With no disagreement among its members, the Rio Linda/Elverta Community Water District Board of Directors directed its staff and consultants to finalize a draft Master Plan and draft Financial Plan for the next ten years. Directors Robert Blanchard, Doug Cater, Mel Griffin, Jay O'Brien, and Jerry Wickham concurred in giving this direction in order to proceed with hearings this fall on the plans and required rate increases.

     The draft 10-year Financial Plan calls for replacement of four wells to shore up the District's aging water system plus handling payments on debt resulting from its 1994 controversial and aborted involvement in a Regional Transmission Pipeline. The Plan shows a need for a 145% increase in rates.

     Early in 2001 the Board intends to return the District to monthly billing to reduce the stress of rate increases on its customers. The initial rate increase will result in customers paying monthly a bill equal to previous bimonthly bills.

     Last year the Board received a rate comparison study which indicated that the median Rio Linda/Elverta residential customer was paying less than they would have paid had they been served by the following ten water purveyors: Arcade Water District, Northridge Water District, Carmichael Water District, Citizens Utilities, Citrus Heights Water District, Fair Oaks Water District, San Juan Water District, Orangevale Water Company, City of Roseville, and Placer County Water Agency. Should the Rio Linda/Elverta Community Water District raise rates as discussed by the Board, the median customer would pay about the average charge within this group of purveyors.

     The last rate increase occurred in 1994 when the District became involved in a regional transmission pipeline to bring in water from the American River. The District incurred a $5 million debt to cover an estimated cost of $4 million only to have the price increase to $6 million plus. After changes in management and Board membership, the District through lawsuits and other action recovered $3.1 million of the funds in return for giving up its interest in the pipeline for which it has no water rights. It is still seeking $2.1 million in court in a lawsuit against the pipeline engineers, Boyle Engineers. The 1994 rate increase covered only 30% of the debt payments, requiring a gradual depletion of reserve funds to cover the debt costs.

     In addition, over the past four years, the District has been forced to replace mains on Elkhorn Boulevard because of road improvements. These costs exceeded $500,000 which further depleted reserves.

     In the meantime, in response to many failing wells and a related inability to maintain system pressure in peak demand period, a new Master Plan and Capital Improvement Program has been prepared. Replacing four wells and completing needed water main improvements over the next ten years will require an estimated expenditure of $7.3 million.

     "Our situation has reached a critical point," District General Manager Mike Phelan explained, "as our financial reserves are being used up at a rapid rate while our wells have aged to the point we are experiencing casing and other failures. The peak water demand periods in the community require all 11 wells to be on line, but we frequently have one or two wells off line. It is only a matter of time before we lose a well. A new well meeting today's standards costs over $1 million."

     "Given the severity of the situation, with the District eroding its precious financial resources, we took action we deemed to be prudent and necessary," Board President Jay O'Brien commented.

     "We intend to combine an initial rate increase with a change to monthly billing to reduce the stress on our customers. But even with a doubling of rates, we will be only biting off part of the pill, enough to stop the immediate bleeding and avoid a water supply emergency. We are planning to put off the rest of the needed increase until we are certain of the outcome of the Boyle lawsuit. Then we intend for the remainder of the needed rate increases, for later years, to be the subject of a citizen review committee which will help guide us into rate structures that best fit our community," O'Brien explained.

     The Master Plan and Financial Plan will be available on the District's web site - www.RioLindaElverta.com - in late September. Hearings will be held in the fall on all the proposals.

After exchanging this correspondence with Bill Shepherd, I asked him for his permission to post this here on the Rio Linda Elverta Mailing list. He granted that permission, so here it is...

Jay O'Brien

-------- Original Message --------
Subject: Rate Increase
Date: Fri, 25 Aug 2000 07:58:32 -0700
From: "Bill Shepherd" <bshepherd@sjobergconsulting.com>
To: "Jay O'Brien (E-mail)" <jayobrien@att.net>

Jay:  I read Mike's post to the RL mailing list.  If I read correctly, it appears that the 100% increase will occur "in early 2001" and further increases will occur after the Boyle suit is over.  I was confused over when or whether public comment will occur for one or both of these "increases". In one spot, (See below), the quote is that the remainder of needed increases will be subject to a citizen review committee (implying that the initial 100% increase will not be subject to any review.)  But, in another spot, the message says that "hearings will be held in the fall on all the proposals"...implying that BOTH increases will get public hearings.

Can you clarify?

Also, can you clarify the format of the "100%" increase proposed...does that mean a 100% increase in the bi-monthly "base rate" or a 100% increase in the "per unit" rates for use that exceeds the base allotment, or both?  Or some combination to be determined later?

Thanks, Jay
Bill Shepherd

-------- Original Message --------
Subject: Re: Rate Increase
Date: Fri, 25 Aug 2000 08:36:07 -0700
From: Jay O'Brien <jayobrien@att.net>
To: bshepherd@sjobergconsulting.com
CC: Mike Phelan <mphelan@bignet.net>

Hi Bill,

After considering the District's financial problems and having received rate comparisons that show us to be at the bottom end of the rates charged in the area, we decided that we had to stop the erosion of the $3M we got from Northridge while we still had an opportunity to realistically plan.

We were shown three scenarios for rate increases of 145% and more,  depending on how they were implemented, to keep the District running  properly. We chose the alternative that would allow us to put money into a new well sooner. We decided to bite off doubling the rates, coincident with a return to monthly billing. This doesn't cover all that is needed, but is crafted as an intermediate step with concern for the customers.

By the way -- the return to monthly billing is also prudent for other operational reasons, it isn't being done merely to facilitate the rate increase.

From a customer standpoint, bills will be received for the same amount as before, but they will be received every month rather than every other month.

By leaving the remainder of the needed increase for later, we can take any settlement from Boyle into consideration in setting the new rates. It is unlikely that we will receive enough from that suit to eliminate the need for an additional increase. The next increase will consider a change in the way water is billed (the tier structure, etc) but the immediate increase will simply double the existing rates.

Here's the direction the Board gave Mike. Proceed with all reasonable speed to double the rates, setting the necessary public hearings. Plan the new rates to coincide with the return to monthly billing. Plan the subsequent rate increase process to include public input via meetings, committees, communications with ratepayers, outreach via the web page, etc.

There will be public hearings, as required, for each rate increase. We made a decision to double the rates now, as that fits well with the return to monthly billing. We invite and welcome public comments and suggestions when we revise the rate structure to accommodate the remainder of the needed increase.

We will be sharing what has been presented to the Board with our ratepayers, so that you, also, will see the financial problems this District is trying to dig out of as a result of the $5 Million debt incurred by the 1994 Board for the regional water transmission pipeline, and why this substantial increase is necessary.

Specifically, to answer your questions: Both increases will get public hearings. The Board wants help from the ratepayers in adjusting the final rates, and we will use whatever means works best for the public to get that input; for now the rates will simply be doubled, and the intent is that both the base rate and consumption rates will be doubled.

Thanks for asking the questions!

Regards, Jay

Jay O'Brien
Director, RLECWD

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