This story has been updated to reflect the percentage of actual increases with the drought surcharge included for residential users.
After making sure they understood the reasons why they had little choice about doing it, the Menlo Park City Council on Tuesday night, July 21, unanimously adopted new rates for the city's municipal water district, which covers the northern and southern parts of the city. Mayor Catherine Carlton was absent.
The changes have raised a lot of questions from residents, because when the rate changes go into effect on Sept. 1, the average residential user in the municipal water district will see a nearly 35 percent increase in their water bill, but almost all commercial users will have their rates drop.
The customers who use the least water, less than 500 cubic feet, will see an even greater increase -- more than 37 percent. Water use is measured in hundreds of cubic feet, called CCFs, with each CCF approximately 748 gallons of water.
The municipal water district covers 4,140 properties in Menlo Park. Most of the rest of the city is in the California Water Service Company's Bear Gulch District, which also recently raised its rates. Areas the municipal district serves include Sharon Heights, the SLAC National Accelerator Laboratory, the Willow Road corridor, Belle Haven and the M2 industrial zone.
"It almost seems like there's a perfect storm of issues," involved in the rates changes, said council member Peter Ohtaki.
Contributing to the perfect storm are several factors, including the cost of water, which the city buys from the San Francisco Public Utilities Commission. The cost has more than doubled in the past five years, mostly because of major projects by the SFPUC to repair and replace aging facilities, including a new pipeline to carry water under the Bay. The cost of water from the SFPUC will go up 28 percent more in the 2015-16 fiscal year and is projected to increase by 61 percent during the five years the rate changes cover, the council was told.
At the same time, the drought has cut back on the amount of water used by water district customers, which has reduced revenues to the city, which has its own problems with aging facilities.
The Menlo Park Municipal Water District plans nearly $7 million in capital improvement projects of its own over the next five years.
Because it has been five years since the city last set rates for the municipal district, and the costs of water increased much faster than had been predicted, the water district has been spending money meant for capital improvements on day-to-day costs, the council was told.
The water district is also constrained in setting rates by a state law passed by the voters in 1996, Proposition 218, which says that fees cannot exceed the cost of providing a service. A recent ruling by a state appeals court said that San Juan Capistrano's tiered water rates were illegal under Proposition 218, and that any tiers must be tied to the costs of providing the water.
City Attorney Bill McClure said this means that rate tiers that were meant to encourage conservation can no longer be used. "All users have to pay their own way," he said.
When the new rates go into effect, the city district will have only two tiers of water use instead of the four it previously had. The lowest tier goes up to 600 cubic feet of water, which Catherine Tseng, a senior financial analyst from Bartle Wells Associates, the company that did a study on water rates for the city, said is the minimum amount of water used by a typically-sized family of 2.7 people. Customers in that tier will be charged only about 30 cents more per hundred cubic feet of water than the $4.21 the city currently pays the SFPUC for water, city Public Works Director Jesse Quirion said.
Ms. Tseng said about 29 percent of Menlo Park's water users' bills fall in tier 1. Close to 72 percent are in tier 2. About 16 percent of the district's water goes to tier 1 and 84 percent to tier 2, she said.
The water rate increases are based on a study by Bartle Wells Associates. The city provided the Almanac with an update to the sample bill impacts in the Bartle Wells study, because the original report did not include a drought surcharge that was approved. The update, which was only done for residential users, shows that under the two-tier system approved, for low water users (those who use 500 cubic feet, or approximately 3,740 gallons of water a month), monthly rates will rise from the current $32.84 to $45.08, a 37.3 percent increase. About 24 percent of the city's customers fall in this category.
The Bartle Wells update shows that for the average user of 1,400 cubic feet of water each month (14 CCF, or about 10,472 gallons), the rate will go up from $70.49 per month to $94.99 per month, a 34.8 percent increase. About 27 percent of the city's customers fall in this category.
For the above-average user of 2,500 cubic feet of water each month (25 CCF, or 18,700 gallons), the Bartle Wells update shows, the bill will rise from $120.54 to $156.15, a 29.5 percent increase. Slightly less than 37 percent of the city's users fall in this category.
The study shows high users of 4,000 cubic feet of water per month (40 CCF, or 29,920 gallons) will see their bill go from $209.04 to $239.55, a 14.6 percent increase. A little over 12 percent of the city's users are in this category.
The proposal is for five years; the staff report shows that rates will increase at smaller increments in future years for low, average and above-average users, but at higher rates for high users. Increases will range from a low of 9.5 percent for low users to 14.8 percent for high users over the four years.
The study also shows that for most commercial water users, rates will fall. These figures are from the original Bartle Wells study and do not include the drought surcharge. Small businesses using only 1,500 cubic feet of water per month are the only commercial accounts that will see a first-year increase, according to the Bartle Wells study -- from $75.04 to $96.26 per month, a 28.3 percent increase.
A moderate-use restaurant, using 7,500 cubic feet of water, will have its bill go down from $425.64 to $424.73 (a 0.2 percent decrease); a high-use restaurant using 20,000 cubic feet of water will have its bill go from $1,225.46 to $1,149.88, or a 6.2 percent decrease.
A large irrigation user of 75,000 cubic feet of water will have the bill go down from $4,544.5 to $4,134.95, a 9 percent decrease; and a large industrial user of 200,000 cubic feet of water will have a bill reduced from $12,317.01 to $11,147.40, a 9.5 percent decrease.
All commercial users will see rate increases ranging from 12.4 percent to 15.7 percent in the next four years, however.
Rates could end up increasing even more over the five years, because the adopted plan includes a provision to allow the city to raise the rates if its water costs increase. A 30-day notice is required for such increases.