Kevin Valine

Modesto News: City eyes steep water rate increases

Modesto is considering raising its water rates by as much as 63 percent over five years to shore up the finances of its water system, which has seen its revenues plummet in the drought, and to pay for infrastructure projects.

This is the worst-case scenario and calls for an increase of 25 percent in September and an 11 percent increase the next year, followed by three annual increases of 9 percent each. The increases would be for all of the city’s water customers, including those in outlying communities that are part of the city’s water system, including Grayson and Del Rio.

The typical residential customer now pays $41.77 per month for water and would see that monthly bill increase to about $75 in five years under the worst-case scenario. Another scenario the city is considering calls for a 59 percent increase over five years. The difference in the scenarios is based on how much the city decides to do in infrastructure projects over the five years.

Utilities Director Larry Parlin and Alison Lechowicz with the consulting firm Bartle Wells Associates briefed the City Council on Tuesday about the drought, the proposed rate increases and other water-related issues.

Parlin said in an interview the work is being fine-tuned and the proposed increases could be less, but still significant. Modesto is looking at steep increases in the first year to stabilize the water system’s finances.

He said the water system lost $6 million in water sales in 2015 because of the drought, as water customers used less. Some context: The water system’s revenues are expected to be $47.5 million in the city’s current budget year. Parlin said the water system needs the rate increase to stay in compliance with the terms of the bonds it issued for water projects. He said the system would fall out of compliance in six months without the rate increase.

Parlin said Modesto faces lots of unknowns with California in its fifth year of drought, including changing state regulations and conservation mandates. California mandated a 25 percent statewide reduction in urban water use in June 2015, though it recently eased that to 20 percent. City officials said Tuesday that cities statewide are in the process of raising water rates (if they have not already done so) because of the drought.

Parlin has said the water system cut expenses where it can but still has fixed costs. It also had additional drought-related expenses, like increased electricity costs for pumping more groundwater to make up for getting less Tuolumne River water.

Modesto must follow a state law known as Proposition 218 in order to raise water rates. The law gives those affected by the proposed increases the right to file protests with the city. If more than 50 percent protest, the city cannot raise rates. The council is expected to authorize the Proposition 218 process at its June 7 meeting.

Notices of the proposed increases would be mailed to property owners and ratepayers later that month. The council would hold a public hearing on the increases Aug. 9 and could adopt them effective Sept. 1.

Kevin Valine: 209-578-2316

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