SOQUEL CREEK WATER DISTRICT (SqCWD) 2012 Proposed Rate Adjustments Frequently Asked Questions 1. What is Soquel Creek Water District (SqCWD)? • SqCWD is a local government agency known as a Special District formed pursuant to the California Water Code which is governed by a five-member elected Board of Directors who is accountable to the voters who live within the District. • SqCWD’s service area extends from 41st Ave. in Capitola through La Selva Beach. • There are about 14,200 connections to the SqCWD water distribution system; a little over 90% are residential. The average SqCWD household uses about 85 units or 63,600 gallons of water in a year. • SqCWD does not serve any agriculture. • SqCWD does not receive any tax revenues or other subsidies. The water rates fund both operations and capital improvement projects 2. Why is a rate increase being proposed? • The District has exercised responsible financial stewardship by gradually raising rates over the past 10 years to keep revenues in line with operating and capital funding needs. However, there are substantial financial challenges in upcoming years due to the need to address (1) the groundwater supply shortage and (2) to complete $66 million in necessary infrastructure improvements over the next 10 years to ensure delivery of high-quality water to our customers. • The proposed rates will provide funding for the cost of operations and partial funding for capital improvement projects. The shortfall will require borrowing money. • Projects to address the groundwater supply include: • Expanded conservation program focusing on public outreach, rebates on the installation of water saving devices, large irrigation efficiency, and reducing water waste. • The Proposed Regional Seawater Desalination Project with the City of Santa Cruz has been identified as the preferred supplemental supply alternative assuming a positive Environmental Impact Review report but the District continues to investigate other options. The proposed rate adjustments over the next three years do not fund construction of a desalination facility. Nor do they fund the alternative mandatory restriction measures that would be necessary if the District does not implement the desalination option or find other viable supply options in the near future. Completion of the environmental review for the Proposed Regional Seawater Desalination Project is incorporated in the identified rate increases. • New wells are an urgent and costly undertaking. The District developed a Well Master Plan to direct the replacement of wells that are unreliable due to age and mechanical problems. Wells in vulnerable locations near the coast are susceptible to seawater intrusion which threatens to contaminate our freshwater aquifers if pumping is not distributed inland. • The District will continue to closely monitor the state of our coastal groundwater basin and work collaboratively with other agencies to implement regional solutions where possible. • Projects to ensure deliver of high-quality water include: • Our ability to provide water across four separate service areas is currently restricted and the District will initiate a number of projects over the next several years to intertie these service areas to enable transmission of water throughout the District. • New water mains will be installed within Soquel, Aptos, Seascape, and Rio Del Mar to replace failing and undersized mains, increase service reliability, improve water quality and reduce water loss. • The District anticipates new regulations will be set in the near future for hexavalent chromium (Cr6) and the District may be required to build two new treatment plants to meet regulatory standards. 3. Why does SqCWD need to develop more water supply? • Our only water source is groundwater wells. No water is taken from creeks or rivers (surface water). All of our water supply comes from precipitation falling on the seaward side of the Santa Cruz Mountains; SqCWD does not have access to any state or regional water. • Despite the consistent conservation efforts of District customers, annual water use continues to exceed aquifer recharge from local rainfall. Demand exceeds supply and the current groundwater situation cannot be sustained. SqCWD must recover groundwater levels after years of over- pumping the aquifers. If nothing is done there will be seawater intrusion. • Ocean water will invade areas where groundwater levels are depressed. • Groundwater will be compromised by salt. • Wells will become unusable. • We will lose our only water supply. 