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Economy could force water bills to increase
Higher interest rates on loans hurts district
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More from County NewsKeeping Southern California flush with water is challenging enough with the mounting problems of shrinking reservoirs and meager rainfall.
But with Metropolitan Water District of Southern California's short-term loan interest rates shooting through the roof, and the shaky economy's effect on municipal bonds and investments unknown, another hurdle has risen.
The district that supplies most of Southern California with water has managed so far to deal with the flux in the budget by cutting back on capital costs. But that could change.
"If this whole situation blows up, all bets are off," Brian Thomas, Metropolitan's chief financial officer told the Ventura County Association of Water Agencies on Thursday at its monthly meeting.
The challenge Metropolitan and other public agencies face is how their debt will be managed in the short- and long-term, and how much access they will have to credit.
"If it were to stay as it were today, liquidity would really be tight," Thomas said.
He said water rates are expected to rise, but that's because of the increasing challenges of delivery, energy and lack of water coming from Northern California — not the credit crunch.
Thomas said it would take a long-term downturn before ratepayers would see an increase because of the economy.
But that doesn't mean Metropolitan isn't taking a hard look at its books. About half the agency's $4 billion in debt is in short-term variable interest rate loans, Thomas said. Some of those weekly rates have shot up from the reliable 2 percent range to 9 percent in recent weeks.
Because Metropolitan has so much debt, when interest rates increase 3 percentage points, it can cost the agency $40 million, Thomas said.
He said local water providers are following the agency in cutting back on capital improvement projects.
"This adds to the management difficulties because the only response we have for our lean district is to cut capital improvements," said Don Kendall, general manager of Calleguas Municipal Water District, which supplies water to most of eastern Ventura County. Projects such as replacing old pumps will likely have to be delayed, he said.
He also said rates will likely go up because of problems on the Sacramento River Delta. But if the credit market isn't fixed for a long time, rates could go up more.
"Down the road, if these challenges are not worked out and the credit markets don't ease, that could happen," said Jeff Borenstein, treasurer at Calleguas.
Posted by chair on October 17, 2008 at 4:14 a.m. (Suggest removal)
$4-billion in _variable interest rate_ loans. Why the debt to begin with and why variable rate! Infrastructure must be under legislative thumbs -- not independent external agencies (elected or not) or via public/private partnerships. But what the heck. Let's keep importing people and increasing our need for water. Let's keep sowing grass and other water-intensive vegetation to keep our lawns gorgeous. Lets continue to ignore reality until there's no other option. Let's keep electing our area's old family descendants who cannot see beyond the past. I'm afraid Sunny Southern is going to learn some very hard lessons the hardest possible way.
Posted by Legs on October 17, 2008 at 8:18 a.m. (Suggest removal)
Just as rising petroleum prices influenced travel plans, this may make the average citizen learn how to conserve water.
Not entirely a bad thing.
Posted by AnnaWhaat on October 17, 2008 at 10 a.m. (Suggest removal)
Water rates in Fillmore have already increased dramatically!!!! And I mean alot! If they go up any more people with have to choose between batheing and eating.
Posted by lawabider on October 17, 2008 at 10:34 a.m. (Suggest removal)
Great! Gasoline, natural gas, electric, groceries, interest rates, housing -- now water too! And just when everyone's income is bottoming out... Me thinks we need a better plan for change than the one we have coming???
Posted by mypov on October 17, 2008 at 1:10 p.m. (Suggest removal)
how about starting with port hueneme. they shouldnt pay a low flat rate, they should pay like everyone else! and wat about people in low income housing and apartments!!!
Posted by luv2sail on October 18, 2008 at 12:45 a.m. (Suggest removal)
Maybe the Cities in the County can invest in the water district. In an earlier article it said that most Cities are getting 3% on their money and Ventura has actually lost some. Seems they could give loans to the Water District at let's say 4%, seems like a win/win.
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