Fact Check: What Water Rate Hikes Pay for

Statement: “0.0%” of the city of San Diego’s water increase is due to rising administrative costs, water officials say in presentations they have given at public forums across the city.

Determination: A Stretch

Analysis: The city of San Diego’s Public Utilities Department is working hard to sell a five-year, 41 percent water rate increase to a wary public and City Council, which will vote Tuesday on the plan.

During a citywide series of public meetings about the increases, utilities department officials have downplayed how much of the money will pay for administration and overhead.

At a Nov. 5 meeting of the Clairemont Community Planning Group, for example, Cathy Pieroni, a manager at the water department, said plainly: “How much are we asking for the city of San Diego’s Public Utilities Department operations? Internally, it’s zero. We are keeping our costs flat, because we understand these are significant rate increases to you that are being proposed, we don’t want to add to your frustration to that.”

While personnel costs are not one of the major reasons water prices are rising, the department has tried to make a black-and-white case that, at times, does not tell the full story. A PowerPoint slide that the department shows and that is posted on the city’s website says “0.0%” of the increase is being driven by “department operations.”

But the department’s statements elsewhere show there is indeed a link between their staffing levels and the amount of new money they are hoping to get.

Earlier this year, in a new annual budget, the utilities department got approval to hire 64 new people. Overall, the department’s budget for the current year is about $900 million, and $160 million of that goes to personnel-related expenses.

Some of those new positions were meant to help enforce drought-related mandates, respond to water main breaks, design a new water purification system and install a new generation of “smart” water meters throughout the city.

The new positions were added before the department asked for higher rates, said Charles Modica, an analyst with the city’s independent budget analyst’s office.

The thing is, even though the positions were added without assuming that rates would be higher, some of those same positions now cannot be funded unless rates are higher. Water-saving efforts and the resulting lower water bills have left the city with less money than officials thought it would have.

While Modica said the department is between a rock and a hard place, it’s hard to separate out costs as clearly as the department has been claiming.

Indeed, the department has said it will have to cut programs and staff if the rate increase doesn’t go through.

Without the rate increases, the city will have to “Reduce staffing levels with likely impacts to customer service,” public utilities director Halla Razak wrote in a recent series of memos to the City Council. Without the rate increase, the department would have to “stop all investments” in new smart meters – a program for which it got permission earlier this year to hire 25 new people at the cost of $6.6 million.

The department argues that it would not have had to add those positions in the first place if not for the drought. In this view, both the new positions and the need for money to fund the positions are only because of the drought, things beyond its control. So, it argues, it’s not trying to add to its administrative overhead.

Without the drought, said Brent Eidson, a spokesman for the public utilities department, “We wouldn’t be asking for this money for the department.”

That is largely true: The department is losing revenue as a result of the water cutbacks San Diegans are making because of the drought. If the city is selling less water, then it has to charge more for each drop it sells. The city is also asking for $354 million in the next five years to fund the first part of a $2.85 billion project to make wastewater drinkable.

But the department over-simplified things to the point of omitting important information about the link between rates and the size of their administration.

While the department isn’t seeking a rate increase to hire a bunch of new workers, it has said it will have to cut staff if the rate increase doesn’t go through. That’s a backward way of saying that the rate increase is indeed tied to staffing and administrative costs. For that reason, claiming 0 percent of the rate increase will go toward administrative costs is a stretch.