Rainbow MWD approves rate setting services contract

A new cost of service study for the Rainbow Municipal Water District is being conducted by Raftelis Financial Consultants.

The Rainbow board voted 4-0, July 27, with Hayden Hamilton absent, to approve a contract which will pay Raftelis $61,702 for a study on appropriate water rates and other charges and $41,476 for the study on wastewater rates and charges.

If water rates are based on the cost of service, a water agency is exempt from the public vote required for a public agency to raise taxes or fees. A rate setting policy can be in effect for up to five years and must include a rate design and public hearings.

Rainbow adopted a five-year plan in 2010, and in 2015, the district contracted with Raftelis to develop a rate structure.

The 2015 study, which analyzed the district’s financial needs, customer usage patterns and rate structure equity, utilized an anticipated annual demand of 18,000 acre-feet, but over the past two years, actual demand has been closer to 16,000 acre-feet.

“Our water sales have gone down even further,” Rainbow general manager Tom Kennedy said.

The decreased sales have created a revenue shortfall for the district, so a study before the 2020 expiration was desired.

Raftelis is headquartered in Charlotte, North Carolina, but has offices in Los Angeles and Murrieta.

“Raftelis is a recognized leader,” Kennedy said.

The 2015 Raftelis work included the development of a financial plan, the development of rates and a presentation to the Rainbow board. The rate structure acknowledges the difference between residential, commercial and agricultural use and also takes into account Rainbow’s recent and predicted shifts from agricultural to residential service. The process also considers cutbacks related to the drought, including conservation incentives as well as the need to fund the district’s fixed costs if water use declines.

Rainbow last increased wastewater rates in 2013, and those new rates became effective January 2014. The wastewater fees are based on the lowest water usage between the months of December and April, and the declining water consumption influences wastewater rates. In the new cost of service study, Raftelis will review other potential methodologies for a wastewater rate structure which include the calculation and documentation of the functionalization, classification and allocation of costs among appropriate customer classes.