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Central Basin Water Lowers Rates, Generates $2.5 Million Net Operating Margin

 

Central Basin customers expected to pay 14 percent less for imported water.

By Brian Hews • May 24, 2021

COMMERCE, CA – Only months after Assemblywoman Cristina Garcia’s controversial bill failed, a bill that attempted to place Central Basin Water (CB) into receivership despite an $8 million reserve and a budget that showed a slight net operating margin (NOM), it is evident that the new CB Board, led by Art Chacon, and management team, led by Alex Rojas, cleaned up the mess left by Kevin Hunt, and the corporate sabotage of former Finance Director Andrew Hamilton, earning a $2.5 NOM and announcing a rate reduction.

Despite a projected statewide drought, the CB Board  approved a 14 percent reduction in imported water rates for cites and other customers in its service area. The reduction was approved during the District’s monthly Board meeting on May 24.

Many California counties are currently under a severe drought forecast precipitated by low water levels and little snow in the Sierras. The District did not increase its recycled water rates, or imported water administrative fees, further reducing the cost of water for its customers.

“Given the impact of severe curtailments in revenue for local cities caused by the pandemic, the Central Basin Board felt that lowering the rates for imported water for our customers was necessary at this time,” said Art Chacon, Board President, Central Basin Municipal Water District. “Although it seems counterintuitive given the state’s drought condition, we really felt it was the right thing to do.”

The drought in California has been growing for two years, and now 14 percent of the state is in “exceptional” drought.  Exceptional is the top and worst level from the US drought monitor. Most of the rest of California is in the extreme or severe categories while small sections of the far north coast and the two southernmost counties are in moderate drought.

California Gov. Gavin Newsom recently expanded a drought emergency across most of the state from 41 of California’s 58 counties.

“As a Central Basin customer, we are incredibly pleased the District is working with all its customers to ensure its service areas have a reliable and diverse source of high-quality water at affordable rates, particularly at a time when local governments have been impacted by the pandemic,” said John Oskoui, Assistant City Manager, City of Downey.

“The Board’s actions reflect a new direction for Central Basin which has started to form collaborative partnerships with its customers and take the necessary steps to ensure the District’s long-term fiscal stability.”

Central Basin’s drop in water fees comes at a time when other districts are proposing or increasing water rates.

The Santa Clara Valley Water District is increasing water rates by 9.1 percent for FY 2022 to help pay for emergency water needed this year to meet demand and keep groundwater at normal levels, other water conversation programs, and expanded recycled water use.

The District then plans to raise its rates by up to 9.6 percent each year for the next eight years, followed by an 8.7 percent jump the following two years.

The East Bay Municipal Water District has proposed an increase for water and wastewater rates of 4 percent each in the first year and an additional 4 percent for each in the second year while the Ventura City Council recently gave initial approval to increase water rates by 7 percent and wastewater rates by 6 percent each year for the next five years.

Additionally, the Contra Costa Water District (CCWD) raised their 2121 rates by 3.75 percent while Western Municipal Water District in Riverside plans to raise rates by 2.1 to 3.5 percent.

“It’s important to remember that one of the principal reasons Central Basin is able to lower water rates is that we have taken prudent measures to regain fiscal control of our budget,” said Alex Rojas, General Manager, Central Basin Municipal Water District. “Our goals for the District are to lower the cost of imported water, ensure our long-term fiscal stability, improve customer service, diversify our revenue streams, and grow our recycled water services.”

At the same meeting, the board adopted a budget and district reorganization that will realize nearly $1.2 million in annual operating savings starting with the 2021 budget year.

That is after CB earned $2.5 million in NOM this year.

The District’s monthly average operating cash and unrestricted reserves are at levels not seen since 2016, and reserves have jumped nearly 40 percent due to the  District making contributions to its unrestricted budget reserves further stabilizing its long-term financial outlook.