WATSONVILLE—The Watsonville City Council will have a public hearing on May 25 concerning proposed utilities rate increases over the next five years, a cost city staff says is needed in order to make several upgrades to ailing infrastructure.
The new rates would mean a typical single-family household would pay about $40 more per month by 2026, and a medium-sized restaurant would see its bill increase by about $270 per month in the same time.
The increases come from a rate study conducted by consultant Raftelis Financial Inc. that says they are needed for the Public Works & Utilities Department to stay fiscally solvent as it undergoes various infrastructure projects that have piled up over the years.
Because of Proposition 218, the city needs to first prepare and send notices to all property owners that receive their water, wastewater and solid waste services before the City Council considers any rate increase.
There will then be a 45-day public notice period in which property owners and customers can send written protests for consideration by the City Council. The Utilities Rate Study Report will be on file in the City Clerk’s office during this time.
According to Public Works & Utilities Department Director Steve Palmisano at least half of all ratepayers—or roughly 7,500 households—would need to submit written and signed protests in order for the rate increases to be rescinded.
Any increase would not be effective until July 1, the beginning of the upcoming fiscal year.
Watsonville has not approved rate increases since 2015. At the time, Watsonville’s rates were half the cost of most other Santa Cruz County jurisdictions, and the gap has only increased since then.
The City Council was expected to weigh rate increases last year, but the pandemic sidelines those discussions. That decision, sought to lessen the burden on the thousands of Watsonville residents who faced financial uncertainty because of Covid-19’s spread, cost the city about $2 million in revenues.
Without a rate increase, the Wastewater Enterprise Fund is expected to be at a structural deficit by fiscal year 2024 and exhaust its working capital reserves by fiscal year 2026. Moreover, the Solid Waste Fund will exhaust its working capital reserves in fiscal year 2023 without the increase.
The Wastewater division over the next 10 years will begin three major projects that must be completed:
- Complete replacement of the Wastewater Treatment Plant’s (WWTP) electrical infrastructure, including the PG&E transformer, and standby generators at a cost of $15.5 million, needed by fiscal year 2023
- Complete replacement of the WWTP’s Headworks and influent pump station at a cost of $15 million, proposed to be constructed in fiscal year 2027
- Reconstruct five pump stations and rehabilitate seven others at a cost of $9 million, proposed to be undertaken within the next 10 years
The Solid Waste division is facing financial pressures because of increased dumping costs at the Monterey Regional landfill—estimated around $1 million over the next five years—and the loss of revenues from recyclable materials.
In addition, the third phase in the closure of the city’s landfill will cost about $2.7 million, and various recently-approved state legislation will also balloon the division’s operating costs.
Palmisano and Assistant Director of Public Works & Utilities Christian Di Renzo say that if those infrastructure upgrades do not happen, the city could be legally liable for any possible failures causing harm to customers. Delaying the upgrades, Di Renzo said, would also cost the city more in the long run.
Councilman Eduardo Montesino, supported by council members Lowell Hurst and Ari Parker, twice tried to up the recommended rate increases so that the city could prioritize infrastructure projects he said have been delayed since before his first stint on the council last decade.
“We have aging infrastructure that if we don’t invest in we’re going to be paying more in the end,” he said.
Both times, however, his proposed changes failed. The vote was 4-3 in both instances, with Mayor Jimmy Dutra and council members Francisco Estrada, Rebecca Garcia and Aurelio Gonzalez voting “no.”
All said they could not further increase the proposed new rates because of the effects the pandemic has had on their constituents.
