Consultant Alison Lechowicz explained the proposed increases to the water fund rates at the City Council’s Prop. 218 public hearing. Photo capture from Live Oak City Council recording

LIVE OAK, CA (MPG) - The Live Oak City Council held a Proposition 218 Public Hearing on May 28 to consider potential water rate increases to cover the operations of the city’s water system, which delivers water to approximately 2,800 customer accounts. 

A grant-funded water rate study determined that rate increases were necessary to move the water fund into solvency and repay its debt. As an enterprise fund, consultant Alison Lechowicz said, “it’s intended to be fully self-supported by rates and charges. It’s not intended to keep borrowing funds from other city accounts to essentially subsidize your water bills.” 

Water rates in Live Oak have remained the same for almost 20 years, so the water fund has been operating at a significant deficit. Revenues are only $900,000 per year, with expenses at $1.7 million.

“Revenues basically need to double to cover costs,” said Lechowicz.

If rates don’t increase, deficit spending will continue at $800,000 per year.

The current rates are the lowest in the region, and “as a result, the water utility is doing very poorly financially,” said Lechowicz. With a deficit of $3.5 million, she said it was “one of the worst cases I’ve even seen” in her 18 years of experience.

Most customers currently pay $23.97 per month for 20 units of water. Under the proposed increase, customers will pay for each unit of water used. So customers who use more will pay more. Lechowicz said the proposed rate structure is legally preferred because the costs reflect the actual service. On average, most customers will see a monthly increase of $20 on their bills during the first year of the plan, with more increases phased in over a total of five years. 

All ratepayers and property owners were informed of the Prop. 218 hearing and if more than 50% submitted a written protest, the council legally could not adopt the increase. 

Some residents in attendance held up signs opposing the rate increase and there was some talking among the crowd during the presentation.

“I’ll ask the public to refrain from talking and getting out of order. We do have rules of decorum in this chamber. I ask that you respect those,” Mayor Jeramy Chapdelaine said.

During public comment, many residents spoke both for and against the rate increase. 

Those in opposition argued that residents should not be forced to pay more for poor quality water, with several mentioning the presence of PFAs (or forever chemicals) in the water. 

One resident said his water has a terrible smell and he can barely afford his bills as it is. He added that a previous council had voted to increase councilmember salaries and he thought public safety should be more important than pay raises. 

Resident Cruz Mora said that this proposal was “getting a lot of backlash” from residents and the council “needed to listen.” He suggested pursuing grants to improve the water system rather than putting the cost on the customer, particularly while there are PFAs in the water. 

Another resident called the water rate increase “outrageous, misleading and unjustified,” and alleged that the Prop. 218 notices were “designed to confuse, not to inform.” As part of a group collecting signatures against the rate increase, he said that the city had not been clear about the number of water accounts, thus “shifting the goalposts” for how many protests were needed. 

A resident submitted a written statement in favor of the rate increase, stating that if the water fund can’t support itself, the city will have to sell it to a private water company that will end up charging customers even more. 

Another resident said this issue has been going on for 20 years and he commended the council for finally addressing it, calling the increase “very necessary.” He said, “You can’t continue to use the General Fund to subsidize an enterprise fund. That’s just not done.” 

Another resident said, “If you don’t increase the water rates, you’re going to be in debt forever. We need to do something practical.” 

Several residents stated that the city will need additional funding from the rate increase in order to improve the water quality.

“Yes, we want better water but it costs money,” said one resident, adding that it was time to make the tough decisions instead of passing the problem onto the next generation. 

Another resident said that the water fund needs to be self-sufficient because it’s impractical to rely on grants, especially from the current federal government. She added that if households pay for what they use, it could encourage more water conservation, since she sees “a lot of water wasted in the community.” 

Councilmember Bob Woten said he appreciated hearing from residents. He acknowledged the public has generally resisted any proposed rate increase, so past councils never moved forward with it.

“We have constantly got behind; there’s no way around it,” Woten said.

The council is responsible for ensuring that the city funds aren’t failing but the water fund is failing and the deficit has to be addressed, Woten said. 

“Our sewer rates are very high,” Councilmember Nancy Santana said.

If the water rates must be raised, Santana suggested, then the sewer rates could be reduced to offset how much customers pay overall for utilities. She said water rates have stayed the same for years and asked, “So, this year, the city is going to go bankrupt because we don’t do this?”

Mayor Chapdelaine reminded Santana that the sewer rates were not on the agenda and legally, the comments need to focus on the hearing’s topic. He also clarified that the council can’t decide to lower the sewer rates, since those rates are also set based on a rate study and Prop. 218 public hearing. Chapdelaine also explained the financial projections.

“Two years out, the water fund will eclipse what we have in non-dedicated General Fund to cover it,” said Mayor Chapdelaine.

Councilmember Ashley Hernandez asked for a list of some capital improvements that would be funded through the rate increase. Interim Public Works Director Jeff Nelson said planned improvements include repairs to the well one roof, inspection of the water treatment systems, valve replacements, upgrades at wells three and four, installation of a backup generator, security and communication systems upgrades, removal of arsenic sludge and updating the water master plan.

Vice-Mayor Aaron Pamma asked what improvements have been made to the water system in recent years. Nelson said that “a lot” of improvements have been done to the sewer system, but with the water system, they have “tried to manage it the best we can.” Because there has not been any funding available for improvements, Nelson said, “the maintenance has been deferred for years and years.”

Vice-Mayor Pamma added that no one likes having PFAs in the water but the water quality can’t be improved until money is available. 

Mayor Chapdelaine thanked the public for attending, stating, “It may get contentious at times; this is what it’s about as a community and having these conversations.”

Chapdelaine also clarified that the city is ineligible for grants and loans at this time because “our debt ratio is too high. With a $3.5-million deficit, we can’t guarantee, we can’t provide a match.” Because the PFAs were only at the reportable level instead of an actionable level, there is no state or federal funding available there either. 

Staff reported that the city received 438 written protests, with 371 verified. Chapdelaine said the number fell well below the 1,400-majority required to block the rate increase. 

Councilmember Hernandez made a motion to amend the rates for the water fund, which was seconded by Councilmember Woten and approved 4-1, with Councilmember Santana dissenting.

The increased water rates will go into effect this July.