The Short Answer​

 

HCSD rates pay for much more than the water coming into your home and the wastewater leaving it.

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Rates help pay for:

• Employees

• Purchased water

• Wastewater treatment

• Electricity, fuel and chemicals

• Maintenance and repairs

• Vehicles and equipment

• Debt payments

• Emergency work

• Major construction projects

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A large part of the current rate increase is connected to HCSD’s Capital Improvement Program.

This is often called the CIP. It is the district’s plan to replace and improve major parts of the water and sewer systems.

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HCSD also wants to build large reserves. Reserves are money collected now and saved for emergencies and future projects.

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The projects may be necessary. But we still need to ask:

• Which projects must be done now?

• Which projects can wait?

• How much should customers pay today?

• How much should be financed over time?

• Which customers will benefit from the work?

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Those questions matter because every dollar HCSD spends eventually comes from someone.

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HCSD’s Five-Year Capital Plan

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HCSD’s current plan lists the following estimated capital spending:

• 2025–26: $8.9 million

• 2026–27: $8.5 million

• 2027–28: $8.1 million

• 2028–29: $8.4 million

• 2029–30: $8.3 million

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That adds up to approximately $42.2 million over five years.

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This money is separate from the cost of running the district every day.

The five-year plan includes work on:

• Water mains

• Sewer mains

• Water-storage tanks

• Water pumps and booster stations

• Sewer lift stations

• Water meters

• Vehicles and equipment

• District buildings and yards

• HCSD’s share of City of Eureka wastewater projects

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These are real needs.

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Some parts of HCSD’s system are already old. Portions of the system could be close to 100 years old by the end of the district’s 20-year planning period.

HCSD must maintain its water and sewer systems.

The disagreement is not about whether we should take care of them.

It is about how we pay for the work—and whether too much money is being collected too quickly from today’s customers.

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Not Every Planned Dollar Must Be Collected Today

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HCSD’s capital plan also looks 10 and 20 years into the future.

The projected 20-year total is approximately $313 million.

That is a very large number, but it needs to be explained carefully.

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HCSD’s own plan says the long-range figures:

• Are meant to help with planning

• Are stated in 2025 dollars

• Do not include future inflation

• Are not a complete list of every future project

• Are not promised construction schedules

• Are not detailed project bids

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The $313 million is not a bill that must be collected from ratepayers today. It is a long-range estimate.

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That estimate will change. Projects may be redesigned, delayed, reprioritized, financed or supported by grants.

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Before raising rates, the public should be told:

• Which projects are urgent

• Which projects can wait

• Which projects could receive grants

• Which projects should be financed over many years

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Why Wastewater Costs So Much

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HCSD sends wastewater to the City of Eureka for treatment.

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HCSD owns approximately 32% of the treatment plant’s capacity.

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HCSD sends approximately $2.2 million each year to Eureka to help operate and maintain the treatment facility.

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That amount represented about half of HCSD’s sewer operating expenses budgeted for 2025–26.

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HCSD also expects to pay an average of approximately $2.15 million each year toward Eureka’s sewer construction projects during the current five-year plan.

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Some of this work is required by state or federal regulations. HCSD also does not completely control Eureka’s projects or their cost.

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But HCSD customers still receive the bill.

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That makes careful planning and financing even more important.

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Reserves: Necessary but Not Free

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Reserves are savings accounts for the district.

They help pay for:

• Emergencies

• Unexpected repairs

• Drops in revenue

• Planned construction

• Other financial problems

Responsible reserves are necessary.

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But reserve money is not free. Every dollar placed into a reserve comes from ratepayers or another district revenue source.

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When HCSD builds reserves quickly, customers pay more now so the money can be spent later.

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The 2023 rate study used several reserve targets:

• Enough operating money to cover between 60 and 180 days of expenses

• A water construction reserve with an initial upper target of approximately $2 million

• A sewer construction reserve with an initial upper target of approximately $8 million

The rate study says these targets were developed with input from HCSD staff and the Board.

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Some reserve requirements may come from existing loan agreements.

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But that does not mean every reserve target—or how quickly it must be filled—is required by state law.

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The Board makes important choices about reserve levels.

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Ratepayers deserve a simple report showing:

• How much money is in each reserve

• How much was added during the year

• Where the money came from

• What the money may be used for

• Whether the money is legally restricted

• When the money is expected to be spent

• The minimum amount that must be kept

• How the reserve target affects monthly bills

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As of June 30, 2026, HCSD reported approximately $22.7 million in total cash and investments. However, the Board packet does not provide a current, itemized accounting showing how much is operating cash, how much is held in each reserve, what restrictions apply, or how much has already been committed to specific projects. This does not mean money is missing. It means the information should be presented more clearly so the Board and ratepayers can understand where the money stands today.

