The Short Answer​​​​​

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HCSD’s water and sewer rates have increased—or are scheduled to increase—by approximately 85% to 88% over five years.

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The district needs to operate, maintain and replace aging infrastructure. That work must be paid for.

The real disagreement is not whether we maintain the system. It is how quickly the money should be collected, where it should come from and which generation of customers should pay.

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The adopted plan relies heavily on today’s ratepayers to fund major capital improvements and build substantial reserves over a relatively short period.

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I believe HCSD should use a balanced strategy combining reasonable rates, grants, subsidized government loans, prudent reserves and long-term financing. Infrastructure serving the community for 50 to 70 years should not be paid for almost entirely by the people receiving bills today.

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HCSD Has Important Work to Do

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HCSD operates and maintains approximately:

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• 114 miles of water mains

• 73 miles of sewer mains

• 10 water-storage tanks

• 12 water booster stations

• 28 sewer lift stations

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These facilities provide essential services every day. They must be operated, repaired and eventually replaced.

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I support necessary infrastructure improvements. Allowing pipes, pumps, tanks and treatment facilities to fail would lead to service interruptions, environmental problems, emergency repairs and even greater costs.

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But supporting infrastructure does not require us to accept every proposed financing plan or every rate increase without fully examining the alternatives.

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Rates Pay More Than Construction Costs

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Even with long-term financing, rates will still need to cover HCSD’s everyday expenses, including:

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• Employee wages and benefits

• Purchased water and sewage treatment

• Electricity, fuel and chemicals

• Routine maintenance and repairs

• Vehicles, tools and equipment

• Insurance and regulatory compliance

• Training and employee certification

• The effects of inflation

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HCSD must recruit and retain qualified employees. California’s certification requirements place substantial training and professional responsibilities on utility workers. Employees who obtain and maintain those certifications should be paid appropriately.

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These are legitimate costs of providing safe and dependable service.

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Long-term financing would not eliminate every rate increase. It would help separate normal operating expenses from major capital improvements that will remain in service for generations.

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The Pay-As-You-Go Decision

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The rate study assumed that HCSD would fund capital projects primarily with current rate revenue rather than new long-term debt.

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This is commonly called a pay-as-you-go approach.

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Pay-as-you-go can make sense for routine maintenance, equipment and smaller projects. But it can create serious rate pressure when used for expensive infrastructure that may serve the community for 50 to 70 years.

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The study also called for building substantial reserves to help pay cash for future projects.

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That means today’s customers are not only paying HCSD’s current operating expenses. They are also being asked to accumulate money for infrastructure that future customers will use for decades.

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That decision is a major reason rates increased so sharply.

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Reserves Need More Public Explanation

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Responsible reserves are necessary. They protect HCSD against emergencies, unexpected repairs, revenue shortfalls and other financial risks. Existing debt agreements may also require certain financial protections.

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But ratepayers deserve to know:

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• How much money is held in each reserve

• Whether the money is legally restricted

• What each reserve may be used for

• The minimum amount that must be held

• The higher target selected by the Board

• When the money is expected to be spent

• How the reserve target affects monthly bills

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The previous rate study used reserve targets developed with input from district staff and the Board. It also proposed accumulating substantial capital reserves so future projects could be paid largely with cash.

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That was a policy choice—not simply a fixed state requirement.

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Reserves should protect the district and its customers. They should not become a financial black hole that ratepayers cannot understand or follow.

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The Effect on Real People

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Rate increases are not simply numbers in a consultant’s spreadsheet. They affect household budgets every month.

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My 92-year-old mother-in-law lives on a fixed income. When utilities, food, insurance, medical expenses and other necessities increase, she cannot simply increase her income to cover them.

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Thousands of other seniors face the same problem.

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The increases also affect:

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• Working families

• Renters

• People living with disabilities

• First-time homeowners

• Local businesses

• Customers already struggling with housing costs

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Every dollar HCSD collects comes from someone’s household or business.

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That effect must be considered before major increases are approved.

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I Asked About Long-Term Financing

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When the rate consultant presented the study to the Board by Zoom, the presentation was followed by a brief question-and-answer period.

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I asked about using long-term financing to spread appropriate infrastructure costs across the years the improvements would be used.

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That alternative received little discussion and was not developed into a complete rate scenario.

Interest is a real cost, and every proposed loan must be examined carefully. But interest is not the only cost that matters.

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The Board must also consider construction inflation, repeated repairs, emergency work, grants, subsidized loans and the effect of sudden increases on current customers.

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The correct comparison is not simply interest versus no interest. It is the complete cost and ratepayer effect of every reasonable option.

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I Asked for More Time

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I also asked for additional time to study the recommendations and develop strategies that might reduce or offset the increases.

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That request was rejected.

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The Board voted that evening to accept the rate study. The vote was 3–2, with Director Joe Mattioli and me voting no.

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I was not asking HCSD to neglect its infrastructure or postpone every project indefinitely.

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I wanted time to examine:

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• Grants and subsidized loans

• Long-term financing

• Project priorities

• Responsible use of reserves

• The consultant’s assumptions

• The effect on monthly household bills

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A decision with consequences lasting at least five years deserved more than a presentation, a brief discussion and an immediate vote.

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Why I Voted No

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I did not vote no because I oppose maintaining HCSD’s infrastructure.

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I voted no because I did not believe HCSD had demonstrated that increases approaching 85% to 88% over five years were the fairest or only responsible solution.

I wanted a strategy that would:

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• Complete truly necessary projects

• Protect the reliability of our systems

• Pay employees fairly

• Pursue grants aggressively

• Use reserves responsibly

• Spread appropriate long-term costs across the generations that will benefit

• Reduce sudden pressure on household budgets

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Ratepayers deserved more time, more alternatives and a smarter financing strategy.

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The Bottom Line

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HCSD must maintain its water and wastewater systems.

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Rates will increase over time because employee wages and benefits, maintenance, equipment, purchased services, regulations and inflation all cost money.

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The disagreement is not about whether we pay our bills.

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It is whether today’s customers should be required to contribute too much, too quickly, toward infrastructure that may serve the community for generations.

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A better strategy would combine reasonable rates with grants, subsidized government loans, prudent reserves, carefully prioritized projects and long-term financing when the numbers support it.

That approach would not eliminate the cost.

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It would distribute the cost more fairly and reduce the immediate burden on the ratepayers paying HCSD’s bills today.

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Continue reading:

Where Is the Money Going?
A closer look at HCSD’s capital plan, reserves, grants and the difference between cash funding and long-term financing.

What Must the Next Rate Study Answer?
The questions and financial comparisons the Board and public should receive before another long-term rate plan is approved.