Councilnomics — anatomy of a 42 percent rate hike

It’s a done deal for the city’s water users.

At its Wednesday, Aug. 21, meeting, the Susanville City Council unanimously approved a 15 increase in city of Susanville Water Enterprise Fund rates for it residential and business customers for the coming year. The council will revisit the proposed rate increases in September 2025.

Public Works Director Bob Godman introduced the item to the council and noted the last rate study was completed in 2016 and the rates have not been raised since 2017.

If the multi-year rate hike stands as presented, the Susanville Water Enterprise Fund revenue will rise from $2 million in 2018/19 to $3 million in 2028/29. For its services to the water fund, the city’s total billing will increase from $971,111 in 2018/19 to $1.6 million in 2028/29.

According to consultant Dan Bergman, the average typical customer within the city of Susanville will see an increase of about $42 per year this year, about 9 percent.

Relief for single-family users
According to Bergman, single family customers pay disproportionally more than all the other customers, and this rate study tries to correct that. According to Bergman, 67 percent of the revenue comes from single family customers, but they only use 58 percent of water. The increase on the commercial side is higher than the  increase on single families.

“They’re paying too much into the system and the reason they’re paying too much is because every single family customer has a monthly fixed charge, and that contribution is proportionally higher than the other customer groups … more of the rate increase is on non-single family customers,” Bergman said.

The city water system is run like a business
According to the California State Portal, Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges.

“No one likes rate increases, but they are necessary for your enterprise funds because your enterprise funds within the city are businesses that operate within the city,” Bergman said. “They are not paid for by tax revenue. You need that tax revenue for police and fire and parks. And so, it’s a tough situation because it’s been seven years since rates have been increased.”

According to Bergman, the rate study and the rate increase are necessary, and the overall revenue increases needed include a 15 percent rate increase Oct. 1, 2024, another 15 percent increase Oct. 1, 2025 (to be reviewed by the council in September 2025), a 4 percent increase Oct. 1, 2026, a 4 percent increase Oct. 1, 2027 and a final 4 percent increase Oct. 1, 2028.

“(An) overall revenue increase is needed to cover expenses — I haven’t mentioned debt service coverage — but it’s critically important that you collect enough money not only to pay your debt on your bonds, but have a little bit extra … ” Bergman said. “Your water is free, and a lot of it flows out of the ground on its own which is a really, really good thing because of the benefit you have with springs.”

According to councilmember Patrick Parrish, “brown is the new green.”

By his analysis, customers became accustomed to using less water so the water department doesn’t make as much revenue. He figured a rate increase would make customers use less water which would result in even less income which would require another rate increase.

“We’re kind of in a cycle of — we’re trying to save money so we use less water, but then again it’s going to cost us on the back end because we’re using less water,” Parrish said.

“Well stated,” Bergman responded. “It’s a cold hard fact that most — over 90 percent of the costs — to operate your system are fixed costs. So, when you sell less water, rates have to go up to cover the cost … It’s not something that we want to accept, that when people use less water they have to pay more for it … That’s the way the economics work. Exactly what you just said so well.”

So we all should use more water to keep the rates lower? Parrish asked.

Bergman responded, “If it wasn’t water, and you were selling something else like footballs, you’d want to sell more of them … “

City Manager Dan Newton jumped in and noted all the state regulations and executive orders concerning water conservation and the steps the city has taken to comply with those regulations — including the drought rates. More regulations and executive orders are expected.

“We have that dilemma of being mandated to conserve, and as Mr. Bergman pointed out, this is a business, right, so we’re not able to sell the number of footballs we would like to sell,” Newton said. “We’re being regulated to sell less.”

Here are some other numbers contained in Bergman’s presentation to the council that should be noted.

Salaries and benefits
According to Bergman’s report, salaries and benefits paid by the city’s Water Enterprise Fund to the city’s Water Enterprise Fund employees were $374,387 in 2018/19, $455,853 in 2019/20, $391,372 in 2020/21, $413,279 in 2021/22, $323,00 in 2021/22, estimated to be $323,00 in 2022/23, $370,000 in 2023/24, $389,000 in 2024/25, $408,000 in 2025/26, $428,000 in 2026/2027, $449,00 in 2027/28 and $471,000 in 2028/29.