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Reserves should protect HCSD and its customers.

They should not become a place where millions of dollars sit without a clear public explanation.

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The Pay-As-You-Go Choice

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​The 2023 rate study assumed that HCSD would pay for most capital projects with current rate revenue instead of borrowing money. This is called pay-as-you-go.

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Pay-as-you-go can make sense for routine maintenance, vehicles, equipment and smaller projects.

However, using current rates to pay cash for multimillion-dollar projects can cause large rate increases. Many of these projects may last 50 to 70 years.

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Today’s customers are paying their regular bills while also helping save for projects that future customers will use. This is one reason rates increased so sharply.

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What Long-Term Financing Could Change

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Financing does not make a project free. HCSD must repay the amount borrowed, plus interest.

But financing spreads the cost over time. This allows future customers who will also use the project to help pay for it.

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For example, financing an $8 million project for 30 years would require estimated yearly payments of:

• $408,000 at 3% interest

• $463,000 at 4% interest

• $520,000 at 5% interest​

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Paying cash would require HCSD to collect the entire $8 million much sooner.

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Financing is not always better. The Board should compare interest costs, available grants, low-interest government loans, the life of the project and the effect on monthly bills.

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Borrowing for every project would not be responsible. Refusing to finance any major project may not be responsible either.

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HCSD Has Used Financing Before

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Past HCSD Boards used financing when it made financial sense.

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HCSD financed its share of the Martin Slough Wastewater Interceptor Project. Financing began in 2012. In 2014, HCSD issued another $7.32 million in wastewater revenue bonds. Payments continue through 2044.

In 2021, the Board unanimously approved five-year financing for a new VacCon sewer truck rather than paying the full cost at once.

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Since the Board’s membership changed beginning in late 2022, I am not aware of HCSD approving any new long-term financing. The 2023 rate plan instead relies heavily on current rates to pay for projects and build reserves.

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I opposed that approach because it places too much of the cost on today’s ratepayers.

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HCSD’s current capital plan shows that financing may be used again for a future wastewater-treatment project. That project may require HCSD to contribute approximately $20 million, with payments spread over time.

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We should make the same careful comparison for every major project expected to serve several generations.

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Grants Save Ratepayers Money

 

​Grants bring outside money into our community for water and sewer improvements. Unlike loans, grant money generally does not have to be repaid.

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HCSD has actively pursued millions of dollars in grant funding. General Manager TK Williams and district staff deserve real credit for identifying these opportunities, preparing applications and doing the considerable work required to obtain and administer grant funding.

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Where Do the Grants Stand Today?

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In July 2023, HCSD discussed approximately $4 million in grants received, $9 million in grants awarded and another $5 million in applications pending. Since then, several of those projects have moved forward, while others have changed or were not ultimately funded.

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Walnut Drive — Approximately $1 Million

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HCSD was awarded approximately $1 million for earthquake-damage recovery at Walnut Drive. That project is now partially complete, with a portion of the grant funding already expended. The District reports that a significant contractor-related issue has slowed progress toward completion.

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Hoover Street — Approximately $3 Million

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HCSD was awarded approximately $3 million for flood-hardening work at the Hoover Street sewer lift station. The design phase is complete, and permitting documents are being submitted to Cal OES for review before being forwarded to FEMA for approval to move into the construction phase.

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Standby Generators — Approximately $1 Million

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HCSD applied for approximately $1 million to install standby generators at several high-impact sewer lift stations in the Pine Hill area. FEMA has notified the District that the funding has been approved, although the formal award has not yet been received.

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South Broadway Force Main

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South Broadway is an important example of why grant funding can be complicated.

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In 2023, HCSD was working with FEMA funding for the project while also seeking additional money because projected construction costs were increasing. As the design progressed, the estimated project cost approached $20 million.

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Under FEMA's benefit-cost requirements, the estimated benefits of the project—approximately $9 million—were not sufficient in relation to the projected cost. Based on recommendations from Cal OES and FEMA, HCSD ultimately withdrew the South Broadway Force Main project from that grant program.

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That means the earlier grant figures associated with South Broadway should not be viewed as money currently available to HCSD for that project.

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Fields Landing Force Main — $4 Million Application

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HCSD also applied for approximately $4 million in grant funding to relocate and replace the Fields Landing Force Main. That application was not approved by FEMA.

