In San Diego, city officials are in a state of unease as they prepare for a crucial vote concerning water rate hikes next week. Analysts from the city have issued a stark warning about the potential consequences of not approving a significant increase in revenue for the Public Utilities Department.
The proposal on the table includes a staggering 63 percent hike in water rates and a 31 percent hike in wastewater rates over the next four years. However, Mayor Todd Gloria’s administration is reportedly struggling to garner support for these increases, leading to concerns about the sustainability of the city’s water and wastewater services.
City analysts have cautioned that any reduction in revenue resulting from decreased or delayed rate increases—or a complete rejection of the proposal—would necessitate severe budget cuts for the Public Utilities Department.
Their report, released on Friday, stated, “At this point, any decrease in revenue due to either approvals of a lower rate increase, delays in the rate increase, or not approving the rate increase at all will require significant reductions to the operating expenses of the water system.”
The pressure is mounting for City Council members, who have remained largely tight-lipped about their voting intentions ahead of a challenging decision. After undertaking several months of considerable fee increases to address a structural budget deficit, councilmembers are faced with a difficult choice.
Daniel Horton, chief of staff for Councilmember Henry Foster, mentioned, “We do not have a yes or no answer at this time.” Meanwhile, Councilmember Sean Elo-Rivera has emphasized the need to explore all other revenue sources before imposing rate hikes.
Elo-Rivera remarked, “San Diego is too expensive and people are struggling to make ends meet. But we also have to adequately resource infrastructure and systems that are as important as water.”
The alarming report indicates that if the council does not approve the rate increases, the Public Utilities Department would need to enact almost a 30 percent budget cut immediately. Such drastic measures could lead to staff layoffs and service disruptions, affecting everything from customer service responsiveness to the frequency of water main breaks.
The consequences of not raising rates could push the department into dire financial straits, risking its ability to fund emergency repairs, which could evoke repercussions from state and federal regulators in terms of fines.
Without achievable savings or layoffs to manage budget shortfalls, the city would likely falter in its debt repayment obligations, potentially incurring substantial costs as collectors seek payment.
Analysts highlight that reductions in the Public Utilities Department’s funding would have a cascading effect across the city’s finances, as the revenue generated by water sales helps repay the operational support provided by other departments, including finance, transportation, and general services.
The factors leading to this precarious situation stem partly from escalating water prices charged by the San Diego County Water Authority, from which the city procures most of its water supply. Analysts noted that approximately 93 percent of the impending rate increase directly correlates with hikes by the Water Authority.
Additionally, there has been a long-term trend of decreasing water usage among San Diegans, driven by enhanced conservation efforts. While this trend is positive for sustainability, it also means less demand for municipal water, reducing overall revenue.
Currently, the Public Utilities Department has minimal contingency resources to weather the storm. The department is planning to deplete its emergency cash reserves, known as the rate stabilization fund, from $40 million in fiscal year 2025 to a mere $5 million by fiscal year 2027 in an effort to prevent an even steeper rate increase.
Back in 2023, analysts first raised alarms about the financial vulnerabilities surrounding the Public Utilities Department. They urged that mayoral appointees to the Water Authority’s board advocate for the sale of some excess water supplies. This initiative has begun to materialize, with the Water Authority’s new leadership expressing a commitment to engage with potential buyers.
The proposed rate hikes are chiefly intended to facilitate funding for the massive $6 billion Pure Water initiative, which aims to convert wastewater into drinking water. The city is committed to this project to avoid the need for a costly upgrade to the Point Loma Wastewater Treatment Plant.
Ultimately, Pure Water is expected to yield long-term savings for the city, primarily by reducing the quantity of water purchased from the Water Authority, the leading factor behind heightened costs.
Recent communications from city officials attempted to shift the focus of blame for the proposed water rate increase away from the Pure Water program and onto the Water Authority. They presented findings indicating that the rates for water produced by Pure Water would be lower than the Water Authority’s pricing.
Another factor complicating the situation lies in the Water Authority’s yearly rate-setting process versus the city’s current four-year locking method. Analysts have cautioned that unless the Water Authority restrains its price increases to 8 percent annually, as previously assumed, the Public Utilities Department may be compelled to return to the City Council seeking further rate recovery authority to cover unexpected additional expenses.
In summary, the city of San Diego stands at a crucial juncture as it prepares for significant water rate increases. With fundamental decisions touching on public utilities at stake, the outcome could have extensive implications not only for the city’s finances but also for its residents’ access to essential services.
image source from：voiceofsandiego
