LIVE OAK, CA (MPG) - The Live Oak City Council voted unanimously to fill two vacancies on the Planning Commission during the March 19 meeting. 

The city received nine applications for the Planning Commission and first considered appointments at the prior meeting, when current commissioner Michelle Serpa was re-appointed to another four-year term.

Live Oak Mayor Jeramy Chapdelaine nominated Liz Skutley for the four-year term expiring in 2029 and Alan Deala for the term expiring in 2027 (a seat vacated by Vice-Mayor Aaron Pamma when he took his position on City Council). Both nominations were unanimously approved by City Council. 

City Council then considered an interfund loan to the Water Fund, which is projected to have a $3.5-million deficit by the end of the fiscal year in June, due to many years of water rate revenues not meeting expenditures. 

Interim Finance Director James Ramsey recommended a loan from the Connection Fee Fund (which comes from fees for new connections to the city’s storm drainage, water and sewer systems), which has available funding not currently allocated. A total of $3 million could be transferred by the end of March, with an additional $500,000 transferred in June when the fiscal year ends. 

The city is also undergoing a Water Rate Study, with the potential to increase rates over five years to cover the cost of water operations. Those increases would also enable the eventual repayment of the interfund loan over a period of five years, beginning after the fund has reached solvency. The loan would also be subject to an annual average interest rate, currently set at 2.46%. 

Councilmember Nancy Santana asked why the water connection fees aren’t included in the Water Fund. Ramsey explained that state law requires a separate accounting system because the water connection fees are restricted to covering the costs of establishing water connections for new developments, while the Water Fund operations should be supported by water rates. 

Vice-Mayor Pamma asked if there would be any penalties for early re-payment of the loan. Ramsey clarified that there would be no penalties since City Council sets the loan’s terms and conditions. 

Because City Council is scheduled to vote on the water rate increase in May, Pamma requested that the full interfund loan amount of $3.5 million be transferred at the end of the fiscal year, after that decision is made. 

City Council voted unanimously to approve the interfund loan to the Water Fund, which will take place at the end of June. 

The council also continued discussion on the Water Rate Study, which recommends annual increases over the next five years to bring the Water Fund out of the existing deficit and into solvency. 

As an enterprise fund, the Water Fund operations should be fully funded by the rates collected from users. But Live Oak has not raised water rates in almost 20 years. Current rates are among the lowest in the region, which has led to a current deficit of $2.9 million, which is expected to increase to a $3.5-million deficit by the end of the fiscal year. 

The Water Rate Study recommendation is to start with an initial 60% increase this summer. Even with the increases, the Water Fund will still be in deficit for the first two years of the plan. However, by year three, it is expected to reach self-sufficiency, with rates covering the costs of operation. Then in years four and five, there should be enough surplus funding to begin loan repayment and eventually to cover capital improvements to the system. 

The proposed rate increases would cover the actual costs of service and bring rates in line with the average costs in the region. The rate increase process is governed by Proposition 218, which requires notices be mailed to all ratepayers to inform them of the proposed change and provide the public hearing date. 

A community outreach meeting is scheduled for April 23 with the public hearing scheduled for May 28 at City Hall. If more than 50% of ratepayers submit a written protest against the increase, it cannot legally be adopted. If there is not a majority protest, then City Council can approve the rate increase schedule, which will set the legal maximum increase for each year in the plan. City Council will review the increases on an annual basis and, depending on the current financial status at that time, can select a lower increase for that year. 

During the meeting’s Public Comment, one resident spoke in support of the plan, stating, “I applaud all of you to make this tough decision. We don’t have a choice. The rates need to be increased.”  

Councilmember Santana suggested that the city reduce the cost of sewer rates to offset the impact that higher water rates will have on the residents. 

However, Mayor Chapdelaine clarified that changing the sewer rates would require a separate rate study and another Prop. 218 process. He explained that it was only the water rate study that was under consideration at this meeting. 

Vice-Mayor Pamma said it was a tough situation but the city had “spent too many years just moving money to cover the Water Fund deficit” and now they need a “real solution.” Pamma also cautioned that the sewer system needs significant capital improvements, so the existing rates might be needed to fund those projects in the next few years. 

City Council voted 4-1 to approve the Water Rate Study and authorize the mailing of the Prop. 218 notices, with Councilmember Santana dissenting. 

Finally, the council reviewed the policies for the maintenance and monitoring of backflow prevention devices, which protect the city’s water system from contamination via homes or businesses. 

There are 231 backflow devices in Live Oak, with just 30 owned by the city. The rest are installed at private homes or businesses. In most jurisdictions, the cost of installation, maintenance, repairs, and annual inspections for these devices are the responsibility of the property owner. However, the ultimate responsibility for ensuring the safety of the water system and compliance with state reporting requirements falls to the City. 

Due to the challenge of ensuring compliance, a prior City Council voted to take on the full cost of all these devices within the city, with the intention that the cost should be incorporated into the water rates. But the water rates were never increased to cover that cost. 

Vice-Mayor Pamma pointed out that the Water Fund budget includes $485,000 over five years for backflow device maintenance, repairs and reporting. With the Water Fund already at a significant deficit and facing necessary rate increases, Pamma suggested that City Council re-examine the backflow device policy and consider requiring property owners to take on those costs. With the current policy, Pamma said, the cost is “subsidized to the residents, so this is hurting them in the long run.”

Councilmember Bob Woten said he owns a business that has a backflow device and that budgets are tight for most businesses in the city. It might not be fair for everyone to cover these costs, Woten said, but having the city oversee the system is the safest way to ensure that the water system is protected. However, Woten acknowledged that the current situation is “kind of a mess,” since the rates were never adjusted to cover this cost. 

Mayor Chapdelaine asked staff to come to a future meeting with options for covering the backflow costs while meeting compliance and reporting requirements. 

The next Live Oak City Council meeting is scheduled for 6 p.m. April 2.