By Craig W. Anderson
Requirements mandated by the Sustainable Groundwater Management Act (SGMA) have put Stockton East Water District (SEWD) in a financial bind due to the rate cap that establishes the district’s maximum agricultural groundwater and surface water assessment.
When the district was reorganized in 1979, the cost of surface water and agricultural groundwater assessments were set by the state legislature at $7.60 and $1.16, respectively. Also, the laws governing the district said that no rate could be established in any year that exceeds those rates by 20 percent, plus a factor reflecting the increase in the federal consumer price index.
“As this law has been interpreted, following a one-time 20% increase, these rates can’t be increased in any year by more than the consumer price index,” said Scot Moody, SEWD general manager. “The agricultural groundwater assessment has remained artificially low because of the law establishing the rate cap.”
Eliminate rate cap
According to the district, new legislation needs to eliminate the rate cap.
“Keep in mind that the legislation only removes the rate cap,” said Moody. “My board hasn’t decided if/what they’re going to do in this regard. They just need the flexibility should the need arise.”
The district’s current maximum ag groundwater assessment is $5.36 per acre-foot. In comparison, the Central San Joaquin Water Conservation District’s assessment is $12 per acre-foot and districts in neighboring counties averages of $10 to $30 per acre-foot.
“Stockton East’s been selling water below other’s rates for years,” said Dave Simpson, San Joaquin Farm Bureau’s Water Committee chair. “All water’s being pushed into a corner by SGMA and SEWD requires legislation while other districts can set rates themselves every five years.”
Because of the requirements mandated by SGMA, SEWD must take action to assure sustainability of the groundwater basin. Among SGMA’s requirements is that districts use more surface water within their boundaries to avoid reductions in groundwater use.
The district has to incentivize surface water use while maintaining the financial ability to implement this and other projects. A rate increase is the most economically feasible way to generate the needed, SGMA-demanded funds.
SEWD’s budget balancing problem
SEWD is divided into agricultural, municipal and administrative divisions; because of the rate cap it’s been difficult for the board to balance the agricultural division budget as subsidies from the other two divisions cannot be used.
These lower rates have put SEWD in an agricultural budget bind for the 2020-2021 fiscal year, explained Moody. “To balance the ag budget, the board of directors moved $500,000 out of the agriculture division fund. This was nearly 17.5% of the division’s reserves.”
“We have to be solvent to provide water to our clients,” said Paul Sanguinetti, SJFB board member and SEWD board member. “We’ve had pretty cheap water here for a long time but costs are going up faster than revenue and SGMA drives those costs.”
He also said surface water use has to be encouraged and “rates need to be increased to meet SGMA’s requirements, build more facilities and get pumps into surface water.”
Board in control
“I think the legislature thought the board would get out of control and that influenced their decision in 1979,” said Sanguinetti.
Moody said, “The board is conservative so the district will spend wisely, not wildly.”
Under the current rate cap, SEWD could charge $34.65 per acre-foot for surface water delivered; however, the district wants to keep the surface water rate low to incentivize its use. The current rate for surface water is $23.
“This legislative change is needed, it’s time to do it,” said Jake Samuel, SJFB second vice president. “The money’s needed to combat SGMA and fight other government regulations.”
SEWD is a member of the Eastern San Joaquin Groundwater Joint Powers Authority (JPA) which includes all Groundwater Sustainability Agencies in the Eastern San Joaquin groundwater basin; the JPA’s groundwater basin plan says it is over drafted by an average 70,000 acre-feet every year. This needs correction and two methods are available: encourage more landowners to use surface water instead of groundwater or require all growers in the basin to fallow enough land to reduce groundwater use by 70,000 acre-feet.
“Obviously, the second option isn’t something any of us want to consider,” Moody said.
Having the legislature change the law by eliminating the cap will “make the district more efficient and able to better serve their customers,” said SJFB President David Strecker. “I wonder how this process will proceed after the next several months bring change due to the COVID-19 virus.”
While continuing with reasonable rates in compliance with the law, the district is convinced the time has come to eliminate the rate cap. The move would be subject to legalities, including: adoption by ordinance, subject to referendum, and full compliance with Propositions 218 and 26 which require: revenues generated can only be used for their designated purpose, cannot exceed the funds required to provide the property related service; the fee amount cannot exceed the proportional cost of the service.
“No one likes to see rates go up, but there’s no way around it,” said SJFB First Vice President Ken Vogel. “Water and farming interests are facing a daunting triumvirate: SGMA, unimpaired flows and a tunnel and money’s needed to deal with these factors that affect all of us.”
According to SJFB Executive Director Bruce Blodgett, “The issue of a short supply of groundwater is the primary factor in all of this and the district’s board has some legislative liabilities to address and projects and programs that are needed.”
Blodgett said the San Joaquin Farm Bureau hasn’t taken a stand “one way or another at this time; we’re in the exploration phase now and identifying projects, SEWD’s proposal and the groundwater situation.”
The issue will require a legislative solution and meanwhile the district will continue its transparent process of conducting numerous meetings with the agricultural community to explain and answer questions about the issue.
“We want to make sure everyone’s attuned to this,” Sanguinetti said.