And there just could be a bit more here than first meets the eye. I, for one, have always enjoyed a good mystery. And what could more mysterious than how this water rate increase matter has been managed? Hard questions get asked, and all that comes back are offers to visit the pump house.
You might remember Earl Richey from our last City Council meeting. He spoke to the City Council at length during Public Comments on matters which they, if I read the body language correctly, were not all that comfortable about hearing. That is, of course, the ones that actually understood what he was talking about. The questions Earl asked were tough, detailed, and not at all conducive to properly managing the public's perceptions on the water rate hike. Which is where City Hall's real priorities have always been.
So here is Earl Richey's letter to the City Council. I am reprinting it here in its entirety.
Regarding: Request for City Council To Agendize ... 37%+ Water Rate Increase & City Water Debt Concerns!
Tuesday, August 10, 2010, I spoke at the Sierra Madre City Council meeting using my 3 minutes allotted for public comments such as mine. This letter is meant to reinforce my comments which I shared that evening.
Is a 37% Water Rate Increase Enough?
I have a few questions which I requested the city council agendize for a future meeting.
1. It was my understanding that the city budgeted to purchase 4,000 new water meters for a cost of $1,200,000+/- which would include radio towers and monitoring devices to be installed to read the residents water usage more efficiently.
- What is today's cost to manually read the 4,000 water meters per billing cycle?
- What is the estimated cost to read 4,000 electronic water meters?
- What is the new radio meter reading savings for Sierra Madre?
1-a. Was the commitment to purchase these 4,000 water meters put out to bid?
- Who were the other bids received from and at what cost?
- When was this agendized and voted upon by any City Council?
2. It is my understanding that the City of Sierra Madre has 60-100 year old water pipes that must be replaced immediately, prior to the big earthquake. Therefore:
2-a. If the full 37% water rate hike goes into effect today, based on the present $3,000,000+/- water sales to city residences per year:
- Why are we only budgeting $24,000 per year for replacement of deteriorated water pipes if we have an additional $1,200,000+/- per year to spend?
- The math: $1,200,000 Water Rate Hike - Additional Increase (estimated 37%+/-) minus $24,000 yearly estimated expenditures for replacing deteriorated water pipes comes to $1,175,000.
2-b. If we budget and spend an additional $24,000 per year for the replacement of water pipes, where would the additional $1,175,000 be spent?
3. It is my understanding that the city owes $7,500,000+/- in borrowed monies in the form of loans and bonds.
- Bond #1 $3,000,000
- Bond #2 $3,000,000
- Re: Item #3-b, $1,500,000 debt service effective June 2011
- Re: item #1 - $1,200,000 proposed water meter purchase.
3-a. Based on the $6 Million Bond Debt, we are presently paying $898,773 a year for interest & principal (debt payments).
- Based upon $3,037,500 water sales, that's 30% of our gross water sales income per year! (Example: $898,773 / $3,037,500)
- Based upon Proposed Debt of $8,700,000, we could be paying in excess of $1,123,773 a year for interest & principal (debt payments).
- Based on the $3,037,500 in water sales, that's 44% of our gross water sales income!
We also owe an additional $1,500,000 to the San Gabriel Valley Water District.
- At the present time the city has no money to pay monthly interest and principle (debt payments) to the San Gabriel Valley Water District.
- I have been told that the San Gabriel Valley Water District has agreed to defer monthly debt payments. The first monthly debt payment will be effective in July of 2011 in the amount of $250,000 per year.
3-c. I would like to discuss where these monthly debt payment monies will come from in the event the city has not increased the water rates prior to July 2011?
- Bond debt = $898,773, San Gabriel Water Dist debt = $250,000, Capital Budgeted for water meters = $100,000. Total $1,348,773.
4. I would further like to request that the city provide a list for the residents to review of Engineering Company & Contractors which were awarded city work in excess of $10,000 per job, for the years 2000 to 2010.
5. At this time, based on our city's current credit:
- What is the City of Sierra Madre's Water Department Credit Limit?
- How much more can the Water Department borrow over the $7,500,000 debt which the city presently has?
6. I would like to know why the Sierra Madre City Council failed to approve these questions to be agendized for any up and coming City Council meetings?
In the event these are deemed not appropriate for Council discussion, then it would appear that water rate increases must not be the real issue.
My take is the City Council will not want to touch topics like $7,500,000 in water bond (etc) debt because that isn't what they want people thinking about. Throwing good money after bad is not what most people regard as being a sound use of their money. And then there are always those embarrassing forensic kinds of questions regarding how exactly things were allowed to get this bad in the first place.
If our little water company is this horribly in debt, wouldn't we be better off just selling it? It's not like our new water rates will be all that cheap after the hike anyway. Will the City's mismanagement of our water company improve if we just give them more of our money? And given that level of already existing debt, is it even worth the money it will take to save it?
As we've said here before, it is all about City Hall managing public opinion in order to get even more of our money. The last thing anybody there wants is inquisitive people with potentially embarrassing questions disturbing the marks. This is not the kind of conversation they're looking to have right now.
Which is why I am happy to raise it here.