4. What needs to be done to provide reliable water supply for existing customers? a. Conservation • We need to limit water use as much as possible. This is the least expensive source of supply, but it won’t be enough to recover our aquifers and meet long term needs. It is estimated that the groundwater pumping rate will need to be reduced 35% from approximately 4,500 acre feet per year to 2,900 acre feet per year for a period of 20 years to recover the aquifers. • The District has developed a robust conservation program over a number of years and the 2012/13 budget includes $307,000 for conservation incentives and programs (exclusive of staff costs). b. Pump groundwater where it will do the least harm: • Over the next two years, SqCWD plans to construct an iron and manganese removel water treatment plant for the new O’Neill Ranch well and rill one other new well. Two other wells are proposed in about ten years – These wells will replace aging wells, help redistribute groundwater pumping and are located to move pumping away from the coast; cost over the next three years is approximately $4.6 million. • Delivery infrastructure – The existing distribution system can not move water throughout the District; several transmission mains and pump stations and one new storage tank are needed over the next five years to intertie SqCWD’s four separate service areas; cost is estimated at $15 million c. Supplemental Water Supply • SqCWD is evaluating a desalination facility shared with the City of Santa Cruz. The District’s estimated share of costs associated with this facility has been included in the District’s Finance Plan for planning purposes. As stated above, the proposed rate increases do not fund construction of a desalination facility or alternative measures needed to address the District’s water supply challenges. • The desalination facility is needed for today’s customers’ long-term needs. 5. Why are rates being raised when customers are conserving and the total water use is less than past years? • It is true that lower water consumption puts upward pressure on water rates. Many of the District’s costs to supply water are fixed; meaning they occur regardless of how much water is sold and the District needs to generate enough revenue to cover its costs. Some customers will be able to mitigate the proposed rate increases through additional conservation. The main reason for the rate increase however, is to pay for the projects listed in #2 and #4 above; which, in conjunction with maximized conservation, are necessary to assure reliable water supply. 6. How are rates determined? • SqCWD operates on a July/June Fiscal Year Budget. • An independent financial consultant assists the District in developing a finance plan based on the District’s current budget, projected water sales, and anticipated future needs. A model was developed to calculate the rates needed to fund the adopted budget and estimated expenses over three years. The finance plan calls for three consecutive 9% annual increases to complete projects in increments using available cash and financing options including long term-debt. Additional increases are anticipated in future years until the needed projects are fully funded. • The Board of Directors reviews current and projected income and expenses and discusses near-term project needs and available funding. The proposed rates are modified by the Board to balance project/service needs against customer impact. The proposed 9% overall increase is designed to have a lower financial impact on low water users and to increase the conservation incentive for higher water users. For example, a low water user (uses 6 units or 4,488 gallons of water over 60 days) will see an increase of $12.46 (20.4%) at the end of three years over their current bill. A moderately high water user (uses 20 units or 14,960 gallons of water over 60 days) will see an increase of $47.04 (31.7%) and a high water user (uses 30 units or 22,440 gallons over 60 days) will see an increase of $90.04 (41.8%) at the end of three years over their current bill. • The elected Board of Directors has proposed 9% annual increases spread over 3 years on the belief that incremental increases phased in over time would be easier on customers than a single increase that would double or triple the rates. • The financing plan will be updated as SqCWD approaches a final decision about whether to pursue a desalination project with the City of Santa Cruz and as identified projects are completed. 7. How much revenue will the new rates generate? • The proposed rates are projected to generate an additional $1.8 million the first year. The cumulative impact over three years is expected to be approximately $4.7 million in additional revenue. • SqCWD’s operating budget for 2012/2013 is $8.6 million; the capital improvement budget is $9.9 million. 