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27 Oct 2020

Keeping the Water Flowing: Two of the Valley's Largest Water Agencies Say a Statewide Moratorium on Shutoffs Has Not Caused Financial Problems—Yet

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On April 2, with COVID-19 establishing itself as both a financial and fatal threat, Gov. Gavin Newsom signed an executive order prohibiting water shutoffs by local water agencies.

The order applied to all homes and small businesses in the state, protecting them from losing their access to water due to the nonpayment of service fees.

“This executive order will help people who have been financially impacted by the COVID-19 pandemic by ensuring they have water service,” Gov. Newsom said at the time. “Water is critical to our very lives, and in this time, it is critically important that it is available for everyone.”

Today, nearly seven months have passed since then, and the state is still mired in the pandemic—so questions are beginning to arise about how much debt is being accumulated, not only by the state’s water providers, but by customers who can’t afford to keep up with payments.

An Oct. 15 article from CalMatters reported: “The State Water Resources Control Board regulates all public water systems in California, serving close to 85 percent of the state’s customers. The board hasn’t required the utilities under its purview to report specific data about how the pandemic has had an impact on their finances, nor has it tracked ratepayer debt. Initial efforts over the summer to collect some of that information from water providers through a voluntary survey fell short” when only 10 percent of the state’s approximately 2,900 public-water systems responded.

The Independent spoke to representatives from two of the largest Coachella Valley water agencies to assess the impacts of this moratorium on their operations. To their credit, the directors at both the Coachella Valley Water District (CVWD) and the Desert Water Agency (DWA) voted on their own to enact water-shutoff moratoriums in March, weeks prior to the governor’s order.

“Right now, we have 510 accounts, out of a total of 23,492 active accounts, that are severely delinquent, which means they’re somewhere between five and nine months past due,” said Ashley Metzger, the outreach and conservation manager at the DWA. “Also, we have about 1,240 accounts that are delinquent, meaning at least two to five months past due. So, overall, we have 1,750 past-due accounts.”

Katie Evans, the director of communication and conservation at the CVWD, was less specific, but said the impact of the shutoff moratorium has been “exactly what we expected.”

“Every year, we generate around $1 million in late or delinquency fees. So we’re now anticipating that won’t happen (for the 2020-2021 fiscal year). In the meantime, other revenue hasn’t really changed much,” Evans said.

Is the shortfall in customer payments causing a cashflow problem for the CVWD?

“We have a reserve fund called the rate-stabilization fund,” Evans said. “It’s very specific for (an unusual occurrence) like this. It ensures that we have funds if there’s a major change in revenue. The intention there is to prevent a big spike in consumer rates in order to compensate for a catastrophic change in revenues due to some crazy situation like a pandemic. So, I think we’re fine, because we have that reserve available.”

To date, CVWD has not yet needed to tap into that reserve.

One reason why cashflow hasn’t yet become a major issue for these local water providers is the valley-wide customer-payment assistance program in which they’ve all opted to participate, administered by the United Way of the Desert. According to the United Way website, The “Help2Others” (or “H2O”) program helps eligible residential customers avoid water-service shutoffs due to nonpayment. Agencies across the Coachella Valley offer between $50 and $100 in annual credits.

(To find out about the program, visit www.unitedwayofthedesert.org/help2others.)

“We have experienced a 200 percent increase in demand for participation in the assistance program,” CVWD’s Evans said. “That’s actually kind of good news, because that means customers who are having trouble paying their bills, instead of just letting it accumulate, are reaching out for customer assistance to get help to pay their bill.”

Currently, both agencies contribute “non-rate” revenues to the H2O program, and at times, other ancillary revenues have been directed there, including water-vendor contributions, public donations and contributions from employees of the agencies themselves.

“Our fund was actually started using employee contributions and money from vendors,” DWA’s Metzger said. “It helps low-income customers when they need it. Also, what we really liked when we set up the program is that the United Way can connect our customers with other social services and resources, so that it’s more of a holistic approach.”

Looking ahead at the financial picture, Metzger reports some positive developments at the DWA in the July-September period—the first quarter of the new fiscal year.

“We’re actually tracking under budget for expenses, which is good,” she said. “Year-to-date, in our operating fund, expenses were 12 percent under budget, while our revenues are (tracking) 7 percent over budget projections.”

That good news didn’t happen by accident, though. The DWA’s fiscal 2021 budget was being prepared when the COVID-19 pandemic took hold, and the extent of the potential financial losses became apparent quickly.

“Our general manager, Mark Krause, told us all: ‘I don’t want to see a wish list. I don’t want to see a want list. I want to see a need list,’” Metzger said. “Basically, he said that if there’s (an expense) that isn’t imperative to do this year, then we don’t want to do it this year.”

Over at the CVWD, Evans reported: “The 2021 fiscal-year budget maintains current rates for domestic water, (as well as) canal and construction meter charges, and includes no increases in staffing for the district.” The operating budget decreased by 3.8 percent ($11.1 million) year over year, while the capital-improvement budget saw a 23.2 percent ($29.4 million) cut.

Still, there is much uncertainty about what the future holds regarding the longer-term costs and the potential debt problems lurking beneath the surface. No specific date has been set by the state for ending the moratorium.

As for when the moratorium ends, Metzger offered some words of comfort.

“It’s not as if the day that the moratorium ends, we’re going to shut everybody off,” she said. “We’ll work with people to set up payment plans so that they can get (their finances) back in order.”

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