News


Water wholesaler could raise rates by 33%

Final decision on rate increase expected to be made Oct. 21 public meeting

Zone 7, which sells treated water to the cities of Pleasanton and Livermore as well as to the California Water Service and the Dublin San Ramon Services District, is looking at raising its wholesale rates because massive infrastructure needs and declining sales due to water conservation during the drought.

The water agency is projecting that it will deplete what money it has left within the next two years.

A meeting of the Zone 7 Water Agency board painted a dire picture of the water wholesaler's future finances if action isn't taken soon.

"Unfortunately, I have to be the bearer of bad news," said Sanjay Guar, vice president of Raftelis Financial Consultants, which was paid to evaluate Zone 7's rate and financial viability. "The situation is grim. We're at bone. There's no fat. There's no muscle. There's just bone."

Board members agreed at a public meeting Wednesday at their Livermore office that changes had to be made and quickly. Some apologized for their hand in leading the agency to the current situation, saying they shouldn't have bowed to pressure from constituents to keep rates low after the recession rather than listening to staff warnings about inevitable financial trouble.

"All the other water agencies have thought about their fixed costs, and we have not," board member Bill Stevens said. "I don't think we've been doing the right thing for the public. We should have done this years ago."

The consultant firm is recommending Zone 7 increase rates enough to raise $3.5 million between Jan. 1 and June 30, then another $7 million from July 1 to June 30, 2017, and then another $5 million from July 1, 2017, to June 30, 2018.

Those rates can be changed in a number of ways, but Wednesday's presentation gave a suggested rate increase of 10%, plus a temporary conservation surcharge of 20%. Given that the Zone 7 board passed a 3% rate increase for this fiscal year, rate in January could be 33% higher than they were this past January.

Some of that increase would be temporary to recoup losses due to lack of sales during the drought, but some could be permanent. The final rate structure, time limits and other details will be described at the next public board meeting Oct. 21 at 7 p.m. at agency offices, 100 North Canyons Parkway in Livermore.

A rate increase could mean higher water bills for residents who get their water from a retailer that buys from Zone 7, and staff at each agency will have to figure out how to deal with that cost.

The city of Pleasanton was among retailers that questioned the proposed structure for increased rates. Under the suggestions shown at Wednesday's meeting, each of Zone 7's four retailers would have a different rate increase based on their historic use.

"We request that Zone 7 spend time evaluating rate structure options and work with the retailers to ensure any new structure is uniform and relatively easy to understand and implement," Pleasanton city manager Nelson Fialho wrote in a letter to the board.

Retailers also questioned the rationale of raising rate immensely when most of the revenue will be used to pay for $20 million capital projects each year and to rebuild the agency's depleted reserves.

"I'm uncomfortable with a 33% rate increase if 90% of (revenue generated) are going to sit in a reserve," board member Angela Ramirez Holmes said.

However, the district has delayed capital improvement projects such as pipe replacement, pump replacement and the building of a new treatment plant for years, which is pushing current infrastructure to the limit, staff said. Pleasanton assistant director of operational services Leonard Olive questioned whether some projects, such as a new ozone treatment plant, could be delayed until the financial chaos is straightened out.

By delaying capital projects, several projects piled up until they couldn't be delayed any longer. Zone 7 staff and some board members said the agency is at that point, and any more delay to defray costs could have serious consequences.

"If our infrastructure fails, it'll be worse than a drought," board member John Greci said. "We won't have any water. Our system is antiquated."

Could Zone 7 deffer more projects and "cross our fingers and hope we don't have failures? Yes. Are there other projects I'm comfortable deferring? No," said Zone 7 general manager Jill Duerig.

Retailers also wondered whether Zone 7 could take out debt to fund capital projects, which ratepayers would fund over a 30-year period, rather than cramming the payment into a few years.

Guar of Raftelis Financial Consultants said taking out debt in about three years would be wise, but agency staff said it wouldn't be possible until then because you have to have reserves -- which Zone 7 doesn't have -- and a good credit rating to get debt issued. Staff members said they would expand upon that subject at the Oct. 21 board meeting.

