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Water district fights to restore 'user fee'

By KELLY NIX

Published: February 3, 2012

THE GENERAL manager of the Monterey Peninsula Water Management District will make a desperate plea to a judge in San Francisco next week to restore a “user fee” on customers’ water bills the district argues is necessary to avoid layoffs and a drastic reduction in the environmental work it performs on the Carmel River.

The user fee, which accounts for 46 percent of the water district’s $10 million annual budget, had been collected from customers since 1983 in order to help pay for staff salaries, fish rescues, aquifer storage and recovery and other mitigation work to reduce adverse impacts to the Carmel River — the Peninsula’s primary water source.

But in July 2009, the 8.325 percent charge that had been tacked onto Peninsula customers’ California American Water bills was removed after Public Utilities Commission administrative law judge Maribeth Bushey ordered Cal Am to find another way to fund the Carmel River mitigation measures.

At a hearing in San Francisco Feb. 8, water district general manager Dave Stoldt and attorneys for the district will appeal to Bushey to reinstate the fee. If Bushey rejects the request, it could be crippling to the district and the work it does on the river, Stoldt said.

“It’s hurting the water district quite a bit,” according to Stoldt, who said the agency has a legal right to collect the fee.

Since 2009, however, the CPUC has issued several decisions against the water district, which, along with Cal Am and the Department of Ratepayer Advocates, have made failed attempts to get the fee reinstated. The CPUC most recently denied the request in March 2011.

To make up for the lost revenue, Cal Am had been reimbursing the water district for the river mitigation work until May 2011, when the CPUC said Cal Am could no longer reimburse the district.

“We are now paying them for the mitigation work [in a contract agreement], but it’s much less than they were paid under the reimbursements,” Cal Am spokeswoman Catherine Bowie told The Pine Cone.

The roughly $1.5 million Cal Am will pay the district for the Carmel River work this year isn’t enough to cover the district’s expenses, according to Stoldt. In 2011, the amount the water district budgeted for the work was $3.7 million and 16 workers.

“If [the fee] is not reinstated, some of the things that would be at risk are fish rescues — and it looks like we may be headed into a drier year” when fish rescues in the Carmel River are most needed, Stoldt said.

Other conservation projects for the river that could be reduced or cut if the fee isn’t reinstated include erosion control work, hydrology and plant life studies and habitat restoration in the Carmel lagoon.

It could also mean “a real threat” to the jobs of the district’s 28 employees, who could face work furloughs or worse, Stoldt said.

“We would first look to things like furloughs,” he explained. “But we have done the math and furloughs don’t solve the problem. [Layoffs] would be on the order of five to eight positions.”

The user fee has generated support by some, including the Carmel Valley Association, which contends the work is necessary for the health and vitality of the river. But the CPUC in a 2010 analysis expressed concern that “Cal Am’s customers may be paying user fees to the management district for projects that may not be necessary or cost-effectively performed” by the district.

Stoldt said the user fee is more essential than ever because of the district’s plans to fund future water supply projects, which could include expanded aquifer storage and recovery and groundwater replenishment projects.

“We are heading in the mode where there are a lot of potential capital expenditures,” he said.

If Bushey rejects the water district’s fee request, Stoldt said it will explore alternatives including a plan where the Monterey County Assessor could collect the fee on tax rolls, which Stoldt said is the “most secure” method of obtaining the money from Cal Am’s customers. Dozens of wastewater agencies in the state, including the Carmel Area Wastewater District, use the mechanism to bill and collect their revenues, he said.

It’s also possible, though unlikely, the water district could square off in court against the CPUC.

“I don’t think any of us is thinking that is an appropriate way to go,” Stoldt said. “If we are successful in coming up with an alternative funding mechanism, that is probably in everybody’s best interest.”

Apart from the user fee, the water district generates revenue from property tax allocations, connection charges, permit fees and state grants.

In early 2011, the water district launched a public relations effort that included a $1,500 advertisement in the Monterey County Herald urging Cal Am’s customers to support the user fee, which they would pay every month. The ad asked ratepayers to sign an attached “support letter” and send it to CPUC President Michael Peevey.

But Peninsula residents have expressed dissatisfaction with the water district in recent years, going so far as to approve by a two-thirds margin a 2002 ballot measure calling for the district to be disbanded because of its reputation for curtailing water instead of supplying it.

Stoldt said the water district wants customers to understand that the user fee is necessary to protect the Carmel River and to come up with alternative water supply projects.

“The ratepayers of the Peninsula have said, ‘We want a water supply,’” he said. “You can’t have the resources without the cost.”

Bowie said Cal Am believes the water district has “expertise and experience to continue the work” on the Carmel River.

The CPUC is expected to consider the water district’s request at the Feb. 8 meeting and issue a decision sometime after that.