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Residential utility rates explained
By Larry Stein
The city of Oxnard operates 3 utility facilities; Solid Waste (Environmental Services aka Trash), Water, and Waste Water (aka Sewer). Each utility is operated as if they were separate businesses. The financial reporting process is tracked through a method known as Enterprise Funds. Revenue is collected together in a combined bill listing the fees for Solid Waste, Water and Waste Water separately. In 2012 Oxnard city staff performed a review of the conditions of the city utilities. In 2013, Public hearings were held and the city council approved increases in the utility rates starting in 2014.
Several items affecting utility rates have occurred since then. The drought in California started in 2012, continued. In 2014 the first stage of emergency drought conditions was declared. In 2015 the second stage of emergency drought conditions was declared and mandatory water conservation measures were implemented. In 2015 the trash facility (MRF Material Transfer Facility), which is owned by the city, but was operated by a private company, began to be operated by the city, saving ratepayers money. A new city manager started working for the city in June of 2014. The new city manager initiated a city wide investigation and determined that numerous issues had not been sufficiently addressed by the two previous city managers including extreme failure in maintaining the facilities and equipment for the waste water facilities. A study was started in 2014 to determine the extent repairs were needed at the waste water facility.
This year, 2015, staff reported that the waste water facility needed significant upgrades to the point that a new facility may be needed to be built. The main facility was built in the 1970s with upgrades in the following 20 years. No significant repairs have been made in the last 15 years. Funds had not been set aside for these expected repairs. Due to the mandatory drought restrictions, staff has reported that revenues for water and waste water have gone down while repair and maintenance costs have gone up. Debt service; payments of water and waste water bonds remain.
Cities borrow money through the issuance of bonds, much like borrowing money to buy a house. The better credit one has, the more money one provides for a down payment, the better the terms the borrower receive. Bond ratings are much like FICO scores, instead of a number value such as 620 or 780, bonds are rated by letters such as, AAA, AA, B and signs + or -. A rating of AAA+ is the best rating. If a bond rating of less than BBB occurs i.e. BBB- or BB, then a government entity cannot borrow money. When bonds are issued, bond covenants or agreements are established. Such covenants include the amount of cash that is available by the borrower and the amount of surplus revenue the borrower is expected to have after paying its financial obligation such as operating costs and debt. Unlike a mortgage, when a borrower must satisfy the lender only at the time of borrowing, a borrower who uses bonds as a form of debt, must maintain the conditions of bond covenants at all times. If the bond covenants are not maintained, the bond holders may ask for their money back, or in most cases, have the borrower pay a fee. The city of Oxnard is concerned that due to declining revenues in water and waste water, the city may be facing violations of bond covenants. Members of the public are concerned that the city may be in violation of bond covenants when it come to the waste water bonds.
In August of 2015, the city asked for citizen volunteers from business, single family residents and multi-family residents to participate, as a committee, in a review of the city’s plans to increase utility rates. This committee, URAP (Utility Ratepayers Advisory Panel), of which I am a member, met Wednesdays evenings, at public forums, at the different utility sites for several weeks. Members asked questions and offered opinions following numerous 90 minutes presentations by staff and their consultants, In November of this year, 2015, a public hearing was held announcing a proposal to increase utility rates. Members of the public felt the increases were unnecessary and wanted to have the published announcement to include a ballot where ratepayers may cast a ballot opposing the rate increases. The public notice of the proposed rate increase, of which the ballot was included, was mailed to each rate payer the second week of December, 2015. Please note my estimation of the impact the proposed rate increases will have on residential rate payers.
Total Utility Billing based on Usage Usage in HCF
Year
6
9
12
15
18
21
2015
$94.24
$109.96
$121.81
$132.34
$162.85
$182.47
2016
$111.73
$128.89
$148.78
$168.67
$193.21
$220.18
2017
$119.70
$137.55
$158.19
$178.83
$204.18
$232.20
2018
$130.40
$149.36
$171.29
$193.22
$220.13
$249.92
2019
$140.10
$160.50
$184.11
$207.72
$236.64
$268.68
2020
$149.38
$171.46
$196.99
$222.52
$253.81
$288.46
Percentage Increase Each Year
2016
18.56%
17.22%
22.14%
27.45%
18.64%
20.67%
2017
7.13%
6.72%
6.32%
6.02%
5.68%
5.46%
2018
8.94%
8.59%
8.28%
8.05%
7.81%
7.63%
2019
7.44%
7.46%
7.48%
7.50%
7.50%
7.51%
2020
6.62%
6.83%
7.00%
7.12%
7.26%
7.36%
48.69%
46.81%
51.23%
56.15%
46.89%
48.63%
Members of the public feel these rates are excessive. A Special City Council Meeting on Utility rate increases took place on December 10, 2015. The presentation by staff and its consultants lasted 3 ½ hours. The opinions and comments from URAP members were not discussed. To oppose the rate increase, 22,000 ratepayers must submit signed ballot to the city clerk protesting the rate increases. If more than 50% if the ratepayers object to the rate increases, city council cannot raise the utility rates. Opinion counts. If you do not speak, you cannot be heard. Please mail your ballot to the city clerk by December 31, 2015.
Read/Vote: Oxnard proposed rate increase and protest ballot
Larry Paul Stein
__________________________________________________
Larry Stein is an accountant and former Oxnard Mayoral candidate, who has been following City of Oxnard financial issues for over 20 years.
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