Since its take-off in January, the new meter-based water billing system has not produced the projected revenue results that the City of Turlock hoped for.
The metered water billing was implemented on a city-wide basis in compliance with the California State mandate.
Back in late 2009, Staff recommended to adopt a new water rate structure. The new structure was intended to ensure that water fund reserves would remain the same under meter-based billing and encourage water conservation.
“The idea was that when we go from a flat-rate billing system to a meter-based billing system our revenues would be about the same,” said Regulatory Affairs Manager Michael Cooke.
Following this idea, the customer’s bills would ultimately be the same as they were under the previous billing system, taking into account different seasonal fluctuations.
Although customers have been saving money under the new structure, revenue is not where it was envisioned to be. The City is now facing a $1.2 million deficit – an approximate $300,000 more than was expected from projected revenue.
Cooke said that the $1.2 million deficit could result in not putting as much money into the capital budget and the reserve for depreciation. There is already a reserve for capital expenses in place, but the City would be spending it down and not replacing it.
Cooke’s presentation to the City Council noted that the adopted budget anticipates that the City will be spending down the "Capital Repair/ Replacement Reserve" from $4,831,120 to $4,124,256.
The City’s total reserves in the Water Enterprise Funds are as follows:
RESERVES FOR OPERATIONS (25% of expenditures) $ 1,872,000
RESERVES FOR CAPITAL EXPENDITURES $ 1,500,000
RESERVES FOR FUTURE DEBT SERVICE $24,635,019
TOTAL RESERVES $28,007,019
“The average customer is paying $6.20 less per month under our existing rate structure,” said Cooke.
Currently, customers pay a minimum of $22.05 per month, which includes an allotment of 21,600 gallons of water. This compares to the previous system which charged customers a flat rate of $31.50 monthly.
During the summer months, between May and September, water use typically rises up to about $38 per month.
Taking these fluctuations into account, the current monthly bill for the average customer totals to about $25.
“Turlock being overachievers that we are, we’re down about 20%,” said Cooke.
Cooke explained the positives of using the meter-based including producing less water, lower customer bills, and cost decline.
The problem is Turlock water is a ground water only system, with all water coming from wells. With this comes a high fixed overhead cost, resulting in about 80% of a fixed cost that must be paid before any water is even pumped.
Recent revenue data shows that monthly revenue in 2011 has declined about $160,000 per month in comparison to revenue received in 2010.
It was estimated that during the summer months, the average monthly water revenue would be back to what it was under the previous flat structure, but this has yet to been seen.
“We’re not seeing that bump in revenue,” said Cooke.
Cooke said that the $300,000 deficit is most likely due to no new homes being built, meaning no new customers, and a fairly wet spring that even extended into June.
Cooke told Council that the situation will continue to be monitored and the budget impact may not be as great if water use slightly increases and more revenue is collected.
However, “It’s likely that unless things change dramatically, we’ll be making recommendations towards the end of the year that we do go with a different type of rate structure,” Cooke said.
Similar to how most jurisdictions are done, the new system would require customers to pay a base line fee, on top of being charged for each gallon used. This differs from the current system which includes a 21,600 gallon water allotment that is included in the minimum monthly fee of $22.05.
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