MWD Looking at Rate, Tax and Fee Hikes

With its drought-related expenses rising, Southern California’s largest water supplier is considering raising water rates by up to 88%, increasing property taxes and, for the first time, placing a special levy on all undeveloped land in its huge six-county service area.

The Metropolitan Water District is examining these extreme measures because it has nearly depleted $500 million in reserves, officials said Thursday during the final day of the MWD’s three-day retreat at the Lake Arrowhead resort.

Drastic rate increases will be necessary next year and the district’s 17 million customers could be seeing higher water bills as early as March, Assistant General Manager Mike Maguire told the MWD board.

The MWD staff is proposing rate increases ranging from 60% to 88%. The impact on water rates in the more than 300 communities served by the MWD’s member agencies would vary according to how much MWD water the local water companies use.

Under some of the staff proposals, MWD property taxes in most of the agency’s service area would rise by about 20%--or by about $4 a year for the average $200,000 home. In some areas recently annexed to the MWD, such as parts of eastern Riverside County and southern Ventura County, taxes could rise by $100 or more per year.

As proposed, special levies on undeveloped land would range from $40 to $80 annually per parcel. For parcels of an acre or more, the charges would be applied per acre, officials said.

These proposals, staff members said, are just the first of a series of projected increases that would nearly triple water rates by 1999.

The proposals received a cool reception from MWD directors, many of whom questioned whether such increases were necessary and expressed concern about the reaction of the public.

“We will have a revolt on our hands if we propose rate increases without cuts in personnel and the capital budget,” said Director Charles Stuart, who represents the West Basin Municipal Water District.

“There’s something out of whack here,” added Carl Kymla, who represents the Municipal Water District of Orange County on the MWD board.

“I don’t think we need to go with these kinds of rate increases,” said Kymla, adding that he hopes that cost cutting could eliminate much of the need for rate, tax and fee increases.

Kymla, chairman of the board’s budget committee, gave the staff one week to develop recommendations on additional revenue sources and to propose budget cuts.

Other directors, including Mike Gage of Los Angeles and A. MacNeil Stelle of the Las Virgenes Municipal Water District, complained that much of the agency’s giant $8-billion capital projects budget could be eliminated if there were a greater conservation effort to reduce future water demands.

“If we can cut water use by new development by half, then we can cut capital costs by half,” said Gage.

In the past several drought years, conservation efforts have cut MWD revenue, but the agency rates have remained relatively stable because it was able to tap surplus funds from previous years.

From a high of nearly $500 million two years ago, the fund has been reduced to about $60 million and could be wiped out by next summer if new revenues are not found, said Greg Leddy, director of finance for the MWD.

Officials say they will need to come up with an additional $350 million to balance a projected $925-million budget in fiscal 1992-93.

The proposed tax increase would raise $22 million annually, the charge on raw land would raise $50 million to $100 million and the balance would need to be made up through a water rate increase, official said.

The MWD staff recognizes that it faces an uphill battle in persuading the board to approve rate hikes. The board’s 51 members represent 27 water agencies stretching from San Diego to Ventura County; they include representatives of city and regional water departments who are accountable to elected officials and voters.

Attempting to promote its proposal, the MWD staff has organized a series of meetings with government and community leaders throughout Southern California during the next month.

“We have to sell our story, and we have a good story to tell,” said MWD General Manager Carl Boronkay.

Director Herbert Stickney of San Diego argued in favor of aggressively explaining the MWD’s financial predicament to the public. “If we’re going to get lynched, let’s get lynched by the facts,” said Stickney.

During the five-year drought, the agency has been forced to make costly water purchases, and conservation by its 17 million customers has cut sharply into the MWD’s revenues.

At the same time, development and population in the MWD service area have continued to expand, forcing the agency to construct additional facilities. A planned 20-year, $6-billion construction program ballooned to an $8.7-billion program over the past several years to meet projected water demands.

But officials said Thursday that current financial difficulties may force the agency to cut more than $2 billion out of its building plan--a quarter of the planned projects.

Among the projects being considered for cancellation is a $400-million desalination plant on the coast and a pipeline to San Diego. A planned reservoir in Riverside County may be significantly reduced in size, officials said.

The agency’s last rate hike was a 14% increase that took effect in July. Before that, the MWD had not had a rate increase since 1983.

The proposed levy on raw land is intended to offset the cost of providing pipelines and other facilities needed to provide water to allow development, MWD officials said.

Raising the MWD-related property taxes would reverse a trend. The tax rate has consistently dropped since the 1930s.

The revenue proposals are expected to be considered by the MWD board in October or November, officials said.