The City Council on Tuesday approved four years of water-rate increases that would have less of an impact than one recommended by city officials, but would hit pocketbooks more than a proposal by Mayor Zareh Sinanyan that did not get Glendale Water & Power back into the black.
The rate bumps are set to affect customers differently depending on how much water they use, the size of their meter and their customer class, but on average, systemwide, they will boost rates by a compounded 20.1% over four years. By 2018, the utility will have $4.4 million in reserves under the approved plan.
It is currently roughly $10 million in the hole because Glendale Water & Power continued to make capital improvements, such as revamping storage facilities, while the council passed on rate increases in the mid-2000s, officials have said.
Sinanyan suggested a rate increase that would ratchet up rates by a compounded 12.55%, on average systemwide, but that left the utility with a $200,000 deficit in 2018.
For Sinanyan, the relatively small debt was worth it because it could give customers a reprieve and be handled at a later date.
“I think that’s the fair thing to do,” he said.
But other council members described his reasoning as fiscally irresponsible, citing rising imported water rates, the threat of future natural disasters like earthquakes, and even the costly impacts of unanticipated water-main breaks such as the one in Los Angeles last week that flooded the UCLA campus. The majority of Glendale’s water is imported from the Metropolitan Water District of Southern California.
“To be prudent, we need to expect the unexpected,” said Councilman Ara Najarian.
The city approved multiple years of water-rate hikes in 2012, but those were miscalculated by a consultant. The rates undercharged some customers, overcharged others and prompted the utility to collect millions of dollars less than expected. The council also agreed on Tuesday to reimburse Glendale Water & Power customers who were overcharged — fire-line customers were overcharged $3.4 million.
Overall, customers will see their rates increase, on average systemwide, by about 30% between 2012 and 2018, if the botched and new rate increases are added together, said City Manager Scott Ochoa.
The new rates are meant to fix the bungled ones and get Glendale Water & Power into positive cash flow, he said.
The city has sued the consultant, Willdan Financial Services of Temecula. Glendale is seeking more than $9 million in damages.
Under the approved water rates, which are set to take effect Sept. 1, a typical single-family customer using 19 hundred cubic feet of water, or 14,212 gallons, with a three-quarter-inch water meter, would see their monthly $72.12 bill increase by $6.70, or 9%, the first year and by $17, or 24%, to $89.12 by fiscal year 2017-18, according to a city report.
A commercial customer using 100 hundred cubic feet of water, or 748,000 gallons, with a 2-inch water meter, would see their monthly $382.38 bill decrease by $33.72, or 9%, the first year and increase by $11.09, or 3%, to $393.47 by fiscal year 2017-18.
The rate plan also includes an adjustable drought charge to keep the utility’s revenue consistent even as customers make mandatory water cutbacks. However, the council on Tuesday suspended the drought fees for six months.
The deferment may cost the utility about $1 million, Ochoa said. That would bring down the $4.4 million in cash reserves expected in 2018 under the new plan to $3.4 million, he said.
The drought fees would charge customers a flat rate of 75 cents per hundred cubic feet of water used, or about 748 gallons, during the second phase of a multiphase mandatory water-conservation plan.
A typical single-family customer uses 19 hundred cubic feet of water per month, so in the first phase, they would receive a $14.25 monthly drought charge. But that extra expense could be canceled out by conserving water, which would lower their regular water charge and, therefore, keep their bill roughly consistent, said Steve Zurn, general manager of Glendale Water & Power.
The drought rate would increase to $1.30 in the third phase, $2.02 in the fourth phase and $3.03 in the final fifth phase, Zurn said.