SLV Water District Proposes New Surcharge

Volume 10: Issue: 7 www.SantaCruzMountainBulletin.net July-August 2021

Surcharge May be Added to Cover CZU Fire Recovery by Mark Dolson Regular readers of my “On the WaterFront” summaries of San Lorenzo Valley Water District (SVLWD) Board meetings already know about an important agenda item on the upcoming August 5th Board meeting. As part of the Proposition 218 mandated citizen review process for all proposed water district rate increases, the Board will be tabulating ratepayer objections to the proposed 5-year CZU fire-recovery surcharge (roughly $10 per month for typical customers). If a sufficient number of customers (roughly 3950) register formal objections, the proposed surcharge will not take effect, and the District will be effectively back to square one in confronting the financial impact of the fire.

A key assumption of the Proposition 218 review process is that citizens will take the time to adequately inform themselves of the relevant underlying facts. Our community will be very poorly served if ratepayers object to the surcharge simply because of something they heard on the radio, read in a newspaper opinion piece, or heard from a neighbor. It will be equally tragic if people object to the surcharge purely to “send a message” (e.g., because they think their water rates are “too high” or because they have complaints with the way the SLVWD has operated in the past). The goal of this article is to provide valley ratepayers with a full and accurate understanding of our current predicament so that they can decide for themselves what response makes the most sense.

The following facts are not in dispute (but also not widely known): last year’s CZU Fire caused more than $20 million in damages to the District’s infrastructure, including melted water pipes, damaged or destroyed water diversion facilities and storage tanks, and other equipment. The District also faces fire-related costs associated with watershed restoration and fuel reduction. The Federal Emergency Management Agency (FEMA) will ultimately reimburse the District for 75% of the cost for a prescribed set of infrastructure repairs, but this will still leave SLVWD to cover the remaining 25% (i.e., at least $5 million because not all costs will be reimbursed by FEMA). Happily, it appears that the state of California will likely reimburse the District for some of this 25%, and the Board has specified that the surcharge can end early if it turns out the District doesn’t need the full $5 million. On the other hand, there are good reasons to fear that the $5 million figure may turn out to be an underestimate.

Unfortunately, SLVWD has not been able to identify any other significant source of revenue. The District does have insurance that covers some of its losses, but unfortunately, SLVWD has not been able to identify any other significant source of revenue. The District does have insurance that covers some of its losses, but FEMA requires that any insurance payments reduce its own 75% portion of the payments, not SLVWD’s 25%. The District is also aggressively seeking (and, in some cases, receiving) grants, but these will do very little to reduce the $5 million in infrastructure-related expenses that the District is currently facing. There has been some public speculation about possible property sales or some other innovative way of generating additional revenue, but these ideas have received substantial Board attention in the past two years, and they have yet to prove viable. This is why the proposed surcharge was approved by the Board by a vote of 4-1.

The only remaining question is whether the surcharge should be designed (as is currently the case) to raise the full $5 million or whether the District could somehow manage with a lower surcharge amount. The only scenario in which a lower surcharge would be conceivable is one in which the District’s operating expenses are reduced (both immediately and for the foreseeable future). Unfortunately, the lion’s share of the operating budget goes to salaries, and a rapid reduction in staffing levels is simply not feasible. The current staff is already under enormous pressure due to the added workload imposed by fire recovery responsibilities (including increased oversight of contractors and intensified pursuit of grants). Consequently, nobody on the Board has yet been able to suggest an actionable plan for meeting the Valley’s fire recovery and ongoing water needs with a significantly reduced SLVWD operating budget. Absent a dramatic reduction in operating expenses, a lower surcharge would inevitably force the District to cannibalize a portion of its recently secured $15 million low-interest loan. The District obtained this loan to restore its reserve funds and pay for capital projects and long-deferred maintenance. Repurposing this resource would constitute poor financial planning in its own right because it would once again defer investment in the District’s infrastructure to cover current costs.

This is the relevant background that may not be apparent to valley residents who have not been closely following the SLVWD Board meetings. Both the surcharge and the District’s budget have been extensively discussed in recent Board meetings, and no viable alternative scenario has been identified. The Board has already taken the precautionary step of ensuring that surcharge revenues can only be spent on fire-related recovery costs (by placing these funds in a restricted account). The District has also committed to renewing its Ratepayer Assistance Program so that those ratepayers who are least able to afford the surcharge are entitled to a comparable monthly rebate.

District is contending with. It is absolutely true that water rates have risen dramatically in recent years, but this has been happening across the state, and it has been primarily driven by two distinct factors: (a) the heightened costs of aging infrastructure with decades of inadequate maintenance (resulting, in part, from insufficient funding due to artificially low water rates), and (b) increased operating costs driven by increasing regulatory demands and other issues associated with climate change. The fire recovery surcharge is addressing a completely independent expense driven exclusively by the catastrophic CZU fire.

The bottom line is that the Board is unanimous in wanting the District to operate as cost-efficiently as possible, and it has been actively pushing for new ways to promote this outcome. But the suggestion that the District can somehow avoid the proposed 5-year, $10-per-month fire recovery surcharge is simply wishful thinking. A separate and deeper concern is that the promulgation of this purely hypothetical scenario in local media is detrimental both to the effective operation of the Board and to the well-being of the District because it rejects the Board’s established and informed deliberative process in favor of a public campaign rife with misleading suggestions and personal opinions.

Santa Cruz Water Rights Project

by Staff Reporter

Water is a hot topic as California faces severe drought conditions. The Santa Cruz Water Rights Project is a proposed project aimed at creating a policy to distribute water to areas including the San Lorenzo Valley Water District.

Environmental impact report (EIR) evaluates the potential for significant environmental impacts from the Santa Cruz Water Rights Project (Proposed Project). It examines the project and alternative projects proposed to control the distribution of water as we face the coming years of drought.

County residents are invited to visit the project’s environmental documents webpage to view the document and for information on how to comment on the Draft EIR www.cityofsantacruz.com

Urgent Care Moves to Santa Cruz

by Wendy Sigmund

The San Lorenzo Valley is losing its closest access to urgent care as the Scotts Valley Urgent care prepares to transition its facility to pediatric care, open to appointment only, while reopening Westside Urgent Care to meet the needs of the valley. This causes great concern for many valley residents as well as many community groups and stakeholders.

A Sutter Health representative responded to Bulletin inquiries by saying, “As part of our commitment to providing safe, personal, affordable care, we regularly assess our service offerings to better steward our resources and meet the changing needs of our patient population. On Aug. 30, 2021, Scotts Valley Urgent Care will transition to providing primary and pediatric care by appointment only and the Westside Urgent Care will reopen.”