Residents of South Cayucos submitted enough protest votes to thwart a County-proposed water rate increase and sent the staff and Supervisor back to the drawing board.
Sept. 1 marked the official hearing and official date for a Proposition 218 “protest” vote on the rate hike for County Services Area 10A’s water rate hike.
According to County Public Works staffers who brought the rate hike to Supervisors in July and started the clock ticking down to the hearing, there are 880 eligible properties in CSA-10A and there had to be at least 441 protest votes — equaling 50%-plus one more vote — in order to defeat the rate increase.
According to the Clerk of the Board of Supervisors, who counted the votes, some 525 valid, written, “No” votes were received before the start of the public hearing, which is more than enough to defeat the proposed rate hike.
Prop. 218 — the Right to Vote on Taxes Act — is a voter passed State Law that gives the public a say on proposed local tax hikes, including fees for services.
Though it’s written into law, successful protest votes are rare. But as Dist. 2 Supervisor Bruce Gibson, who represents the North Coast including Cayucos said, “it does happen.”
The County said CSA-10A’s revenues were not keeping up with expenses forcing the County to dip into reserves to cover shortfalls.
The County said currently the budget runs short by some $165,000 a year and in 5 years the shortfall will be some $420,000.
So, they proposed a 15% immediate rate hike and 5% hikes for four consecutive years, or some 35% overall.
Laura Holder, the County’s program manager, said current bills run about $217 every 2 months and using 14 units of water. Any water use above 14 units gets charged at just over $12 each unit.
Under the proposed rate increase the first year’s bills would increase to $250/2 month/14 units and $14.57 for each additional unit of water.
By year five, the basic rate rises to $304/2 months, and additional units would charge out at $16.87 each.
“The proposed rate increase,” Holder’s report said, “is the minimum required to support operations, meet debt service obligations, stabilize financial reserves, and fund an update to the CSA-10A Master Water Plan.”
The report spelled out what the increased revenues would cover:
• Increased Water Treatment costs ($20,000);
• Consumer Price Index (inflation) increases for outside vendors and contractors ($40,000);
• Increases in water system labor rates, including operations, engineering, and management ($50,000); and,
• Annual Parent Fund loan payment ($50,000).
Holder explained, “The following annual increases of 5% are intended to maintain adequate revenue as operating costs continue to rise.
“In years two and three, the additional revenues will allow the system to begin rebuilding operating reserves and fund the development of a Master Water Plan Update.”
Things were projected to catch up in the final year of the rate hike. “By year five,” Holder said, “revenues are projected to increase by approximately $420,000 as compared to current levels. While this rate increase addresses projected operations and debt service requirements, the financial reserve targets will not be achieved within the 5-year period.
“Operating reserves may build gradually once revenue requirements are satisfied. A smaller ‘rainy day’ fund will limit the amount of revenue available for reinvestment and may extend the timeline needed to complete infrastructure repairs or require additional loans.”
But the County’s justifications fell short with the ratepayers and none of the Cayucos residents who attended the Supervisor’s meeting was in the least bit supportive of the County’s numbers.
Rachel Wilson, who sits on the Cayucos Citizens Advisory Council (CCAC), the advisory body that the County first brought the rate proposal to for comments and inputs, questioned the County’s numbers including even the number of eligible parcels that were included for the protest vote.
Wilson said there are 782 water hookups in CSA-10A and yet the County included an additional 98 undeveloped parcels. She argued that the water system has only added 11 new meters over the past 9 years and when she asked if these added parcels had water meters, she was told the County could not divulge that information.
The County also would not give her the number of “will serve” letters that had been issued but not hooked up yet; nor would they give the number of new construction permits on file.
She said many of the extra lots are on the hillside where the County has been dealing with numerous so-called “paper lots” that are on a map but unable to be built on due to steep slopes and danger of landslides, among other reasons. The County has been taxing the property owners and seizing those that default on the property taxes, buying them up for pennies on the dollar. The idea is to eventually buy them all up and retire them into open space.
She added that there are just 310 residents actually living in CSA-10A and most are retired and unable to absorb higher water rates.
Susan Dunn, who lives in South Cayucos, said she’s worked for Federal, State and Local government agencies and “The numbers are why we’re here.” She pointed to the “Chaney Project,” a project that would replace and upsize a water pipe running underneath Hwy 1 from the east to west sides of the highway that bisects South Cayucos.
That project, she said, increased from $225,000 to now over $563,000 an increase of more than 170%.
“Where is all this money going?’ she asked.
She added that when she walked the neighborhood talking to residents about the water rate hike, 98% of them were opposed to it.
Other speakers talked about a previous rate hike of 35% from 2018 that included a list of infrastructure projects they said the County never completed and is now asking for another increase to tackle the same projects.
Susie Anderson asked Supervisors to order an independent forensic audit of CSA-10A’s books and to go back and come up with rates that meet the “spirit and letter of the law,” (Prop. 218).
“A 35-percent increase proposal is a classic rate hike abuse that Prop. 218 was enacted to prevent,” she said.
Other speakers mentioned Cayucos’ two privately held mutual water companies and asked why they can deliver the same water service for far less than the County?
Others urged the Supervisors to look into what it would take to privatize the county’s water system?
“We cannot continue to spend money the way we are,” said Maryann Carnegie.
Another speaker who also lives in the zone commented that the 2018 rate hike was in part supposed to pay for storage tank upgrades and then the County borrowed $4 million to pay for that project, part of an estimated $5 million overall in debts under CSA-10A that the County is paying off through the water bills.
The storage upgrade was one of the main infrastructure improvements that the County promised to complete with the last rate hike.
Another man, who said he owns a home in Cayucos but has a main residence with acreage in Templeton, said his Templeton water bills run $42 a month, asking why Templeton can provide water so cheaply, and called the County’s Cayucos water bills “ridiculous.”
In the end, with the protest vote settled, Supervisors didn’t have much to say. Sup. Gibson moved the County acknowledge the results of the Prop. 218 vote and deny the rate increase.
He said he would be meeting with the staff to work on what to do next.
Dist. 3 Supervisor Dawn Ortiz-Legg tried to add a direction to Gibson’s motion, to have the County look into what it would take and cost to turn CSA-10A over to a private entity, potentially through a contract for operations and maintenance.
Gibson didn’t want to change his motion and said that could be part of the upcoming discussions with staff on what to do now.
After the meeting the CCAC issued a press release signed by Wilson adding some fuel to the fire that the protest vote lit.
“To attempt another Proposition 218 with some slightly changed figures,” the release said, “ignores the very real problems and will be just a waste of money and time. We urge the County to figure out where the $5 million went and explore privatization ASAP.”
It’s likely the County will have to take a deep dive into the projections made to arrive at the rate increases it proposed and residents can probably expect them to come back some time in the future with another proposal. But it will have to be more palatable to the ratepayers, lest they reject it again.
A second, successful Prop. 218 protest vote would enter the unprecedented realm of possibilities.
For assuming their estimates on revenue needs vs. expenses are solid, the County’s water system will still be swimming in the red and potentially sinking deeper every year.