PERS pension contributions
The city’s Water Enterprise Fund also pays PERS pension benefits for those city employees — $21,783 in 2018/19, $58,109 in 2019/20, $46,343 in 2020/21, $86,341 in 2021/22, $86,000 in 2022/23, $90,000 in 2023/24, $95,000 in 2024/25, $100,000 in 2025/26, $105,000 in 2026/27, $110,000 in 2027/28 and $116,000 in 2028/29.

Internal services (administration, public works and engineering)
The city also charges the city’s Water Enterprise Fund for the internal services its employees provide to the Susanville Water Enterprise Fund.

Those internal services charges to the Water Enterprise Fund are $574,941 in 2018/19, $724,262 in 2019/20, $689,131 in 2020/21, $711,996 in 2021/22, $770,953 in 2022/23, estimated at $810,00 in 2023/24, $851,00 in 2024/25, $894,00 in 2025/26, $939,000 in 2026/27, $939,00 in 2027/28 and $1,035,000 in 2028/29.

Salaries and benefits PERS pensions and internal services
City charges to the Water Enterprise Fund for employees’ salaries and benefits PERS retirement and city-provided internal services — $971,111 in 2018/19, $1.23 million in 2019/20, $1.3 million in 2020/21, $1.2 million in 2021/22, $1.2 million in 2022/23, $1.3 million in 2023/24, $1.34 million in 2024/25, $1.4 million in 2025/26, $1.5 million in 2026/27, $1.54 million in 2027/28 and $1.6 million in 2028/29.

Net revenue
According to Bergman’s report, the net revenue from the enterprise fund was $685,370 in 2018/19, $339,747 in 2019/20, $812,114 in 2020/21, and $456,095 in 2021/22.

The project net revenue draws some red ink ——-$243,392 in 2022/23 (the first year Bergman reports transfers to the infrastructure fund), -$437,254 in 2023/24, and -$253,270 in 2024/25.

The black ink returns — $7,841 in 2025/26, $137,614 in 2026/27, $164,705 in 2027/28 and $187,532 in 2028/29.

Water Infrastructure Fund
The Water Infrastructure Fund (established in 2016 by Resolution No. 16-5339), a separate line item on the city’s water bills, are tracked separately from operating funds and are projected in the rate study.

Bergman’s report contains no transfers to the Infrastructure Fund in 2018/19, 2019/20, 2020/21 or 2021/22. (His report did not cover the year 2017/2018.)

According to Bergman’s report, in 2022/23, $653,195 was transferred to the Infrastructure Fund, creating a loss of $243,392 — the first time the city’s net revenue collected red ink. Future projected transfers include $660,00 in each upcoming year — 2023/24, 2024/25, 2025/26, 2026/27, 2027/28 and 2028/29.

Susanville water revenues 
In 2018/19, total operating revenue was $2.7 million (including $653,624 in revenue for Infrastructure Fund). In 2019/20, it rose to $2.9 million (including $654,297 in revenue for Infrastructure Fund). In 2020/21, it rose again to $3 million (including $657,045 in revenue for Infrastructure Surcharge). In 2021/22, it remained about $3 million (including $659,879 in revenue for Infrastructure Surcharge). In 2022/23, it fell to $2.9 million (including $653,195 in revenue for Infrastructure Surcharge). In 2023/24, the forecast is $2.8 million (including $660,000 in revenue for Infrastructure Surcharge). In 2024/25, with the 15 percent increase, the forecast is $3 million (including $660,000 in revenue for Infrastructure Surcharge). In 2025/26, the forecast is $3.4 million (including $660,000 in revenue for Infrastructure Surcharge). In 2025/26, the forecast is $3.5 million (including $660,000 in revenue for Infrastructure Surcharge). In 2026/27, the forecast is $3.5 million (including $660,000 in revenue for Infrastructure Surcharge). In 2026/27. The forecast is $3.5 million (including $660,000 in revenue for Infrastructure Surcharge). In 2027/28, the forecast is $$3.7 million (including $660,000 in revenue for Infrastructure Surcharge). In 2028/29, the forecast is $3.8 million (including $660,000 in revenue for Infrastructure Surcharge).