If Zone 7 doesn't raise rates at all, the agency will run out of money during the 2016-17 budget year and will be $58 million in the red by the end of the 2019-20 fiscal year. Zone 7 fiscal years run from July 1 to June 30, according to the consultant firm's presentation.

"I've been on this board for 21 years, and I think this is the most trying times. We've been pulling on our reserves for the last couple of years. That's not good business," Greci said. There's "no gingerbread in this. It's just existence."

Between the $20 million a year needed to deal with aged infrastructure, lower-than-expected sales due to water conservation during the drought and a historic unwillingness of the board to substantially raise rates, board members understood how the agency got to its current state, but not exactly why.

"Why we got here, I don't know," said board member Jim McGrail. "Why are we here now, and what do we do so we're not here again?"

Comments

7 people like this
Posted by Swimmrer75
a resident of Another Pleasanton neighborhood
on Sep 21, 2015 at 10:43 am

Let's see......raise our water rates 33% by Jan., 2016, but keep building houses, etc. in the Tri-Valley?? Let's stop the building before our Infrastructure fails! Dublin is adding 8,700 more homes to their already over-crowded City!! And if the MEGA El NINO comes, we will all have flooding?? No loss here in Pleasanton as we are moving out of CA. soon......


12 people like this
Posted by justwondering
a resident of Another Pleasanton neighborhood
on Sep 21, 2015 at 11:16 am

We'll need to remember who voted for this absurd increase when elections for Zone 7 Board members are held next June!!


6 people like this
Posted by Damon
a resident of Foothill Knolls
on Sep 21, 2015 at 11:32 am

Large rate increases aren't any surprise, are they? If nearly everyone in the community is cutting back their water use by about 25% to 30%, then Zone 7 has to increase their rates by about 25% to 30% in order to maintain their revenue. That's not rocket science, is it?


13 people like this
Posted by Ken
a resident of Del Prado
on Sep 21, 2015 at 3:06 pm

Zone 7 should look at the overly generous retirement benefits they are paying themselves and their workers. When public workers retire in their early 50's, you are I support them for the rest of their lives. This is not sustainable. The talk of "cutting to the bone" is rhetoric.


10 people like this
Posted by ????
a resident of Another Pleasanton neighborhood
on Sep 21, 2015 at 5:37 pm

aren't there laws against jacking up prices during catastrophes? For life essentials like water.


16 people like this
Posted by To Damon
a resident of Birdland
on Sep 21, 2015 at 7:47 pm

True if the only issue is one year revenue decline due to the drought. Who thinks the 30% will ever go away when it starts raining?

The bigger issues are lack of policy and management discipline to control expenses which is the other half of the rate equation. Then toss in the recent grand jury indictment, lack of openness and transparency, spending $25 million for hillside property that will never be used, and now they want 30% more?

It's really time for Supervisor Haggery and the Alameda County Boad of Supervisors to step in and take back control of this hidden agency for the sake of the people


3 people like this
Posted by John
a resident of Birdland
on Sep 21, 2015 at 8:13 pm

Just raise the rates and keep on building. Bring in more people when we don't have enough water here now. What do these people have in their heads for brains. If you don't have enough to supply what's here why in hell add more people.


4 people like this
Posted by kbenson
a resident of Bordeaux Estates
on Sep 22, 2015 at 5:02 pm

Do what I do-

1.Fill up water bottles at the various fountains parks/mall.
2.Take showers @ the gym + fill more water bottles.
3. Ask for glass/cup of water @ the various eating establishments.
4. use toilets @ safeway + 1 2 or 3 above.

Yeah I know my way is "a bit extreme", but with bridge tolls and other rates increasing + wages staying flat, it is a viable alternative to cutting back on groceries.

PS- I also carpool to help damper the bridge tolls.


6 people like this
Posted by Michael Austin
a resident of Pleasanton Meadows
on Sep 22, 2015 at 5:33 pm

Michael Austin is a registered user.

@kbenson:

GOOD JOB.


Like this comment
Posted by BobB
a resident of Another Pleasanton neighborhood
on Sep 22, 2015 at 7:01 pm

My water bill is cheap. What are you guys talking about?


