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Californians face increased water rates after state allocates property tax and Feds reduce income tax By Michael Gardner
SACRAMENTO – Homeowners across the state soon could be surprised by
sewer and water rate increases as local agencies blindsided by a
larger-than-expected state raid on property taxes frantically dig deeper
to come up with $75 million more.
Sewer and water districts determined to
avoid punishing rate hikes may have to plunder their savings, scramble
to borrow, delay capital improvements or curtail services.
Whatever they do, the districts face a
two-year fix: The state is taking $1.3 billion in local property tax
revenues this year and next to help close its budget deficit.
In San Diego County, Fallbrook-area
homeowners are being warned to brace for a potential combined $20 climb
in their monthly sewer and water bills to cover an expected deficit of
nearly $1 million.
"For a small homeowner like Mrs.
McGillicuddy on Main Street it represents a 30 percent increase,"
said Keith Lewinger, general manager of the Fallbrook Public Utility
District, which has not yet acted to raise the rates.
The Padre Dam Municipal Water District is
weighing fee increases of as much as $4 a month, or dipping into
reserves to buffer the potential increase for its 25,000 customers in
East County
The much larger Otay Water District plans
to avoid a rate increase by raiding its savings account to offset the
state's take of $2.4 million over two years.
District officials say that any rate
increases would probably be erased from customers' bills when the
state's property tax shift ends two years from now.
Even the San Diego County Water
Authority, a wholesaler to water districts in the region, is not immune.
It will lose $5.75 million this year.
But the city of San Diego escaped the
additional hit.
Its sewer and water agencies were not
affected by the latest shift affecting districts, although the city
overall did lose property taxes.
Sewer and water districts this summer had
accepted a two-year deal between Gov. Arnold Schwarzenegger and local
governments to partially offset a state budget deficit by providing $2.6
billion in property tax over two years.
As part of the agreement, special
districts agreed to send $350 million in property tax revenues to the
state. Of that, about $225 million became the responsibility of mostly
sewer and water agencies that can raise rates.
Sewer and water district officials
initially figured they would lose about 40 percent of their property
tax, a hefty price but manageable.
But those calculations proved premature.
Lawmakers exempted fire and hospital districts. Panicked by an outbreak
of West Nile virus, lawmakers exempted Mosquito Abatement Districts.
That left the remaining districts on the hook for an additional $75
million.
The Schwarzenegger administration is
distancing itself from the added cost for the districts, saying special
district association officials statewide were responsible for carving
out compromises internally.
"Representatives of each of the
agencies said they would take the responsibility of resolving
intergovernment disputes," said H.D. Palmer, a spokesman for the
state Department of Finance.
District officials are exploring
legislation.
"We will be asking the Legislature
to revisit the issue," said Steve Hall, who leads a statewide
coalition of water districts. "I don't think the Legislature
understood just how dramatic the hit would be."
But lawmakers are not expected to reopen
a hard-fought, two-year deal that helps them avoid squeezing state
services more or raising taxes.
Significantly, influential legislators
are openly skeptical of some water districts, following recent
revelations of fat reserves and questionable spending on luxury junkets
and high-priced dinners.
Asked whether he would find sympathy in
the Capitol corridors, Hall responded, "Probably not."
Knowing the political delicateness of
rate increases, Hall's organization – the Association of California
Water Agencies – will be counseling directors to make sure the public
understands that higher fees are courtesy of Sacramento.
The state controller is expected to wrap
up calculations soon for each district's contribution, and sewer and
water agencies are bracing for the worst.
"We were looking at losing $700,000
or $800,000. If you listen to the rumors and watch the tea leaves, we
could lose $1.8 million," said Mark Watton, Otay's general manager.
Watton, whose agency serves 45,000
customers, said the district will raid its own reserves and borrow.
"If we just raised our rates it
would be a shock to our customers," he said.
Still, borrowing will come at a price in
interest, Watton said.
"What the state is doing is, instead
of them borrowing, they're making the special districts borrow. There's
no free money," he said.
At the Padre Dam district, directors
probably will try a combination of reserves and rate increases to cover
projected losses, said Doug Wilson, director of finance.
As first proposed by the state, the
property tax loss to the Padre district would have been about $850,000.
But the added bill could inflate the loss to $2 million, Wilson said.
Wilson said he would recommend that the
board use reserves to cover half the loss and temporarily raise rates to
generate the other half. Under that strategy, rate increases would be
limited to about $2 a month. If savings are not tapped, the fee hike
could reach $4, he said.
"The $4 probably is not going to
happen," Wilson said.
To recoup a projected nearly $1 million
loss, the district is pondering hefty sewer and water rate increases.
Sewer bills could climb $8 and water rates may go up $13. That could
mean higher bills of $21 a month for the 4,500 households hooked up to
the district's twin services.
"We're losing nearly every penny of
our property tax," said Lewinger, the general manager.
Frustrated, Lewinger pointed out that
decades ago Fallbrook-area residents voted to tax themselves to pay for
these services. Now the state is taking away that money.
"It seems the philosophy of the
state is that we can take care of it. All we have to do is raise
rates," he said.
The county water authority had expected a
$2.3 million annual loss, under the first draft of the budget deal. Now
it will lose 99 percent of its property tax, or $5.75 million annually
over the next two years. No decisions have been made on how to cover the
loss.
The wrenching choices confronting San
Diego County districts will be repeated across the state, officials
said.
"Some agencies will postpone
projects. Some will use reserves and some will likely have to raise
rates," said Mike Dillon, who represents many sewer districts in
Sacramento.
The water district coalition's Hall said:
"In some cases, they cannot raise rates. Some of them are going to
have to go to reserves, curtail services and perhaps lay people
off."
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