8. What are the rate categories? • The District has three categories; Single Family Residential (includes single family homes and lots with two residential units served by one water meter), Multi-Family Residential (apartment and condominium complexes, mobile home parks, etc.), and Non-Domestic (commercial). • The proposed rates will create one standard Single Family Residential (SFR) service charge and one standard water quantity tier structure for all SFR customers regardless of meter size. • Under the proposed rates, the service charge for Multi-Family customers will continue to differ based on meter size (larger meter = higher rate). However, Multi-Family customers will transition from a flat rate for all water consumed to a tiered rate structure for water quantity charges, similar to that of SFR customers. This new rate structure is intended to encourage conservation. • Commercial customers will continue to be billed a flat rate per unit for water used and a service charge based on meter size. 9. What is a Service Charge? • This is a “Readiness to Serve” fee that covers fixed costs incurred regardless of whether any water is sold such as those related to the District’s 24-hour emergency responses, meter readings, and customer service. It also helps fund the costs for maintenance and improvements to District service lines and meters and the partial repayment of debts on capital improvement. • The proposed service charge is designed to generate about 30% of the District’s revenue from water sales. The water quantity charges will generate the remaining 70%. The proposed bi-monthly charge (covering 60 days) for a single-family residential customer, regardless of meter size is $43.40 in 2013, $46.43 in 2014, and $49.66 in 2015. 10. What is the Quantity Charge? • SqCWD’s quantity charges reflect an “inclining rate structure”, in other words, those who use more; pay more. The thresholds for tiers are derived from use trends and rates for each tier are based on anticipated sales within that tier and on revenue requirements (as outlined in the budget and financial plan). • Following are the proposed quantity charges for single family residential customers: 2013 2014 2015 Tier 1: 1-6 units* $3.60 $3.80 $4.00 Tier 2: 7-14 units $5.80 $6.40 $7.00 Tier 3: 15-30 units $8.50 $9.75 $11.00 Tier 4: 31+ units $13.00 $14.50 $16.00 *one unit = 748 gallons • Following are the proposed quantity charges shown in cost per 100 gallons of water for single family residential customers: 2013 2014 2015 Tier 1: 1-6 units* $0.48 $0.51 $0.53 Tier 2: 7-14 units $0.78 $0.86 $0.94 Tier 3: 15-30 units $1.14 $1.30 $1.47 Tier 4: 31+ units $1.74 $1.94 $2.14 *one unit = 748 gallons • The proposed rate structure for multi-family residential customers will transition from a flat rate for water to a moderate, tiered rate structure. Shown below are the proposed quantity charges (per unit of water) for multi- family residential customers: 2013 2014 2015 Tier 1: 1-4 units* $5.00 $5.30 $5.60 Tier 2: 5-10 units $6.00 $6.55 $7.10 Tier 3: 11-20 units $7.00 $7.80 $8.60 Tier 4: 21+ units $8.00 $9.10 $10.20 *one unit = 748 gallons • Customers will be allotted water within each tier based on the number of dwelling units. For example, if your parcel houses 10 residential dwellings your bi-monthly tier thresholds in 2013 rates would be 1 – 40 (10x4) units at $5.00 per unit, 41 – 100 (10x10) units at $6.00 per unit, 101 – 200 (10x20) units at $7.00 per unit, and all units consumed in excess of 200 units would be billed at $8.00 per unit. 11. How is the water bill calculated? For Single Family Residential customers: 2013 proposed rates (example of 32 units or 23,936 gallons of water): Bi-monthly service charge: $43.40 6 units @ Tier 1 rate: 6 x $3.60 21.60 7-14 units @ Tier 2 rate: 8 x $5.80 46.40 15-30 units @ Tier 3 rate: 16 x $8.50 136.00 30+ units @ Tier 4 rate: 2 x $14.00 28.00 Total bi-monthly bill: $275.40 12. How often will I receive a water bill? District customers receive 6 water bills a year and each water bill covers a 60-day period. Depending on the service address, customers are either billed on odd (January, March, May, July, September, November) or even (February, April, June, August, October, December) months. The District is evaluating a change to a 30-day billing period. This could result in water savings as District personnel would read meters every 30 days instead of every 60 days and customers would receive feedback regarding their water use on a more frequent basis. It is also possible that some leaks would be detected sooner, thereby shortening the period of water waste and lessening the impact on a customer’s bill. A change to a 30-day billing period would require adjustments to both the proposed tier structure and the service charge. The proposed single family residential rates would be adjusted for a 30-day billing