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Looking for the Next Opportunities

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HCSD is also participating in a North Coast Resource Partnership technical-assistance award. This gives the District an opportunity to work with regional partners to develop water-supply and infrastructure-resiliency projects that may ultimately compete for Proposition 4 funding.

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Grants Still Matter

 

​Not every grant application will succeed, and an application or preliminary approval does not necessarily mean money will ultimately be received. But successful grants can reduce the amount that must come directly from HCSD customers.

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I want to commend TK and the staff for pursuing these opportunities and encourage HCSD to pursue every appropriate federal, state and regional grant.

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Grant applications take time, technical expertise and careful follow-through. TK already has a great deal on his plate. If existing staff cannot handle the workload, the Board should consider staff training, an employee focused on grants or outside grant-writing assistance.

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The cost of that help should be compared with the potential value of successful grants.

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HCSD should also provide customers with a short, regularly updated grant report showing:

• Grants applied for and awarded

• Money actually received

• Local matching money required

• Projects supported by each grant

• Applications still under review

• Applications that were unsuccessful or withdrawn

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Grants cannot pay for everything. But they should remain an important part of HCSD's long-term infrastructure and financing plan.

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Which Projects Come First?

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A capital plan should explain why each project is needed and when it must be completed.

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Major projects should be placed into clear groups:

• Needed now for health or safety

• Required by law

• Needed to prevent a likely failure

• Expected to lower future costs

• Needed for growth

• Helpful but able to wait

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Waiting can raise construction costs or lead to more repairs. But doing every project immediately can make rates unaffordable.

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The Board must compare those risks openly.

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A More Balanced Way to Pay

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HCSD should not use the same payment method for every expense.

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A balanced plan would use:

• Current rates for daily operations and routine maintenance

• Reasonable reserves for emergencies and known needs

• Grants whenever available

• Low-interest government loans when they save money

• Long-term financing for appropriate major projects

• Connection-fee revenue for improvements related to growth

• Careful project scheduling

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Small and routine costs should generally be paid as they occur. Large projects that will serve the community for decades deserve a serious financing comparison.

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The goal is not to avoid paying HCSD’s bills. The goal is to pay them in the fairest and most affordable way available.

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Making Information Easier to Understand

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HCSD posts its Board packets, budgets, Capital Improvement Plan, rate study and other records online. The Board also discusses these matters at public meetings.

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The information is available. But very few ratepayers attend the meetings or have time to read hundreds of pages of technical reports.

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That does not mean they do not care.

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Ratepayers elect us to study these issues, make responsible decisions and protect their interests. We should explain major decisions in plain language.

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Many customers may not realize that the five-year rate plan will increase the combined water and sewer bill by approximately 88%. Many may also be unaware of the large increase in connection fees.

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HCSD should provide a short public summary showing:

• How monthly bills will change

• Where ratepayer money is going

• How much is being placed into reserves

• What each reserve is for

• Which projects will be paid for with cash

• Which projects could be financed

• What grants have been requested and received

• Which projects are urgent and which can wait

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This information could be shared through bill inserts, email, text messages, the district’s website, community newsletters and short videos.

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I believe the other Board members care about ratepayers. Our disagreement is philosophical. It concerns how quickly projects should be completed, how much money should be collected now and how costs should be shared between today’s customers and future customers.

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HCSD already makes its records public. The next step is to make the most important information easier to find, easier to understand and harder to overlook.

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The Bottom Line

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HCSD has real infrastructure needs.

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Its current five-year capital plan lists approximately $42.2 million in expected projects. The much larger $313 million figure is a long-range planning estimate—not a bill that must be collected today.

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The 2023 rate plan relies heavily on today’s rates to pay for construction and build reserves. That places strong pressure on current customers.

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A fairer plan would combine reasonable rates, grants, responsible reserves, low-interest loans, long-term financing and carefully chosen project priorities.

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For every major project, the Board should answer three questions:

• When is the project truly needed?

• What is the best way to pay for it?

• Which customers should fairly bear the cost?

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Continue Reading

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The next section explains the questions and ratepayer protections that should be required before another long-term rate plan is approved.

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Sources and Important Notes

Capital-project figures come from HCSD’s adopted Fiscal Year 2025–26 Capital Improvement Program.

Reserve targets and the use of current rates for most capital projects come from HCSD’s March 2023 Water and Wastewater Rate and Capacity Charge Study.

The financing figures are examples based on equal yearly payments over 30 years. They are not loan offers or estimates of what HCSD’s rates would have been under a different plan.