Oakdale Irrigation District directors moved a step closer Tuesday morning to raising agricultural water rates for the first time in three decades. Next, it will be up to the district’s 2,900 customers to vote on whether they agree to pay significantly more for their water.
OID is under a state-mandated deadline to measure how much water is delivered to customers and develop a volumetric pricing structure for the 2015 irrigation season. Directors agreed to proceed with a rate study featuring a tiered pricing structure based on a base rate of $27 per acre and a volumetric rate on top of that for the water used.
Currently, OID charges its agricultural customers $19.50 per acre per year for as much water as they can put to “a reasonable and beneficial use.” The proposal passed Tuesday includes the suggested base rate, plus charges per acre foot beginning at $3.15 for the first three acre feet that rises to $6.25, $8.30, $10.40 and $20.75 at successive levels.
The rate study suggests a 3 percent escalator clause, which directors can enact or not each year. There also is a per-acre surcharge of $6.10 per acre when the board declares a drought, as it did earlier this year.
Under the proposed rates, a 20-acre farm would pay $916 for four acre-feet of water compared to $399 today. By comparison, customers in the Turlock and South San Joaquin irrigation districts pay $660 and $720, respectively. Modesto Irrigation District farmers pay $1,038.
Before rates can be adjusted, Proposition 218 requires that the district’s ag customers vote via an all-mail ballot. That would happen between now and Oct. 21, when directors have scheduled a public hearing and could adopt the new rate structure.
Any increase in water rates would go into effect Jan. 1, 2015, unless 50 percent plus one of all voting customers reject the proposal.
OID’s 650 domestic water users are not affected and will not vote.
Agriculture economist Allan Highstreet of CH2M Hill in Sacramento walked the directors and about a dozen interested farmers through the reasons supporting a rate hike. He also showed a series of charts detailing water use by crop and how much farmers might expect to pay to irrigate under various scenarios.
Highstreet said the district spends more than $1.5 million more to deliver water than it receives in revenue under the current rate structure.
General Manager Steve Knell said OID also is confronting revenue declines in two other key areas – sales of hydroelectric power and surplus water – that have enabled it to keep ag rates low. He said the district expects to spend almost $9 million in reserves to balance its budget in 2013 and 2014. There is a $3 million deficit projected in the 2015 budget under the current rate structure.
“We have kept operations and maintenance costs to an average increase of 1.5 percent a year. We’ve done a good job. It’s not an expense problem; it’s a revenue problem,” Knell explained.
Farmer Guy Stueve voiced concern that rates as proposed could promote more groundwater pumping by some farmers worried about higher water bills.
“It could stimulate more pumping,” he said.
There has been widespread concern across the San Joaquin Valley about how much groundwater is being used during the three-year drought.
Farmer John Brichetto called the rate proposal “too aggressive,” saying the district should proceed “an inch at a time, not a mile at a time.”
Directors Frank Clark, Steve Webb, Al Bairos and Herman Doornenbal voted unanimously to proceed with the rate study. Director Jack Alpers was ill and did not attend.
“We’ve had a wonderful deal all these years and deservedly so. People had the foresight to put in Tri-Dam and it’s worked out great,” said Clark, referring to the power-generating units at Donnells, Beardsley and Tulloch reservoirs. “Hopefully, the revenue will come back, but we’ve got to balance the budget.”
Added Bairos: “No one likes increases. But if you keep on running a business and it’s going downhill and you don’t do something to change it, you’ll end up in trouble.”
Webb expressed hope that the new rates could be lowered if revenues increase in future years.
“I’ve been a champion of keeping rates low,” he said, “but there’s no choice but to up them now.”
If approved by customers and adopted by the board in October, Knell recommended that the new rates be staggered over three years.
In the first year, all users would pay only the flat rate of $27 per acre for water. In the second year, they would pay the flat rate, plus 50 percent of the charges under the tiered structure. In both years, their water bills would indicate how much they would pay if the full rates had been implemented.
The expectation, Knell said, is that farmers will invest in ways to improve their water efficiency before the full rate hike takes effect in 2017.
In other action at Tuesday’s meeting, the board heard a report from Knell about water storage at New Melones Dam. He said if the drought continues, there may not be enough water next July to serve all customers. He said he has asked for exemptions from the federal Bureau of Reclamation regarding environmental flows on the Stanislaus River.
Also, the board set a fee of $425 per use of district pumps out of season (Oct. 1 to Feb. 28); approved an extra irrigation rotation after October, if water is available; and declined to refinance its long-term bond debt.