period as follows: 60-day Billing Period 2013 2014 2015 Tier 1: 1-6 units* $3.60 $3.80 $4.00 Tier 2: 7-14 units $5.80 $6.40 $7.00 Tier 3: 15-30 units $8.50 $9.75 $11.00 Tier 4: 31+ units $13.00 $14.50 $16.00 *one unit = 748 gallons 30-day Billing Period 2013 2014 2015 Tier 1: 1-3 units* $3.60 $3.80 $4.00 Tier 2: 4-7 units $5.80 $6.40 $7.00 Tier 3: 8-15 units $8.50 $9.75 $11.00 Tier 4: + units $13.00 $14.50 $16.00 *one unit = 748 gallons Service Charge 2013 2014 2015 60-day Billing Period $43.40 $46.43 $49.66 30-day Billing Period $21.70 $23.21 $24.83. Customers who have chosen not to participate in the District’s Automated Meter Reading Program pay a $10 opt-out fee each time the water meter is read. Under a 30-day Billing Period, these customers will pay $120 per year ($10 x 12) as opposed to the $60 per year ($10 x 6) that they pay under the current 60-day Billing Period. 13. What are “emergency water rates? The District established a Water Shortage Contingency Plan as part of its 2010 Urban Water Management Plan. There are five curtailment stages for long-term supply shortages with target cutback levels ranging from 5% to 50%. The trigger conditions for each curtailment stage are based on cumulative rainfall amounts ending in March of each year; however curtailment can also be triggered by other water quality or water supply concerns. In the event of a water shortage emergency, the District will need to raise rates to maintain operating revenue during the period of decreased water usage. For more on water shortage contingency planning visit http://soquelcreekwater.org/content/urban-water-management-plan or call (831) 475-8501 ext. 144. 14. What about charges to new development? In order to receive water service from SqCWD all new development must: 1. Pay its proportionate share of the existing water system and planned projects through a water capacity charge. The current water capacity charges range from $11,200 for a 5/8-inch meter to $699,200 for a 6-inch meter. These charges were adopted in 2010 and are currently under review. 2. Offset 120% of its projected water use so there is zero impact on our water supply 3. Pay for its meters and service installation 15. Hasn’t recent development strained our limited water supply? • The requirement to offset 120% of demand has actually saved water, e.g. for every new house proposed to be built, 5 to 8 existing homes within the SqCWD service area are retrofitted with new, efficient water fixtures and all costs are borne by the developers. • Water use in the SqCWD’s service area has steadily dropped for the past five years, and today’s use is actually less than fifteen years ago. 16. What about the private well owners? • A long standing County Ordinance prohibits new wells within SqCWD’s service area and many private wells have been abandoned and now receive SqCWD water service. • There is an active effort to eliminate/reduce the use of large non-District wells • Cabrillo College • Pays full price for an emergency connection to upper campus • Has implemented significant conservation measures • Were required to offset all new water use for the recently constructed South Campus • 17. How can I learn more about the major projects being planned by SqCWD? Integrated Resources Plan (IRP) Update in 2012 • Calculates conservation potential • Establishes need for supplemental supply • Reviews alternatives • Selects desalination with City of Santa Cruz as best overall option for supplemental water supply • IRP can be viewed at http://www.soquelcreekwater.org/content/integrated- resource-plan or hardcopy is available from the District office • Information about the desalination project is available at www.scwd2desal.org Well Master Plan • Groundwater management objective to move pumping away from coast and spread out over a wide area (see Groundwater Management Plan 2007 – http://www.soquelcreekwater.org/content/groundwater-management-plan • Aging wells have lost capacity and are no longer able to meet peak day demand • Need 4 new wells (1/4 of the system), but total groundwater production is limited to the post recovery yield and will be less than current production • Well Master Plan EIR Project Description http://www.soquelcreekwater.org/content/well-master-plan or contact the District office Water System Intertie • Currently the District distributes water to four separate service areas. Cannot move large quantities of water between service areas and this limits ability to address localized supply or water quality issues. • Planned projects to move water from Soquel to La Selva Beach include transmission mains, two pump stations and one additional storage tank. • Contact Michael Wilson, Acting Engineering Manager, for more information at (831) 475-8500.