With the city’s water utility $13.5 million in the red, the City Council is scheduled to vote on a plan Tuesday that could include raising rates incrementally through 2015.
Also included in the list of options to raise revenue is issuing a bond that, combined with recommended water rate increases that would boost revenues by 3% a year, would build an $11-million reserve and jumpstart badly needed capital improvements, according to a city report.
Residential customer rates under the plan would change depending on the amount of water used, according to a tiered structure. Commercial water rates would not be tiered.
Some council members on Monday said they’re on the fence about the change.
“I’m torn,” said Councilman Ara Najarian. “I’m balancing between the impact of an additional cost on our residents for our water service, but also aware we have to improve our infrastructure for the water delivery.”
Councilman Frank Quintero said he’s for a tiered rate structure, but hasn’t made his decision yet about increasing rates.
“I’m having issues trying to justify it,” he said.
Glendale Water & Power officials told the City Council in September that without a rate hike, the utility would be on shaky financial ground.
Nearby Crescenta Valley Water District is set to raise its water rates in January by 8.2%, followed by a 3.1% increase in July.
Both Glendale and Crescenta Valley point to the increased cost of imported water and deferred capital improvements as reasons for the need to boost revenues. The Metropolitan Water District of Southern California has been steadily ratcheting up the rates charged to member utilities and is expected to do so again in the near future.
People using less water due to conservation efforts, as well as smart-grid costs, have also been a drag for the utility, according to a city report.
In the first year, a single-family residence may see its monthly bill drop to $60.62 from $63.78, while a high-scale user would see their bill increase from $158.05 to $165.53, according to the report.
Without a rate increase, Glendale Water & Power officials have said getting a $60 million water bond to pay for needed capital improvements may be difficult.
In July, Fitch Ratings gave the utility a negative outlook, citing a lack of cash. In its ratings report, Fitch said “failure to adopt rate increases needed to preserve healthy operating margins for bondholders” could spark a ratings drop.
The rate increase would also pave the way for the utility to build an $11-million reserve.
In 2008, Glendale Water & Power issued a $50-million bond and expected to issue another one in 2010 for $37 million, but that was deferred, according to a city report.
The city stopped transferring about $4 million to its General Fund — which pays for basic public services — from the water utility several months ago after a resident pointed out that state law bars the practice. However, the city still takes millions from the utility through other means, according to the Fitch report.
Glendale Water & Power expects to spend an average of $11 million annually from 2014 through 2022 on capital improvements after issuing the bond, according to the report.