The water authority has postponed extraordinary fee increases

This article originally appeared in the Morning Report.

After hours of debate, San Diego’s water importer (since the region must buy most of its water from outside the county) decided to raise prices just a little bit — and postpone the worst part of the planned water price increase until next month.

Why? Well, many representatives of local water utilities (there are 33 of them) didn’t agree with the way the City of San Diego (the region’s largest and most powerful water buyer) was trying to fend off even bigger price increases. And the city, which has the power to push through whatever it wants, hit the pause button instead.

How we got here: San Diego County Water Authority staff initially proposed a 22 percent rate increase effective January 1, for a variety of reasons you can read about here. That amount was later negotiated down to 18 percent – still huge compared to water rate increases over the past few decades. The actual water prices paid by residential and business consumers wouldn’t necessarily increase that much, but local water districts would have to pay for those rate increases somehow.

Then the water authority scraped together a $19 million grant from the government to reduce the price increase to about 15 percent.

Not good enough: The city of San Diego, at the urging of Mayor Todd Gloria, was still not satisfied. At the water authority’s board meeting on Thursday, Nick Serrano, Gloria’s vice chairman and deputy chief of staff, called on the authority to pass a 14 percent rate increase. That sent water authority CEO Dan Denham and his finance team back to the proverbial locker room to come up with a new plan to make it happen.

Later that afternoon, Denham’s team told the full board that the water authority could offer a 14 percent rate increase, but would have to use $9 million from its emergency fund (of which only $25 million remains).

Fees and debt manager Pierce Rossum laid out a plan with some scary red “x”s indicating what reduced fee revenue would mean for the authority’s future: This plan would not be consistent with the board’s cash policy, it would take money from the contingency fund and it would further damage the water authority’s already weakened credit rating.

That was enough to create cold feet. “Stop pushing for 14 percent. That’s not going to happen,” was the mood in the room. The city of San Diego withdrew its demand. The board went into recess.

When the board returned, San Diego Board Director Fern Steiner threw the city a proverbial spanner in the works. She asked the board to instead approve a 4 percent increase so the water authority could pay its bills to the Metropolitan Water District of Southern California – San Diego’s lifeline to all its major water sources. And the board would deal with the rest later – at its July 25 meeting.