The following article is my thoughts about the cost and complexity of CCWD. These are my thoughts and I am not speaking for the Board or the staff, but I think that they will generally agree with what I write. One of the most common questions I am asked is why are our rates so high, and, secondly, are you out of your mind even considering raising rates.
The CCWD District is a very large district and has so many systems that it would be impossible to drive to all of the facilities in a single day. Furthermore, CCWD has only a limited number of customers which drives up the cost per customer much more than for a single system that has a lot more customers. The CCWD system consists of water systems, wastewater systems, hydroelectric systems, as well as numerous water/wastewater issues, legislative issues, legal issues, water rights issues and many other related issues to deal with and to pay for.
For the water systems, CCWD has five systems: Copperopolis area, Jenny Lind area, West Point area, Arnold area, and Sheep Ranch. There are 290 miles of distribution pipe serving approximately 12.750 connections which is an average of one connection for every 120 feet. Please accept the fact that it is almost as expensive to run a plant serving 1000 connections as for a system serving 25,000 connections. In other words, it cost much more per connection to run a small system as for a much larger system. When you consider the operation of multiple systems versus one system, it is even more expensive per connection.
For the wastewater systems, CCWD has 13 systems: Copper Cove/Poker Flat, Arnold, Forest Meadows, Indian Rock, Mill Woods, Sequoia Woods, Six Mile Bowl, Vallecito, La Contenta, Southworth, West Point, Wilseyville, and Douglas Flat. There are 125 miles of collection lines serving 4620 customers which equals 143 feet per customer. Again, keep in mind that it costs much more per customer to operate a small system than for a much larger system.
CCWD also has a hydroelectric system on the North Fork of the Stanislaus River and a hydroelectric powerhouse at New Hogan Reservoir Dam on the Calaveras River. The North Fork system was funded by and is being run by Northern California Power Agency. NCPA is paying for the systems capital costs and operational costs and paying CCWD money for the lease of this system. The powerhouse in the dam at New Hogan Lake dam is leased to Modesto Irrigation District. On a good year it makes a little money and on a bad year it may lose a little money.
Add to all this all the costs for issues that don’t seem to be directly related to O&M expenses for water and sewer service that CCWD customers must pay for. Water and wastewater regulations are very expensive without having any other source of money to pay for this except from the CCWD District ratepayers. We must be proactive in managing and protecting the water rights. We must stay involved in the Bay-Delta issues to protect our water interests even though it is very costly to do so. CCWD must respond to the many lawsuits, many are frivolous, which is very expensive, but would be even worse if we ignored them. CCWD is required to be involved in county and state water planning as well as our own interests which costs a lot of money in staff time and for consultants. CCWD must spend a lot of money for consultants and associations that help us regulate and protect our interests in Sacramento, Washington and throughout California. In addition, CCWD is obligated to pay for unfunded retiree costs which it has both contractual and regulated by law. Like every other government entity of any size, we are having to deal with this issue and are trying to eventually get out from under this huge obligation by building up a find to cover this and limiting future costs by reducing our obligations with future employees. This may not sound fair to the future employees, but we cannot afford to continue obligation ourselves (and you) to these expensive retiree benefits. Furthermore, it will be years before we begin to see the results from these changes.
This brings me to the issue of why monthly rates are so high. I will try to pick several of the issues off one by one starting with operations crews and equipment. The state demands that all operators be licensed by the state. Operators are in demand throughout the state and have been able to rate a relatively high pay scale. They also belong to a union, and the union has been very effective in negotiating pay, benefits and retirement. Because CCWD has so many plants throughout the county, CCWD must have more operators than for a system with many more connections than CCWD but only one or two plants to operate. We also need more maintenance personnel to cover the various plants and distribution/collection systems over a large area. CCWD currently has approximately 50 operators and field employees. For most employees there is a need for a vehicle. There is also a need for backhoes, tractors, heavy equipment trailers and large trucks to haul the equipment as well as tools and equipment for the vehicles and employees. Since getting on the board I have pushed to use CCWD employees to do as much of the work as possible that was formally contracted out to contractors and only use outside contractors when necessary. I have nothing against outside contractors, but they usually cost the district more than using our own employees if they are capable to adequately do the job.
In the office, CCWD has about 11 employees in the Finance Department. These employees oversee the billing, accounting, banking, overseeing investments, paying bills, fielding calls from the ratepayers and many other duties. When talking with them I am constantly reminded that they are understaffed and overworked, and I believe them. However we are trying desperately to hold costs down as much as possible.
There are about nine employees in the Engineering/Technical staff. There are also another eight or so employees in Administration and Planning. Finally, there is the General Manager. All employees (except the General Manager) have civil service protection, good benefit packages and retirements, both while currently employed and after retirement, all paid for by CCWD and you, our customers.
