SLO rates rising despite abundance of water

June 20, 2013

By JOSH FRIEDMAN

San Luis Obispo water rates will increase next month for the eighth consecutive year even though the city currently only uses about 55 percent of its annual supply of water.

As the city continues to raise rates, it has amassed an abundance of water that it could use to generate more sales and lower rates. However, the city does not sell water outside its boundaries, and it instructs its residents to practice conservation, even though it is raising rates the most on those who conserve the most.

San Luis Obispo has three primary sources of water — Nacimiento Reservoir, Whale Rock Reservoir near Cayucos and the Salinas Reservoir at Santa Margarita Lake — which provide the city about 10,000 acre-feet of water yearly.

However, the city only pipes in about 5,500 acre-feet per year.

The unused water remains in the reservoirs, amassing reserves. Reserves shrink, though, when droughts occur. Presently, the city has enough water to last 11 years of a drought as dry as the worst it has previously endured.

In addition to piping in reservoir water, San Luis Obispo also produces recycled water. The city’s water reclamation facility converts sewage into water for irrigation and agricultural purposes.

San Luis Obispo, which is the only city in the county that operates a water reclamation facility, recycles more than 5,100 acre-feet annually. But, it dumps about 97 percent of the water it recycles into San Luis Creek, or about five million gallons per day of recycled water.

In 2010, the city recycled 5,250 acre-feet of water but only delivered 153 acre-feet of recycled water for usage.

A state permit requires the city to flush 1,807 acre-feet of recycled water into the creek annually to maintain a proper habitat for steelhead trout. However, the remaining recycled water, which totals more than 3,000 acre-feet of water annually, is available for the city to sell.

But, since the onset of the water reclamation program in 2006, the city has only sold upward of 160 acre-feet in a year. Most of the recycled water the city sells goes to its own Parks and Recreation Department for watering fields, and the rest goes to private customers within the city limits.

A 1983 ordinance prohibits the city from selling water outside city limits, but the council could amend the ordinance at any time.

In spite of the ordinance, the city has hired a consultant to study the recycled water market, Water Division Manager Wade Horton said. The Utilities Department is considering the possibility of selling recycled water to wineries in San Luis Obispo County.

“The city of San Luis Obispo invested into being able to use some of that water and sell it,” Horton said. “It could generate long term revenue that could bring the rates down.”

The Utilities Department, though, is still not considering the possibility of selling reservoir water, which is of much higher demand. Water levels in North County are particularly low right now.

At a recent council budgeting meeting, former mayoral candidate Steve Barasch suggested selling water to other agencies to help lower the rates.

Mayor Jan Marx responded by saying she supports the city prohibition on “wheeling water” and that selling water outside the city limits creates sprawl and conflicts with smart growth principles.

Horton said selling reservoir water might compromise the city’s reserves.

“We spend a lot of money to develop a water supply, so we want to make sure the water is there in the case of a drought,” Horton said.

The city likewise remains firm in its stance that residents should conserve water. Despite just restructuring rates so that the biggest conservers face water bill increases of at least 20 percent, the Utilities Department is not encouraging increased usage.

“The city of San Luis Obispo wants you to conserve water,” the department website says.

To help residents conserve, the Utilities Department offers tips on water conservation and even water audits, in which staff speak with residents “in an effort to discover the cause of unusually high water bills.”

However, the department does not recommend using more water in effort to lower rates. At the water fund hearing last week, Utilities Director Carrie Mattingly joked that making such a recommendation in San Luis Obispo would amount to “heresy.”

Councilman Dan Carpenter did so anyway.

“Stop conserving. Start using our water if you really want to see our rates come down,” Carpenter said at the water hearing. “We need people to use more water because we need that revenue stream to offset our costs.”

City water costs increased significantly three years ago when the city began paying its portion of the Nacimiento pipeline. The city owes San Luis Obispo County $162.2 million for its share of the pipeline, including $78.5 million in interest payments.

The city must pay off its Nacimiento pipeline debt over a 30-year period. Including maintenance, the pipeline currently costs the city about $6.2 million a year.

Another major expense lies ahead in the form of a state-mandated upgrade to the city’s water recycling facility, which falls under the city sewer fund. The upgrade will cost $63.2 million, and the city plans to issue a bond to cover $50.8 million of the expense.

The city plans to begin making payments on the upgrade to the water reclamation facility in 2016-2017. It expects to owe $3.8 million annually over a 20-year period for the upgrade.

Like water rates, sewer rates will increase both at the beginning of next month and on July 1, 2014. The average residential sewer bill for San Luis Obispo residents next month will be $58.85, slightly higher than average water bill of $57.48.