CITY HALL — Glendale Water & Power officials this week gave a grim outlook on utility finances, even if the City Council approves a proposed water rate increase to help recoup lost revenue.
After the City Council voted unanimously last year to restrict outdoor watering to three days per week, water usage dropped 18%, resulting in a $6-million loss in revenue for the utility.
Several City Council members have been skeptical of the proposed 3.8% net rate increase, which they say penalizes consumers for responding to mandatory conservation measures.
But with the lost revenue sharply hitting the utility's bottom line, officials told the Glendale Water & Power Commission on Monday that their budget has already been slashed to keep the proposed hike as low as possible.
For the average residential customer, the increase would translate into $2.35 more per month, officials said.
"There comes a minimal level after which the utility just simply ceases to function," said Assistant General Manager Peter Kavounas. "We are looking at a hibernation of the utility, including the rate increase."
The loss in revenue has been intensified by the increasing cost of imported water from the Metropolitan Water District of Southern California, which will institute a 15% rate increase over the next two years on top of a 20% increase approved last year.
"We are really talking about a much larger issue than rates in Glendale," said utility General Manager Glenn Steiger. "What we are talking about is a shift in the ability of water to be transported into Southern California and the availability of water at all for Southern California in the foreseeable future."
Kavounas warned that even if the 3.8% increase is approved, critical capital projects, including maintenance of the city's aging pipe network, will be postponed for at least five years. Other upkeep and operation costs have already been cut significantly, he said.
"The message I am giving you loud and clear is you should be very alarmed at the expense reductions that are proposed in this budget; that is including the 3.8%," he said. "You should be concerned. We are not able to maintain the same level of service as we have afforded in the past."
A key bond-rating agency has also warned that it could downgrade Glendale Water & Power's market status if the utility doesn't impose future rate increases.
Glendale Water & Power Commissioner John Miller questioned whether a higher rate increase should be considered to maintain financial stability and reliability.
"These reductions are severe … and frankly, in my view, are somewhat alarming," he said.
Meanwhile, other commissioners said they remained concerned that the rate hike would send the wrong message to consumers.
"Really what we are saying is, 'You saved this much money, and now we want a percentage of it back with the 3.8% increase,'" said Commissioner Zanku Armenian.
Utility officials plan to host several community meetings in September before the City Council considers the proposed rate increase in October.