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February 13, 2024
By Brian Hews
According to online financials, the Pico Water District (PWD), which serves nearly 30% of Pico Rivera residents, has been raising its rates annually for years, but apparently, that has not fixed the infrastructure or financial problems of the tiny water district.
The PWD recently retained Water Resources Economics for a water rate study to develop a five-year schedule to increase water rates that “will sufficiently fund the District’s expenses and provide financial sustainability.”
PWD has scheduled a public hearing to discuss and potentially implement the recommended changes at a public meeting this Thursday, February 15.
According to the study, the proposed rates will trigger a huge increase for PWD users, amounting to 111%, over the next five years: 51% in the first year, 20% in the second year, and 12% for the next three years.
Additionally, potable water rates per cubic foot have a proposed increase of nearly 29% for the first year, 20% in the second year, and 12% for the three years after that, amounting to over 85% over five years.
PWD indicates the increases will generate 35% more revenue in year one, 20% in year two, and 12% in the three years after that, and 91% in additional revenue for five years, averaging 18% per year.
By contrast, PWD’s proposed expenses, excluding capital spending, are projected to increase by only 6% per year.
For comparative purposes, rate increases for the Pico Rivera Water Authority (PRWA), which serves 70% of Pico Rivera, were also done with the objective of meeting its current obligations as well as providing funding for water improvements. PRWA’s increases were set well below PWD’s at 10% per year for the first five years, with an automatic CPI inflator option after year five.
The driver behind the huge increases is the PWD’s proposed increase to its cash-on-hand reserve targets, from about $2 million to over $6 million.
The PWD wants operating reserves to be set at 35% of annual operating expenses, capital improvement reserves to be set at 80% of the annual five-year capital improvement plan, a 20% rate stabilization reserve, and an emergency reserve set at $2 million.
The increases for each category amount to a total of $6 million, which is nearly 100% of the PWD’s annual expense budget; with that, the agency will achieve its reserve targets set by the study in five years.
And many think that is excessive, including the city of Pico Rivera, which is asking the PWD to set a longer period of time to achieve its reserve goals, closer to ten years instead of three, easing the burden on its water users.
“We would ask that PWD consider examining the effects these reserve requirements have on the proposed rates; and, if they want to achieve the upper limit, set a more reasonable period of time to do so, maybe over 10 years. There have to be other ways to obtain financial stability besides such high rate increases.”
Casting a shadow over the proposed rate increases is the lack of financial information provided in Water Resources Economics’ study. Shockingly, the financial results of prior year’s and current reserve balances were not included.
The City of Pico Rivera initiated a public records request at PWD to receive the last two years of audited financial statements and approved budgets.
According to City officials, the PWD financials were received, and the city asked PWD for more time to review the numbers and postpone the meeting; PWD declined.
Pico Rivera has options to protest the rate changes, including negotiations, public hearings, and forums to present evidence concerning the rate increase.
Pico Rivera City Manager Steve Carmona told Los Cerritos Community News. “The City of Pico Rivera is deeply concerned about the proposed water rate increases by the Pico Water District. We believe these proposed rates, potentially increasing by 127.6% over the next five years, place an undue burden on our residents and businesses. The city is committed to ensuring affordable, reliable water services and will rigorously evaluate these proposed increases to advocate for the best interests of our community. We encourage all stakeholders to engage in this critical discussion to find a balanced solution that maintains service quality without imposing excessive financial strain on our citizens.”
I live in Norwalk and Liberty is looking for big rate hikes as well .makes me wonder