Special Notice / Hearing:
Complied with Required Notification/Public Hearing
Required
Vote Required: Majority
To: Honorable Board of Supervisors, Acting as the Governing Board of County Service Area No. 11
From: Ann M. Stillman, Director of Public Works
Subject: Adoption of Proposed Water Rates and Charges for County Service Area No. 11, Pescadero Area
RECOMMENDATION:
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Acting as the Governing Board of County Service Area No. 11, conduct a public hearing:
A) Open public hearing
B) Close public hearing
C) Adopt a resolution authorizing the imposition of water rates and charges for County Service Area No. 11 for Fiscal Years 2025-26 through 2029-30.
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BACKGROUND:
County Service Area No. 11 (CSA 11) was established in 1988 to finance the development of a public groundwater source and to provide service as the water provider for the Pescadero community. Water for CSA 11 customers is provided from an underground aquifer and is delivered to 102 water service connections through approximately 2.2 miles of water mains.
On December 8, 1992, this Board adopted Resolution No. 056747 establishing regulations and rate schedules to meet the anticipated financial obligations for CSA 11.
On September 3, 2003, this Board adopted Resolution No. 066229 amending the water service rates and charges for CSA 11.
On June 26, 2012, this Board adopted Resolution No. 072027 setting the current tiered bi-monthly water service rates and monthly meter service charges for CSA 11. Revenue generated from these rates is no longer sufficient to adequately operate, maintain, and administer CSA 11.
On October 20, 2020, this Board adopted Resolution No. 077810 executing a three-year agreement with Bracewell Engineering Inc. for operation and maintenance services to two small County governed water systems, CSA 7 (La Honda water system) and CSA 11, with the option to extend the agreement for two (2) additional years. On September 22, 2023, the Department of Public Works (Department) issued Amendment No. A1 to the agreement extending the agreement through October 19, 2025.
On January 28, 2025, this Board adopted Resolution No. 080880, which set 9:00 a.m. on April 8, 2025, at this regularly scheduled Board meeting as the time and place for a public hearing to consider water rates and charges for Fiscal Years (FYs) 2025-26 through 2029-30 for County Service Area No. 11 and directed the Director of Public Works to send the necessary notices for said hearing.
The process to be followed for adopting the water rates and charges includes:
1. Hold a public hearing and receive testimony on the proposed water rates and charges.
2. After considering all written and oral objections to the proposed water rates and charges for CSA 11, close the public hearing and determine if there is a majority protest to the proposed water rates and charges.
3. If there is a majority protest, terminate this Board’s consideration of imposing the increases to the water rates and charges.
4. If there is not a successful majority protest, adopt the resolution and set the water rates and charges for FYs 2025-26 through 2029-30 beginning with the July billings for each fiscal year (July 2025, July 2026, July 2027, July 2028, and July 2029).
DISCUSSION:
The January 28, 2025 Board Report, prepared by the Department, explained the need for the increases to the water rates and charges. Notices were sent to the CSA 11 property owners and active account holders (102 active accounts on 87 individual parcels) informing them of the proposed rate increases, the reason for the increases, and the date and time that this Board would consider the proposed water rates and charges. The mailing complied with Article XIII C and XIII D of the State Constitution by individually noticing each property owner of record and active account holders directly liable for payment of the proposed increases in the property related fee and a mechanism for rejecting the fees via a “majority protest” during the public hearing.
The Department held an in-person public meeting on January 21, 2025 in Pescadero and has posted informational documents regarding the proposed rate increases on its website at: <https://www.smcgov.org/publicworks/water-services/CSA11_Rates>. Property owners and active account holders were informed of this link and had the opportunity to submit questions. At the time this report was prepared, the Department has received one (1) written protest to the proposed water rates and charges. Staff will report to this Board on any written protests that are received up to and including the date of the public hearing.
Alternates to Consider
After the close of the hearing, if there is not a majority protest, this Board can approve the proposed water rates and charges or reduce the water rates and charges as the Board may determine appropriate. However, reducing the proposed rates would require identifying a source of funding, such as a loan or grant, to support CSA 11 operations as the rates would not be sufficient to adequately support CSA 11 expenditures. Additional impacts to CSA 11 could include reduced maintenance, deferred repairs and replacement of existing facilities, or CSA 11 not meeting State and Federal water quality requirements that could result in possible fines against CSA 11, all of which would negatively impact CSA 11 water system and residents.
The County Attorney has reviewed and approved the Resolution as to form, and we will provide an alternate form of resolution if the Board determines reducing the water rates and charges is appropriate.
EQUITY IMPACT:
Adoption of the water rates and charges will provide CSA 11 with the necessary revenue for the continued provision of potable water service to its customers, provide reliable water, invest in system improvements, and ensure the sustainability of the water system.
FISCAL IMPACT:
The proposed rates are anticipated to generate annual revenues between $101,000 to $194,000 over the five rate years. This is an estimated increase in revenue of approximately $33,000 to $126,000 over the current rates. The increases are necessary to fund all routine and non-emergency operations and maintenance activities to meet current Federal and State regulations for FYs 2024-25 through FY2029-30 with small amounts allocated for reserves and loan repayment. However, evaluations of the rates will need to be conducted periodically to determine the adequacy of the proposed rates. The proposed rates are not sufficient to fund any capital improvement projects in the near term.
There is no direct impact to the General Fund. However, water service charges are levied on County leased/owned properties that are provided water by CSA 11, including the existing County Fire Station Number 59 on Pescadero Creek Road.