The Indian Wells Valley Water District Board of Directors passed its budget in a 4-1 vote for the upcoming 2019-2020 fiscal year, which starts July 1. Board member Stan Rajtora was the lone no vote.

With the budget passing comes a 3 percent rate increase as part of the district’s cost of service study, which was approved in November.

The rate increase is the second under the new study, with the first adopted in January. The next increase won’t be until July 1, 2020, should the board decide to approve it.

According to IWVWD finance director Tyrell Staheli, total revenues are expected to be $11.99 million, with the bulk of it coming from water sales.

In terms of water sales, projected to be about $10.82 million, the district’s fixed fees make up 61.59 percent of the revenue, while commodity sales (water used) make up 38.41 percent.

General fund expenses are projected to be $12.9 million, including $3.77 million in salaries and benefits and $3.5 million in district asset depreciation costs. The operating costs, including salaries and benefits, comes to about 6$.39 million.

Rajtora questioned whether the rate increase to projected income numbers was accurate. He noted that the 3 percent rate increase, on top of a 1 percent growth amounts to a 4 percent increase in the revenue.

That total for water sales should amount to $11,012,000, not $10.82 million.

“If we’re going to raise the fees, it seems to me we should raise the projected revenues,” Rajtora said. He added, based on his calculations, the revenue projected appears to reflect a 2.3 percent rate increase, not the 3 percent rate increase.

Staheli said he doesn’t budget at 100 percent when planning the budget.

“You never hit 100 percent of the budget most of the time,” Staheli said. “You may, but I do conservative estimates — I’m not going to put down a hundred percent unless I’m confident.”

Rajtora also asked which types of funds were considered restrictive and unrestrictive on the district’s cash flow projection. Restrictive funds can only be spent on specific projects or funds.

Staheli said about $5.7 million in cash would be available for discretionary spending.

The projected emergency reserves, however, has been targeted at near $3.2 million, the capital infrastructure replacement reserve at $2 million, and bond project funds at $1.9 million. About $2.2 million has been allocated for “other assigned projects.”

Rajtora also had questions about what the district’s reserve or balance fund, noting it is different from the district’s cash flow.

“The numbers that were used to justify a 3 percent rate increase were based on losing a million and a half dollars in FY 2019 so that our reserve balance went down to just $1,000 more than what we needed to meet our target reserve,” Rajtora said.

He added that the district apparently did not lose that amount.

“We should be well above our target reserve targets,” Rajtora.

He also noted that the reason why the consultant who conducted the cost of service study recommended a rate increase was in part to cover the debt service obligations the district has for its capital improvement projects.

Rajtora added that because it seems the district has an ample amount to cover the debt service, he didn’t see the need to implement a 3 percent increase.

“If we don’t need a fee increase, we don’t need to implement it,” Rajtora said.

Staheli said the ideal budget covers an agency’s entire depreciation expenses.

“That is what allows you to continue to repair and maintain your infrastructure,” Staheli said. “We are running at a minus $900,000 balance for our proposed budget, so we’re not covering a hundred percent.”

Board president Don Cortichiato told Rajtora that the board had already voted to approve the cost of service study and implement its recommended series of rate increases.

Jim Worth, the district’s legal counsel, noted that if the rate increase were stripped from the budget approval process, Staheli and the district staff would have to conduct a major overhaul of the 2019-2020 projections.

Board member Ron Kicinski asked inquired whether the expenses-over-revenues projections would increase by $1 million if the rate increase were removed. Staheli confirmed that.

Board member David Saint-Amand noted the rate increase should be included.

“I would then agree with our CFO on the assessment that if we want to stay ahead of the curve and fall not behind that we shouldn’t delay it,” Saint-Amand said. “Postponing it just kicks the problem down the road and makes things even worse.”

Rajtora reiterated that the data in Staheli’s budget didn’t justify a rate increase. He added that without sufficient data to support the rate increase, he didn’t feel comfortable passing the budget.

Kicinski said his job as a board member was to ensure the district stay fiscally healthy and continue to provide a good product to its customers.

“I believe we do all that,” Kicinski said. “This budget scares me a little bit because we are already almost a negative million dollars, but I know we have some midterm adjustments we will do.”

He added that he had studied the budget thoroughly.

“The fact is the budget is healthy and needs to remain healthy because we have some things coming down the pipeline. We have to look out for that.”

Board member Chuck Cordell noted that Staheli hasn’t steered the board in the wrong direction before, but added the board should review the budget process earlier.

“We shouldn’t let it go this long so close to the date that we need to vote on it,” Cordell said. “We should be doing it a month earlier.”

Staheli said that when he starts a budget, he prefers to do so with the most up-to-date information so the district can have a complete picture.

Resident Mike Neel agreed with Rajtora’s argument not to include a rate increase. He noted the increased rate is more than what is needed to maintain the district’s needs.

“People are really tired of paying more taxes and paying for more stuff than they need to have to pay for,” he said, noting the recent defeat of the city of Ridgecrest’s proposed parks assessment. “This rate increase, for me just running through every bill I get, is more than $49 increase.”

He noted that from his view, the water district has a 42 percent budget reserve, something he protested as a ratepayer.

“The city would throw the biggest party you would see if they had that type of reserve … they have been operating way below that,” Neel said. “Me paying for this district to continue funding a 42 percent reserve is unreasonable. We don’t need an increase on top of what you got six months ago.”

Cordell countered by noting the board has turned down two previously proposed increases during his time on the board.

“If we have two wells go down, you’re looking at a few million bucks to replace them, and if I go to my faucet and there’s no water for five days, we’re going to die of thirst … that’s the same for 26,000 people in Ridgecrest,” Cordell said. “I’m not particularly fond of this (rate) increase now, but we missed one last year. If Ty says we need it, we need it. We can always decide to not do it next year.”

Capital improvements budget

The district also plans to spend $12.8 million on capital improvement projects in the upcoming fiscal year. That budget is split from the general fund.

Among the high priced items is Well 35 at $2 million, which the district plans to use for backup purposes. The district already has 10 wells it utilizes.

Rajtora asked whether the district needs another.

General Manager Don Zdeba said that four of the district’s wells go through the arsenic treatment facility.

“If those facilities go down for some reason, we’re down to six wells,” he said. “I’d rather have more wells than we need than not have enough wells for redundancy reasons.”

Rajtora said on any other occasion he would agree with Zdeba.

Renee Morquecho, the district’s chief engineer, said that the two of the three wells in the district’s higher zones in the southwest, have a history of major issues.

“If we were to lose those two wells — and we have had that happen at one time — we would only have one left out there,” Morquecho said. “If we lost that one well, we would be in big trouble.”

Rajtora also had concerns with $5 million in “miscellaneous capital purchases,” noting he did not feel comfortable voting for it without knowing in detail what it meant.

Cortichiato noted that even if that line item is included in the capital improvements budget, the board would have additional say on any purchases or projects before they went forward.

Among the other high-priced items is $3.03 million for the district’s automated metering infrastructure project, which will allow the district and ratepayers to monitor water use. The system is similar to what Southern California Edison or Pacific Gas and Electric use with their customers.”

The capital budget was approved 4-1, with Rajtora the lone number.