Los Osos residents could be looking at water rate increases but can protest by vote.
Water rates in Los Osos for roughly half the town could be going up if ratepayers approve a proposed increase in a future vote.
The Los Osos Community Services District Board on April 3 was slated to vote on a proposal from the staff to increase water rates in each of the next three years.
In a staff report, General Manager Ron Munds pointed out that one LOCSD committee, the Utility Advisory Committee (UAC), had recommended the board approve increases in the base rates and throw in a new inflationary increase, in order to cover the district’s money needs going forward, including work on a capital projects’ list.
The UAC, Munds said, “were presented with the full water rate analysis at their March 19 meeting. After an in-depth review of the information and discussion, the committee supported the assumptions.”
Among those assumptions, was a $750,000 figure in net revenues, $50,000 in Zone A property taxes, and the sale of 200,000 water “units” (equal to 748 gallons per unit). They also supported instilling a 3% annual inflation rate increase.
The rate hike would be enacted over three years.
Zone A is an assessment district that covers the entire community and is used for the needs of the district and the overall town. “The rationale behind the contribution to Fund 500,” Munds’ report said, “is that the District has taken the lead on several Basin Management Committee and community water supply initiatives, which provide a benefit to the community as a whole.” Some of this money, $50,000, has traditionally been carved out of the whole and transferred to the District’s water fund.
The Board also had to come up with a base for consumption, but water usage has fluctuated over the past several years since the last water rate study was completed in 2021.
In 2020-21 the district sold 215,456 units of water; 209,192 in 2021-22; 191,619 for 2022-23; and 211,055 units in 2023-24, according to the report.
The Board split the difference and set the consumption at 200,000 units, as the base for calculating the water rates. That’s a drop of 10,000 units from the assumptions made from the last water rate study, Munds explained. Once again, the COVID pandemic is raising its ugly head.
“The significant increase in water sales in 2020-21,” the report said, “can be attributed to the COVID pandemic where many residents were working from home and/or children were being home schooled. The low water usage in 2022-23 can be attributed to the higher-than-average rainfall that winter/spring. The 2023-24 numbers appear to be elevated as well based on the Los Osos Middle School water use which was about 12,000 units more than their past average.”
That wet winter of 2022-23 dumped enough water on Los Osos that the residents didn’t need much for outdoor irrigation. And in the future, LOMS’ water usage should drop significantly, after the County completes a project to hook the school up to its supply of treated wastewater from the community treatment plant and end the use of drinking water for the sports fields and landscaping. That project is in progress now.
The new 3% inflation rate is actually one percentage point lower that the old water rate study had set.
“The last rate analysis used 4% per year inflation rate when calculating the rates over the three-year period,” Munds said. “Inflation over the past three years has been highly variable. It is difficult to predict, at least in the near term, what the rate of inflation will be for the next three years.”
In essence, it all depends on which rate table the Board chooses to present to ratepayers for use in a Proposition 218 “protest vote.”
The base rate that every customer pays monthly could jump from $6.65 to $12.45. Currently the base rate is $75 and using a 3% inflation increase would go to $77 the first year, $78.60 the second and $80 in the third year. (Add to this the actual usage to come up with an individual customer’s monthly bill.)
Overall, keeping the $750,000 net revenue figure, at 4% a year the total revenues would jump up to $3.52 million and at 3% to $3.5M, an increase of over $18,000 a year for the first year.
In year three, the 4% revenues would top $3.75M and $3.69M at 3%, a difference of over $39,000 a year. But there’s a more fundamental issue to resolve, as well: “How should we handle Base Fee increases?” Munds’ report asks.
“It has been explained that over 80% of the District costs to supply water are fixed. With a multi-tiered rate structure like the District has, revenue stability is an issue. If customers reduce their water use because of drought, increase costs from rate increases, etc., revenue decreases can impact the District’s ability to provide safe, clean drinking water. The Base Fee provides an element of stability by providing consistent income over time.”
Readers shouldn’t think this is a done deal and that there’s nothing they can do about it. Any rate increases will be subject to a Prop. 218 protest vote, which the Board must set up and advertise ahead of time.
In a Prop. 218 vote, ratepayers — either homeowners or renters depending on who pays the water bills — will be able to vote whether to accept the increases or send the Board back to the drawing board to try again.
If over 50% of the ratepayers vote to protest the new rates, they cannot be approved. But the vote is a bit tricky, as it will likely be mail-in balloting and defeating such an initiative is difficult to accomplish. Also, anyone who fails to vote “No” is considered a “Yes” vote, so turnout is key.
Water customers should keep an eye out for notices in the mail as the CSD has several requirements in this process that if they are not followed could potentially be challenged in court.
Ratepayers cannot be lobbied by the CSD to not protest, but citizens can organize an effort to defeat the increases.
Defeating a rate increase through Prop. 218 is a rarity but it has happened before.
