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Soquel Creek Water District Rate Increase

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					                  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.

				
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Description: Soquel Creek Water District rate increase sheet.