Paso to dip into water fund reserves

Prompted by Tuesday’s failure of Paso Robles’ proposed water rate increases, city staff has begun gearing up to release another rate system in mid-December to pay for its share of the Nacimiento Water Project.

In the meantime, the city will tap into its water fund reserves — into which customers pay — to cover the costs for pipeline bills when they come due in mid-2010.

That arrangement won’t last forever, City Manager Jim App said, because the reserves will dry up by 2014 — and that’s only if the city's current pumps and storage tanks, for example, don’t need major fixes before then.

That poses a significant risk to the city’s general fund, he said, because that money pays for city services such as police, fire and parks and it’s already being impacted by the recession.

“I believe that the majority of the people understand the issue — that the water is already committed and needs to be paid,” Mayor Duane Picanco said.

There’s a $3.3 million gap between the revenue water customers pay into with current rates over what the pipeline bills require, App said. John Borst, spokesman for Concerned Citizens for Paso Robles, said his group plans to continue its argument that the capital costs for the water project should have been presented as a special tax — not a charge on a water bill — and that any future rate plan should be subject to an election requiring two-thirds voter approval. That group’s petition drive last spring led to Tuesday’s election.

The city has long rejected the group’s claims.

Paso Robles is locked into paying for its share of the pipeline because in 2004 it signed up for the water in a multiparty contract to construct, operate and fund it, App said. 

The county fronted the cash for the work — a 45-mile pipeline broken into four parts to link up upon completion, three pump stations and three water storage tanks — through 30-year revenue bonds that its finance authority sold in September 2007.

City staff has been working on alternative rate plans for several months, App added, just in case voters knocked down Measure A-09, as happened Tuesday.

The December release will include new rates based on both fixed charges and how much water each household or business uses along with tiered pricing to encourage conservation, App said.  A low-income discount program will also be offered.

“A huge, huge, factor is no one wants to raise their bills,” Picanco said of Tuesday’s election. “They don’t want the electricity bill to go up, and don’t want their gas bill to go up, and that’s the same with their water bill. Compound that with the economy — absolutely, positively, that had a significant effect on the voters.”

Borst said Concerned Citizens believe its argument was also part of voters’ decision to reject the proposed rates.

The total principal and interest payments for Paso Robles’ share of the water project over the 30 years is $144.2 million, officials said, with the task of footing that bill evenly divided between existing and future customers.