By Neil Farrell

Morro Bay’s water and sewer rates are slated to rise dramatically, providing proposed rate increases survive a vote from residents and property owners.
The city council set May 26 for the official Proposition 218 “protest vote,” and if 50-percent plus-1 of the roughly 5,000 properties in the city votes “No,” then the City would have to go back to the drawing board and eventually try again for a positive vote.
Notices have been sent out to every property owner — in town and out – plus every residence and even Post Office boxes, to make sure everyone gets the voting notices, explained Public Works Director Rob Livick.
“We want to make sure all the bases are covered,” Livick said. “Protests need to be received by the City Clerk’s Office at City Hall before May 26 or can be dropped off at the council meeting that night, he explained. No emails or faxes are allowed. How it works is each property gets one protest vote, he said.
And it doesn’t matter if the vote comes from the property owner or a tenant. Using an apartment complex as an example, Livick said that if even one resident turns in a protest vote, the whole property is counted as voting “No.”
This even if the property owner decides he or she supports the rate hikes. “This is a protest vote,” he said, “so if you support it you don’t have to say or do anything.”
As it stands now, the city is proposing to raise water rates substantially for the first time in some 20 years. Rates were raised in 1995 to pay for the city’s costs for the “Coastal Branch of the State Water Project” and at the time became the highest in SLO County.
Since then, rates have remained unchanged giving Morro Bay now some of the cheapest water rates in the county. The new increase will put Morro Bay near the upper-middle of SLO County water rates.
The City proposes increasing the current fixed monthly charge from $16.43 to $23 by July 1 and then increase annually reaching $32 a month in 2019. The new rate schedule is for 5 years.
The added charge of actual water usage will go from the current zero for up to 3 units (equal to a hundred cubic feet per unit or 748 gallons) of water a month, to $3 for each unit by this July 1, and rising to $6 per unit by 2019 (about a 3.5% per year).
About 35% of the annual bills are for 3 units or less, according to a rate study conducted by the City’s consultants, Bartle Wells Assoc.
On the commercial side, business users pay the same base rate as residential users, but restaurants and motels use a whole lot more water than a typical residence. Tier 3 users — 11-50 units — will see rates go from $7.81 to $11 per unit. So based on 40 units, a restaurant’s monthly bill might go from the current $312 to $531 a month by 2019.
The City also wants to install a surcharge for times when it needs to run the desalination plant for extended periods of time — a month or longer. That surcharge would be an additional $3 per unit while the plant is either desalting brackish groundwater or filtering nitrates out of the fresh water from the Morro basin wells at Lila Keiser Park.
However, the City Council rejected a recommendation from Bartle Wells to also put in a pass-through surcharge to cover the more than $2 million a year in payments for the State Water Project, which makes up about half of the annual water fund expenses.
Another surcharge would take effect if and when the City’s supplies were in such dire straits as to turn to water rationing. The theory is that when rationing hits, the water usage will drop and thus the revenues would fall short of paying the operating and maintenance costs of the water department. So getting and using less water would mean paying more money.
“That would be if we had to take very draconian conservation requirements,” Livick said. “If the revenues drop, then we can’t pay our costs.” That scenario would be a double-edged sword. “We’d be telling people not to use water, plus they’re paying more for the water they’re going to get, to meet our operational needs.”
In a worst case scenario that under-3-units customer would be paying (as of this July) a $23 a month base charge, $3 per unit rising to $6 if the desal plant is running, with the potential of another $3 per unit if water rationing were instituted. That would total a potential $59 a month for minimal users of water.
The water study raises rates to cover a major shortfall in the water fund’s budget, too. Livick explained that a projected $900,000 budget deficit this fiscal year, something that was not vetted last summer during the City’s budget hearings, is more on paper than an actual shortfall.
The Bartle Wells study looked at the water fund as a whole, he said, and if the City were to do all its planned capital improvements, the fund would come up short. “We’ve been using the reserves to help pay for day-to-day operations,” Livick said, adding that this practice has saved them from going in the red for several years now. “This didn’t happen overnight. It’s been since the 1990s in the making.”
Such reserve funds are typically meant to just hold money the City intends to use to pay for planned and even unplanned repairs and upgrades to the system.
Bartle Wells’ financial projections assume the City would borrow in 2015-16 to pay for $3.5 million in maintenance projects.
It also assumes the City will borrow $25 million (at 3% interest over 30 years) to pay for a waste-water recycling project in connection with the new sewer treatment plant, however those costs are not included in the proposed rate increases, and would have to be dealt with, when and if the recycling project is ever done. (Currently, the sewer treatment plant project doesn’t anticipate a recycling component until sometime around 2020-21.)

Editor’s Note: Next issue — the proposed sewer rate increases.