All of this is very expensive and contractual, meaning that we cannot go back on a contract even if you or I deem it to be desirable. But, I still need to add another part of the finance issue to what has already been presented: capital costs. Treatment plants, pipelines, and related equipment that has a lifespan of more than a few years has to be upgraded, replaced, or repaired as needed. Also, we have to pay for systems as they need to expand to accommodate new customers or communities. Most of this is highly regulated and very expensive. On top of these costs need to be added the planning, legal, consulting, regulatory, association dues, and cost of financing projects. The state is very dictatorial in what it will approve, and require, in regulatory hoops that must be jumped through. By the time that CCWD (or any other state regulated utility) can finish building/replacing a treatment plant, the costs are many times more than what the actual costs of the physical equipment and construction costs actually are, and takes many years of planning and regulatory procedural requirements to complete.
Another needed fund which is not currently being funded concerns CCWD’s North Fork Hydroelectric project which we own. The North Fork system has a value of over $500,000,000. The current FERC (Federal Energy Regulatory Commission) license expires in 2032, less than 20 years from now. We are told that it may take up to 15 years to undergo the relicensing effort and cost many millions of dollars. When this license is successfully renewed it will bring in many more millions of dollars annually to our district than we are now receiving. If we fail to renew this license, we run the risk of losing this project altogether. We are in the beginning planning stage of exploring ways to be able to finance this licensing effort without burdening the ratepayers, but I haven’t figured it out how to do this yet.
Now, in addition to the O&M costs and the capital costs is the issue of financial reserves. Repeatedly, I have been told by others that CCWD has millions of dollars stashed away in numerous accounts not doing anything. To the casual observer this may appear to be the case, but it isn’t. CCWD has a number of reserve accounts with the monies in these accounts earmarked for certain uses only. For starters, we must keep an emergency O&M fund which is kept at around $3,000,000. This may seem like a lot of money, but it really isn’t. In a major emergency we could blow through this amount in a heartbeat and still be required to build it back up to the original amount as soon as possible.
Every service area has a one-time capacity fee for new customers who are adding to the number of connections to a system. This fee is from slightly below $10,000 to over $15,000 per connection for a single family residence (more for multi-family and commercial customers) depending on the service area. These reserves are held specifically for the capital expenses for each particular service area and cannot be used for anything else. In some cases the reserve is near zero and others are several million dollars. When looking at our capital projects lists and the costs for the repair, replacement, and new plant needs, it is obvious that the needs still far outweigh our reserves. Consequently, we are constantly putting off many needed capital projects that we cannot pay for at this time. Our economy has exacerbated this situation since very few new connections have been created since the national financial meltdown in 2008.
There are a number of other reserves to cover miscellaneous needs. One is for debt repayment. As money come in for these debts, it is put into a reserve for that debt until the next payment is due (usually once a year). Another is for unfunded retiree benefits. We must pay the unfunded retiree benefits each year and are setting up a reserve fund that will cover future costs that will, eventually, not require money to be paid from the current monthly service bills of each year. There is still another reserve set up to cover unanticipated administrative budgeted needs. Examples of this need can include, but are not necessarily limited to unbudgeted non capital equipment, legal issues, water rights issues, regulatory issues, regulatory fines, etc.
Now for revenues: CCWD has four primary revenues and several minor revenues. I will not cover the minor ones due to their relatively small size. The four primary revenues include monthly service fees for water and sewer service, property taxes, hydroelectric power sales, and expansion fees. I won’t cover service fees and expansion fees since they have already been covered above. Currently, from property taxes CCWD receives a little under $2,000,000 annually which is down from over $3,000,000 a few years ago due to declining property values. Seventy five percent of these funds go to augment the monthly service fees of our customers, and the other 25% goes to special needs such as water rights, regulatory and legislative issues, planning, engineering, and administrative issues. Ideally, all this money should be used for water and wastewater issues for the county at large and not for customers’ monthly bills, but I am not brave enough to suggest that we raise the monthly rates to cover that take away without fear of being hung.
The other major source of revenue is hydroelectric sales which is, again, used primarily to augment customers’ monthly service bills. This amount is a little over $600,000 per year. It would be nice to be able to use this for hydroelectric issues, but we would have to raise the monthly service bills to be able to do so. It would be great to use the majority of this revenue source set aside as a relicensing reserve fund for the North Fork Project.
This brings me to my final point. If anyone wishes to review the CCWD budget and other financial reports, please go to CCWD’s webpage which is www.ccwd.org. Once on this page, go to “publications” and then to “Financial reports”. Also, the first Budget Workshop meeting was this past December 18th, and there will be several more between now and June of 2013. There will be a public hearing at the end of the workshops, then there will be a Proposition 218 vote by the ratepayers, and finally will come before the board for a vote. All are welcome to attend our workshops and meetings. Our meetings are posted on our website and in the newspaper. On our website, go to “Board of Directors” and then to “Agendas”.
If anyone is interested in viewing our posted financial information, please go to our website, then to “Publications” and then to “Financial Reports” and choose among a number of reports. If anyone wishes to communicate with me directly, they can do so by emailing me at “firstname.lastname@example.org”.