6 people like this
Posted by Jack
a resident of Downtown
on Sep 22, 2015 at 7:01 pm

With all due respect to the previous two posters… You're not saving water. You're just using water that other people are paying for...


Like this comment
Posted by BobB
a resident of Another Pleasanton neighborhood
on Sep 22, 2015 at 9:00 pm

@John,

People aren't the problem; They are only a tiny fraction of the water usage. Most is agriculture and environmental use.

We can add a lot more people and only add negligible water use.


1 person likes this
Posted by Vineyards
a resident of Livermore
on Sep 23, 2015 at 8:46 am

One Word- ENTITLEMENTS...


3 people like this
Posted by Charlie Brown
a resident of Pleasanton Valley
on Sep 23, 2015 at 9:48 am

I'm sure when the reservoirs fill up, rates will drop?


5 people like this
Posted by Megan Parks-Haller
a resident of Val Vista
on Sep 24, 2015 at 10:31 am

Let's see......raise our water rates 33% by Jan., 2016, but keep building houses, etc. in the Tri-Valley?? STOP the building before our Infrastructure fails! Dublin is adding 8,700 more homes to their already over-crowded City!! And if the MEGA El NINO comes, we will all have flooding??
The prices will go up and never decrease, this is BULL$$%Y@^A#&^$59P8!!!!!!!!!!

LET IT RAIN!


6 people like this
Posted by Sick and Tired
a resident of Mohr Park
on Sep 24, 2015 at 12:39 pm

It is utterly ridiculous that we have to pay more. What can we do? We save water so we can prevent running out of water and avoid paying fines. We accomplish this task and now we have to pay even more because the Zone 7 business model doesn't support lower water usage and they can't close their budget because they need to do maintenance on their existing (but aging system). Or it is because some other budget line item (not to be mentioned here due to political sensitivity) is going through the roof. If this was a business, you revenue income is decreasing due to water conservation, a revised business model and implement mitigation plan. A business doesn't raise prices just because revenue income decreases. Can anyone imagine if this happens to all the businesses?


1 person likes this
Posted by highdiver
a resident of Another Pleasanton neighborhood
on Sep 24, 2015 at 8:35 pm

As you probably know, the Zone 7 charge is the smallest part of our bi monthly Water Bill in Pleasanton. Saying a water bill goes up 33% doesn't mean the bill you get will go up 33%.

It would have been helpful if the article mentioned the specific amounts not just the shock value of saying a 33% increase.

For instance, how much is the average charge for Zone 7 in our bills now and how much will they be given a 33% increase.


2 people like this
Posted by local business owner
a resident of Amador Estates
on Sep 25, 2015 at 9:29 am

Let’s see if I got this straight:
We pay taxes and fees for water and other utilities. Adequate storage facilities for our growing population are not built. When water is in short supply they mandate conservation. Then when we conserve water as instructed, they raise rates because they aren't making enough money since we are conserving as they mandated. This is theft.


2 people like this
Posted by Fed Up
a resident of Vintage Hills Elementary School
on Sep 27, 2015 at 3:35 pm

Since we are doing such a good job of conservation, why let a good crisis go waste.

Proposed basic water rate / unit :
$3.68 (Zone7) + $2.56 (Pleasanton drought surcharge) = $6.24 vs. $2.36 today

This does not include the Pleasanton "distribution charges" ~$1/ unit or more

Zone 7 : Wants a 33 percent rate increase in 2016.
$2.36 /unit ->$3.15, 2017 rise to $3.45, 2018 rise to $3.68 / unit (55% hike)

This hike will be automatically passed on by Pleasanton, which reviews rates only once every 5 years (Oct 6th 2015, 7.pm City council chambers is the next review which conveniently does not include above and includes the hike only till $2.62)

Pleasanton: Not to be left behind wants to implement the "Drought surcharge". starting Oct 2015 of $2.56/unit (for stage 4 drought). This is over and above the $2.62 /unit regular charge.

These are *baseline charges* & separate from the penalties (up to $16/ every unit used).

