Covina Accused of ‘Artificially Inflating’ the Cost of Water

The city’s water division, whose profits have increased astronomically since the City Council passed a water rate resolution two years ago, has been “artificially inflating” customers’ rates, a council-appointed committee charged this week.

In the report presented to the City Council on Monday, the committee accused the division of violating city policy by using both consumer price index increases and increments in water and electricity costs to justify annual rate increases.

The 1987 resolution that established the city’s procedure for rate-setting states: “The city manager is authorized to automatically increase the rates based on the annual increase in the consumer price index or the periodic increase in water or electricity costs.”

The city acted “contrary to the resolution’s specific language” by considering both factors in calculating rate increases in 1988 and 1989, the report said.

But City Atty. Charles Vose responded that the law was meant to allow the city manager to use “one, none or both” factors in determining rates.

The city’s profits from water sales have increased dramatically since fiscal year 1986-87, when the water department netted only $8,014 in profits. Profits reported for 1987-88 and 1988-89 were $52,083 and $510,090 respectively, Finance Director Stan McCartney said.

The money goes into the budget of the Public Works Department’s water division, which uses it to maintain reservoirs and equipment, and to buy water and the electricity for pumping it, McCartney said.

The council Monday scheduled a joint meeting between it and the nine-member citizens committee next Monday to study the committee’s proposals to make the city’s water rates more “fair and equitable.”

The committee, created in November, also is urging the city to eliminate its four billing zones. Under the present zone system, residents are assessed according to the elevation of their property, with customers in the highest area, Zone 4, paying the steepest rates.

Elimination of the zones, when coupled with a proposed reduction in the commodity rate charged, could result in savings to the average customer of $1.31 to $16.99 per billing every two months, the report said.

Covina water bills are based partly on the commodity rate, which ranges from 75 cents to $1.20 per 100 cubic feet of water used, said Richard Morales, Finance Department supervising accountant. The rate, which includes the cost of water and electricity to pump it, varies depending on a home’s location.

The committee recommends a flat rate of 68 cents per 100 cubic feet. One hundred cubic feet equals 750 gallons of water. An average household consumes 3,500 cubic feet per bimonthly billing period, the committee’s report shows.

City Manager John Thompson, in a formal response to the report, told the council, “No matter what you do, (the rate structure) will be inequitable and unfair to some.”

In his response, Thompson wrote that he supports the current method of determining water rate increases, although he does not oppose “clarification” of the 1987 resolution. He said he agrees with a number of the report’s other recommendations, including eliminating zoned billing.

Covina’s water division provides water to two-thirds of the city, serving 7,189 households and businesses, officials said. In addition, 875 customers from outside the city buy Covina water, Morales said. Customers outside the city are assessed a 35% surcharge.

McCartney said the enormous jump in water revenue collected in 1988-89 came as a surprise to the city. The annual rate increases contributed to the windfall, as did increased water use during the recent dry years, he said. Also, maintenance costs were lower than expected, he said.

The city buys its water from the Covina Irrigating Co. and the Metropolitan Water District. According to Public Works Director Wayne Dowdey, Covina pays an average of $135 per acre foot of water. One acre foot equals nearly 326,000 gallons of water.

HOW COVINA WATER BILLS WOULD CHANGE Amounts are for average use of 3,500 cubic feet per bimontly billing

Zone Percentage Average Decrease Decrease In Covina 1 3.5% $1.31 2 19.5% 8.73 3 24.9% 11.95 4 32.0% 16.99 Outside the city 1 3.2% $1.61 2 18.8% 11.27 3 24.0% 15.43 4 31.1% 31.98

Source: Water rate committee report WATER DIVISION PROFITS Covina water department’s profits have increased astronomically since the City Council passed a water rate resolution two years ago.

1986-87 $8,014 1987-88 $52,083 1988-89 $510,090

Source: City finance director