Performance must justify rate hikes

By Union Democrat staff June 29, 2009 09:16 am

It was at best a marginal victory for the Tuolumne Utilities District.

First, Tuolumne County’s largest water purveyor proposed a series of five yearly rate increases that could have jacked the standard monthly bill from today’s $20 to $52 — a collective hike of 160 percent. Although General Manager Pete Kampa said the increases were proposed over five years rather than all at once to avoid public outcry, customer reaction was quick, loud and hostile.

TUD directors immediately backed off, retreating to a one-year, $7 boost. Even that spurred both board and public protest before hobbling to approval.

Laurie Day, wife of Director Joseph Day, was a vocal audience critic of the hike for which her husband later voted. And board deliberations were marked by bickering between Directors Bob Behee and Ralph Retherford.

“You keep pinching a penny until it squeals,” Behee said of Retherford, who voted against the hike. But in today’s economic grind, vice-like grips on one-cent coins have much popular appeal.

Tight money and a down economy, Kampa admitted, played a “huge” role in the poor reception of TUD’s five-year plan.

Lost in the hue and cry over the hikes, however, has been the rationale behind them: funding maintenance and improvement projects so TUD’s pipelines, tanks and infrastructure don’t wear out and fail, bringing emergency costs that would be far higher.

Such repair and replacement work has been budgeted over the years, but lately rising operating costs have caused the district to borrow or dip into reserves to pay for needed projects. According to Kampa, reserves have dropped from $10.8 million in 2007 to $7.2 million today. And, even with the hike, they are expected to dip by another million next fiscal year.

Meanwhile, tanks and pipelines continue to deteriorate as TUD resorts to such short-term, cost-ineffective solutions as “diapering” and “gut-strapping” — paying $40,000 or so per tank to put plastic liners inside and metal straps outside.

Protecting district assets, collectively valued at $85 million, is Kampa’s understandable goal.

But the focus of the recently concluded rate-increase debate often focused on contentions that the TUD board was insensitive to today’s bleak economic realities and — in contrast with Tuolumne County government and other public agencies — hasn’t done enough belt tightening.

Unlike the county, Kampa counters, TUD has little latitude for cuts. While the county provides an array of services and can trim those it deems least essential, the district provides only sewer and water service — neither of which is expendable.

Then there are TUD’s 80 employees, whose pay and benefits account for 77 percent of its $10 million yearly operating budget. Customers complained that workers this year got a 2.3 percent raise, and Retherford groused that they enjoy a “Cadillac” health plan that annually costs taxpayers $800,000.

Kampa counters that many of TUD’s workers — like treatment plant operators, engineers and technicians — are skilled professionals. “We have to stay competitive or we’ll lose them,” he reasoned, adding that he will look into concessions and trimmed benefits — but not beyond the point where the district can attract qualified employees.

So what’s next?

“We will assume no additional loans, live within the money available and save wherever we can,” promised Kampa, adding that two tanks and two main water line replacements scheduled for this year have been shelved. “We’ll consolidate operations and be more efficient. We’ll take a long look at vacant positions before we fill them.”

And how might TUD convince a skeptical public that even one more rate increase is necessary or wise?

“Education,” said Kampa, who stopped short of saying the district would even ask a hike next year. “We need to involve our stakeholders — business, residential, schools, everyone. We need to make them understand that maintaining our system is the key.”

This is admirable and should have been done a year ago. Now it will be tougher: TUD must prove that it can live within the budget it has before ratepayers are at all inclined to give them any more.