Skip to main content

Independent Voice

City Officials Meet Over Water Rate Increase

Mar 27, 2024 09:19AM ● By Angela Underwood
Resident John Schrader told the Dixon City Council that the public might not be fully aware of why there is a proposed water rate increase. Courtesy photo

DIXON, CA (MPG) - With looming water rate increases, the Dixon City Council held a special financial water workshop before its regularly scheduled March 19 meeting.

Andrew MacDonald, a city engineer consultant, said the March 18 Rate Advisory Committee (RAC) had a "wonderful community workshop" before introducing IB Water Rate Study Consultant Habib Isaac, who focused on a financial plan summary, rate drivers, current financial position, reserve policies and proposed financial plans.

Isaac said consultants are moving along “pretty well” with city staff and the advisory committee on getting direction for the cost of service and rate design. They slowed down, Issac said, to identify the pressures on rates by comparing historical water usage to the present, along with an inflationary climate and capital spending.

Rewind to 2013, the last time that Dixon had a rate increase and when water demand was reduced as the city's customer base increased. According to Issac, the mandatory statewide water conservation to no more than 600 million gallons after that made citizens more water-efficient.

"So you have 2013 rates but you don't have the usage related to that," Isaac said. "With no unit rate increase in that time, it has caused one component that puts pressure on rates."

Resident John Schrader, who attended the Rate Advisory Committee meeting, said the public needs to better understand the looming rise concept.

"We are not talking about the water bill going up; it is the water rates that are going up, not the sewer, which is the largest percentage of your overall water rate, and a lot of people are saying, 'My water bill is going to double,'" Shrader said. “I think we need to clarify that it is not the entire bill; it is just this one section.”

Isaac explained that along with new connections and less usage, Mother Nature also contributes to the current rates.

"The fiscal year 2023 was a very wet winter and it appears this winter is also becoming very wet, and when that occurs, we want to see where you are at with uses to date," Issac said, adding overestimating growth could mean not generating needed revenue.

Next, Isaac showed that historical inflation has skyrocketed since 2013, specifically with the Construction Price Index (CPI), which includes labor and material cost increases. From 2013 to 2023, the labor Construction Price Index rose by 42% and capital costs rose by 50%.

After being presented with numbers, Councilmember Jim Ernst said past mistakes were made. 

"In the last 10 years, these guys over here at Cal Water spent $20 million on their system and we didn't spend a cent; we put Band-Aids on our system and now we are going to try and fix it at 50% higher costs of construction," Ernst said, adding. "Sometimes, it's best to just admit that and move on, and I think that is where we are."

The city completed a strategic assessment plan in 2018, which used Isacc to compare Dixon's current standing. Isaac showed that financial projection rates changed from around $27.4 million to $29.5 million in today's dollars.

Laying out the critical capital improvement plan for Fiscal Year 2025-2029, Isaac detailed numerous projects, including upgrades and security implementation. The maintenance of wells and tanks is the most critical, Issac said, with the city possibly losing water, due to cracked main lines and improper readings.

Isacc showed officials how Dixon is running on an operating deficit of $417,000 that will grow to $2 million by 2029, which is why reserves are so important, according to Issac. Extra money in the coffers mitigates inherent risk, Issac said, which stabilizes rates, covers debt, ensures capital repair and replacements.

Regarding reserves, Isacc said, the minimum Dixon should have is $2.9 million, with a target of $5.5 million in reserves.

"It is very important to have strong reserves, so you are in a financial position to move forward with your capital plan and not worry about waiting for funding," Isacc said; adding that reserves also help secure grants, loans and low-interest rates.  

Officials were given four capital funding options to choose from: critical (no debt), critical, critical and near-term, and near-term with rescheduling and reconstruction (R&R).

While officials had hoped to narrow down the options at the meeting, Councilmember Hendershot said he needed more time.

Councilmember Kevin Johnson said, "While the repeal of the rates was a very difficult situation and we are exposed tremendously," he is positive that the council gained the experience and knowledge needed from the engineering department's analysis of the water system.

"This group of people did not have the knowledge of the system we now have and I have complete confidence in their breakdown of critical versus near-term, verses R&R," Johnson said.

Officials will meet again on May 7 for another rate workshop, on June 3 for a public workshop, and on July 16 for a public hearing.