Rainbow MWD board approves June 27 rate hearing, Prop. 218 notices

Joe Naiman

Village News Reporter

The Rainbow Municipal Water District has set a June 27 hearing for an expected 8% annual rate increase each year over the next five years.

A 4-1 Rainbow board vote April 25, with Patti Townsend-Smith casting the dissenting vote, set the June 27 hearing date and approved the sending of Proposition 218 notices informing ratepayers about the hearing and the proposed rate increase. Ratepayers will be allowed to submit protest letters prior to the hearing.

In November 1996, the state's voters passed Proposition 218, which requires a public vote on benefit assessments but exempts water and sewer rate increases if a cost of service study shows a relationship between the rates and the agency's cost to provide service.

A rate setting policy can be in effect for up to five years and must include a rate design and public review. Rainbow last held a Proposition 218 hearing in 2021, before an increase in the inflation rate created costs beyond what the district had anticipated.

“Our rates weren’t sufficient to keep up with inflation,” said Rainbow General Manager Tom Kennedy.

The 2021 hearing approved a 9% increase for 2022, a 5% increase for 2023, a 4.5% increase for 2024, and 3% increases for 2025 and 2026. The new hearing will seek an 8% increase each year from 2024 through 2028.

The rate increases do not include any increases in the cost of water purchased from the San Diego County Water Authority or from the Eastern Municipal Water District should Rainbow be successful in detaching from the SDCWA and purchasing water from Eastern.

Water rates include both charges per unit and fixed charges for expenditures which are incurred even when water use is reduced. Fixed charges cover the water agency’s expenses in the event of low water sales, which is often the case during a rainy year, but penalize those who conserve. “It’s a hard balance,” Kennedy said. “People would much rather that we don’t have any fixed charges on our bills.”

The proposed rate increase amount is based on the expectations of 12,738 annual acre-feet of water sales in which case the rates would recover 39.9% of the district’s fixed costs.

During fiscal year 2022-23 operating costs exceeded revenues by approximately $765,000, and that doesn’t include any funding for capital projects. Water purchased from the CWA accounts for approximately 58% of Rainbow’s operating costs while wastewater treatment costs set by the City of Oceanside whose outfall treats Rainbow’s wastewater account for approximately 35%, so only approximately 7% of Rainbow’s total operating costs are within the district’s control.

The 8% rate increase includes estimated annual salary increases of 6% and benefit cost increases of 3%. Capital construction costs are expected to increase by 7.2% during fiscal years 2023-24 and 2024-25. General costs are expected to increase by 7.71% during the fiscal years 2023-24 and 2024-25. The forecast also includes a 5% increase in energy costs.

The rate increase authorization also assumes no revenue from developer fees, which is a worst-case scenario. Rainbow would be authorized to increase rates up to 8% annually not including CWA or EMWD pass-through costs but could increase rates by a lower amount if the financial situation permits.

The June 27 hearing will take place at 1 p.m. in the Rainbow district office. The hearing notices will be sent out no later than May 13.