Newport Beach City Council will hold a public hearing about the water rates on Tuesday, and the presentation will include a proposal for an increase.
Based on the results of a water study completed by an outside consultant, city staff is recommending an increase of 7.4 percent each year for five years, Utilities Director Mark Vukojevic explained in during an interview.
It equals out to about $3.40 per month per typical Newport Beach household, or about $40 a year.
“It is a large increase, but there’s a reason why,” Vukojevic said. “A lot of that increase has to do with the fact that we have not increased rates over the last five years… We haven’t been keeping up with basic inflation.”
Additionally, water inflation is much higher than standard inflation, he pointed out.
“Our cost to pump groundwater and produce groundwater has gone up 75 percent in the last five years,” he explained.
About 25 percent of the city’s water is surface water that comes from the state and Metropolitan Water District, primarily, at the moment, Colorado River Water. The other 75 percent is pumped groundwater.
The water that the city buys from MWD from the Colorado River has gone up 20 percent over the past five years, Vukojevic added.
A lot of that is because they’re recycling additional groundwater, electricity cost has increased, other maintenance costs, labor and materials, and more.
The other large part was because of a study of the city’s Capital Improvement Program.
“Basically, what’s our pipeline replacement program?” he explained. “The analysis that we did recommends that we spend an additional $2 million a year…in capital expenditures.”
Capital improvements like the pipelines in the harbor that will soon need to be replaced. It’s a worthwhile investment, he commented.
“Right now, as a utility department, we are spending more money…than is actually coming in,” Vukojevic said. “We’re actually using our reserves to balance our budget.”
Those are the main factors driving the rate increase, which is needed to stabilize the budget and all the work that needs to be done over the next five years.
It should be enough to fund purchasing water over the next five years, as groundwater is very likely to continue going up about six percent every year. The MWD Colorado River water will go up yearly about three percent.
The plan is to then do “regular, basic, keep up with inflation” type of yearly adjustments, Vukojevic confirmed.
They are aiming to implement the increase in January.
“Nobody likes a price increase, I don’t either, I’m a consumer too and I don’t want it, but it’s been five years,” Vukojevic said. “The money they’re paying, their rate, actually goes directly back into our water system.”
It buys water, maintains the system and replacing the infrastructure.
It would be easy not raise rates and not replace pipes, but that’s not a smart plan.
“We could keep on living and singing for a while, up until things start breaking more and more often,” Vukojevic said. “We need to reinvest into the system. The system belongs to the people of Newport.”
When water works well, consumers don’t think about it much.
“How do you put a price tag on reliability,” the assurance that the water will turn on, be high quality, and with good pressure, he commented.
He’s expecting some pushback, but he’s hopeful that people will find it reasonable.
According to city staff, the utilities department “operates and maintains approximately 302 miles of potable water pipeline, 202 million gallons of water storage capacity, 26,500 service connections, 17 booster pumps, 42 pressure reducing stations, 2,723 fire hydrants, and 8,172 distribution valves.”
Operation of the system includes purchasing groundwater and imported water supplies, implementing the 2019 Water Master Plan and water pipeline infrastructure projects, water main and valve repair and replacement, hydrant testing and system flushing, water quality testing and state reporting, water meter installation, leak detection, and customer service.
Raftelis Financial Consultants, Inc., prepared a water rate study and developed a financial plan that sufficiently funds the operation, maintenance and repair activities referenced above. Raftelis analyzed the cost of water services and completed the water study in August. The study also made recommendations regarding the rate and structure in compliance with state law. The study recommends a water rate increase to ensure adequate funds are available to continue to maintain a safe and healthy water system.
For more information, visit newportbeachca.gov/government/departments/utilities/water-services/new-water-rates