly understanding what happened in 2005 and addressing this and handling this in a respectful manner. ... (I) don’t want you to think we don’t care; we do.”

The council vote on the rate increases included having staff exploring selling or in some way transferring the Del Rio water system to Del Rio. That prompted one audience member to say that would not relieve the city of its obligation to make the improvements as outlined in the 2005 settlement agreement.

Parlin said Modesto’s water system has taken steps to reduce its costs, such as selling the Waterford Hickman water systems last year for $2.6 million and deferring $14.6 million in infrastructure projects. But he said without the rate increases, Modesto would fall out of compliance with the terms of the bonds it issued for water projects.

Parlin has said about half of the proposed increases are needed for Modesto to stay in compliance. City officials said not doing so would hurt Modesto’s credit rating and make it more expensive to borrow money. The increases also are needed to pay for water projects.

While the council approved rate increases over five years, the increases are not automatic. The council must approve the increases one year at a time. Parlin said the increases the council approved Tuesday are the maximum amounts the council can approve and are based on worst-case scenarios, such as continued drought and more state mandates. He said he expects the council will approve annual increases of lesser amounts. Utilities staff also will provide the council with quarterly updates on the water system’s finances to determine whether rate reductions are warranted.

The first rate increase takes effect Sept. 1 and raises the monthly bill for the typical single-family home from $41.77 to $55.43. The second annual increase can raise the monthly bill to as much as $57.98, the third to as much as $62.73, the fourth to as much as $68.11 and the fifth to as much as $73.81. The city also is increasing the rates for its other water customers, including apartment complexes, businesses and industrial users.

As required by Proposition 218, Modesto sent notices in early June to property owners and ratepayers about the proposed increases, though some audience members said they did not receive them. The notices included information on how to protest the increases. The city received 1,492 protests, well below the threshold to automatically stop the increases.

This story was originally published August 10, 2016 at 6:48 AM with the headline "Modesto City Council votes 6-1 to raise water rates."