Signal Hill reviews water-rate increase at community workshop

City seeks to increase rates over five years to improve water system.

The City of Signal Hill held a community workshop Monday evening to share a subcommittee’s conclusion that water rates should increase as of Feb. 1, 2020.

The intimate meeting on Oct. 28 at the council chamber included several city officials as well as two city commissioners and a handful of residents who were able to ask many pertinent questions as the officials presented.

Matt Tryon, water-systems superintendent, explained that Signal Hill has two sources of water– its primary source of groundwater and a secondary source of purchasing water from the Metropolitan Water District (MWD), which costs twice as much.

The city owns about 2,000 acre-feet of groundwater-extraction rights and its annual consumption is about 1,800 acre-feet, serving 3,161 customers through 50 miles of pipeline, Tryon said.

“We have enough water rights […] to cover all the demands the city has each year,” he said. “And it also gives us a little room there, too– an extra 200 acre-feet in case there’s growth or expansion or maybe a business comes that uses a lot of water.”

The city stores 7.4 million gallons of water in three reservoirs, he said.

“[That] offers fire protection, or maybe we have some pipeline breaks in an earthquake,” Tryon said. “There’s water in the reservoirs to help serve the community for about three or four days.”

Tryon added that the water system covers four pressure zones and uses three pump stations and 12 boosters to move water around, including uphill. The city also has three groundwater-extraction systems– or wells– Wells 7, 8 and 9, only the first and last of which are operational.

The city currently has an opportunity to re-drill and rehabilitate the 37-year-old Well 8 with an interest-free loan that will cover about half the $3.5-million cost, Tryon said.

However, the officials explained that the city needs to increase water rates to help cover the other half of that cost to ensure long-term water stability and also have money for ongoing water operations. Because residents have been conserving water so diligently because of the drought, revenues have been less than expected for the last few years.

Finance Director Scott Williams said that the City uses three different funds for water– a water-operations fund currently at $2.4 million that covers ongoing activities, a water-depreciation reserve of $1.2 million to cover capital improvement projects and a water-development fund of $200,000.

But he said that water expenses have unexpectedly increased while revenues have decreased because of customer water-conservation efforts, which weren’t budgeted at the last water-rate increase.

Williams showed slides highlighting that without a rate adjustment, water-operations expenses will exceed revenues by 2022 and necessary capital-improvement expenses already exceed revenues.

“We’ve operated at a deficit since I’ve been here,” Williams said. “The fund is anticipated to be completely depleted by fiscal year 2021-2022.”

Sara Russo, management analyst with the Public-Works Department, said that the City increased water rates by 13% between 2004 and 2010 though inflation increased by 25%. The City imposed no increases between 2011 and 2015 because of the recession, after which it increased rates by 8% over five years.

However, since 2015, the City unexpectedly consumed 19% less water due to drought-conservation efforts, Russo said. The average monthly bill is actually $9 less than the $48 that the city had projected when it increased rates before.

Meanwhile, personnel, insurance and especially groundwater-replenishment costs have increased. MWD standby fees have also increased, Tryon said. He and Public Works Director Kelli Tunnicliff said that furthermore, having only two operating wells leaves the city vulnerable if one shuts down.

A council-appointed subcommittee examined three scenarios and recommends one that includes replacing Well 8, Williams said. In that scenario, water rates would increase by 15% in 2020 and 2021 (including the 8% increase already budgeted), 12% in 2022 and 7.5% each in 2023 and 2024. Well 8 would be rebuilt in 2022, funded in part by a $1.5-million, zero-interest loan from the MWD.

Typical rates would increase from $45.44 in 2020 to $67.64 in 2024, Williams said, adding that the city’s water rates would still be on the low end when compared to similar cities and that the it will continue its 13%-average discount for low-income customers.

“Our goal here is to be very conservative in our estimates and be better than expected in the out years,” Williams said. “It is conceivable that rates could be reduced if the fund is operating that way and everything is going as expected.”

At its next meeting on Nov. 12, the Signal Hill City Council will consider Jan. 14, 2020 as the date to conduct a public hearing about increasing water rates as of Feb. 1.