Fed Up with the gouging


3 people like this
Posted by Fed Up
a resident of Vintage Hills Elementary School
on Sep 27, 2015 at 4:19 pm

Never let a good crisis go waste !

Since we are doing such a good job of conservation, why let a good crisis go waste.
Am i only one Fed Up with the gouging planned (because conservation is working).

1) Proposed basic water rate / unit : for 2016
$3.15 (Zone7) + $2.56 (Pleasanton drought surcharge) = $5.17 vs. $2.36 today.
This ensure that everyone who uses even a unit of water is gouged, conservation be damned.

A) Zone 7 : Wants a 33 percent rate increase in 2016. $2.36 /unit ->$3.15, (33% hike)
in 2017 it rises to $3.45, 2018 it rises to $3.68 / unit (56% hike)

Above Zone 7 hikes planned for next year will be automatically "passed on" by Pleasanton, which conveniently reviews rates only once every 5 years.

B) Pleasanton: Not to be left behind, wants to implement the "Drought surcharge". starting Oct 2015 of $2.56/unit (for stage 4 drought). This is over and above the $2.62 /unit Zone 7 increased price.

C) Above deviously named drought rate (rate has little to do with the drought, but is for raising revenue) is in addition to the Pleasanton "distribution charges" ~$1/ unit or more. Provides a stealth 200% hike which can be turned on & off at discretion & gets approval while the going is good.

D) Above are *baseline charges* & separate from the Pleasanton penalties (up to $16/ every unit used) which are expected to still be kept in place (more revenues).

Conserve water & be damned with increased baseline rates, don't conserve & be damned by the higher rate and penalties.

Actions: Oct 6th 2015, 7.pm City council chambers is the next 5 year "review", which conveniently does not include the Zone 7 'proposed' $3.68 rate and includes the hike only till $2.62.

Make sure to show up !

Web Link


4 people like this
Posted by mooseturd
a resident of Pleasanton Valley
on Sep 27, 2015 at 4:22 pm

mooseturd is a registered user.

While you are at the council meeting on Oct. 6th you can let them know your opinion of Ponderosa's plan to build 27 new homes on the Centerpointe church property.


3 people like this
Posted by Fed Up
a resident of Vintage Hills Elementary School
on Oct 20, 2015 at 8:57 pm

The Zone 7 rate hike meeting is scheduled for this Wednesday (10/21) at 7.00pm, Zone 7 Administration Building, 100 North Canyons Parkway, Livermore, California.

Zone 7 Wants a 33 percent rate increase in Jan 2016. $2.36 /unit ->$3.15, 2017 rise to $3.45, 2018 rise to $3.68 / unit (55% hike).

Web Link

If you look at their budget (page 1-31) their revenues for 2015 went down by $3mil, but expenses went up by $8mil, compared to 2014.

Web Link

For 2016 their revenues actually go UP by $2.5 mil (vs. 2014), but they are proposing additional spending of $27mil over revenue, leading to a "loss".

2014 was their highest expenses year EVER. (see 7 year chart, page 4-13) and they managed to beat that for 2016 by a whopping $27mil !

No wonder they are in a hole & want to run roughshod & hike prices while a "crisis" is on. Never let a good crisis go waste !!

Zone 7 were only spending $60-$80 mil per year for 7 years from 2007-2013. Never let a good crisis go waste !!

They hiked spending to $108mil in 2014 & are now proposing $124mil in 2016 with revenues at $97mil. Of course they want to hike rates. This would have been a huge surplus in any other year. Never let a good crisis go waste !

I'm sure they will all collect bonuses too, for meeting revenue goals with the 55% hike in rates !


Like this comment
Posted by Gary Sekhon
a resident of Ruby Hill
on Oct 25, 2015 at 8:15 am

Have a great day.


Like this comment
Posted by Fed Up
a resident of Vintage Hills
on Oct 28, 2015 at 10:10 pm

Web Link


Like this comment
Posted by ??
a resident of Apperson Ridge
on Oct 29, 2015 at 7:52 pm

If you didn't send in an email, contact the directors or show up at the zone 7 board of directors meeting, you have NO business complaining!!


Sorry, but further commenting on this topic has been closed.

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