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ADELANTO - For the second time in three months, the City Council punted on proposed water rate hikes despite urging from a consultant with a bleak message: Delayed action will only inflate the inevitable increases and shrink potential long-term savings to customers.
City leaders first rejected the hike in late September. Since then, the potential savings to customers had plummeted by about 50 percent to $6.5 million over the next 20 years, according to Fletcher Davis, a consultant with Bartle Wells Associates.
The projected savings would come as a result of re-financing bonds at a better interest rate because the rate increases would push the city to meet the favorable 1.25 times debt service coverage. It means that a utility is generating enough revenues to pay its operating costs and stashing 25 percent above debt service toward capital improvements and cash reserves.
By waiting long enough, the savings will disappear and rates must be enacted anyway, Davis said.
The Council hasn’t raised rates since 2012. On Wednesday, they declined again to move forward, this time by a 3-2 vote with Mayor Rich Kerr deciding against it to break a 2-2 split. He suggested he may not have had adequate information.
Councilman Ed Camargo said there must be
alternatives, although he failed to identify any.
The rate increase itself would average 2.6 percent over five years or roughly 47 cents more each month, according to Davis. For 80 percent of the Adelanto Public Utility Authority’s 7,500-plus customers, the increase will not exceed $1.46. APUA’s customers’ bills are currently dead center among providers in the High Desert and would remain there even after the proposed hikes.
Still, Council members have balked at even minuscule increases for residents who have fallen on hard times and instead have called for infrastructure upgrades to precede increases. Some residents Wednesday night said the water quality must improve before hikes are OK’d, but it presents a catch-22 since more revenue is needed to bolster system infrastructure.
The city had received 21 letters in protest from customers, according to Clerk Brenda Lopez.
Over the past few years, the APUA has seen usage decrease 22 percent due to conservation and drought, according to Davis, while the Mojave Water Agency, where augmented water is purchased, has increased prices about 6 percent annually.
Because these costs have gone up and our sales have gone down, we haven’t had enough net income, Davis said,
to meet our debt service coverage, nor have we had enough net income to fund capital projects.
An equally pressing suggestion that the rate study will be approved at some point is that it will eliminate a three-tier structure for residential users and single-rate structure for commercial users in favor of a two-tier rate structure for all users.
The shift is required by state law after a recent court ruling declared structures with tiers meant to encourage conservation illegal.
Source: Shea Johnson, Daily Press