(Please Note: This post has been changed to correct some errors. The numbers I used were from the CCSD’s website, in a powerpoint from the May 13 meeting. I apologize for the initial error. See the document used for the corrections here. )
This Board, not just previous Boards. By now, most Cambrians are aware that this Board and the ones that came before have been deferring maintenance on the systems and spending most of their energy prioritizing projects that improve the firefighting capacity of the system. The other fact that has come to light is that there have been no rate increases, other than cost of living, since 1992. On several occasions this Board has said the enterprise fund reserves are non-existent – far less than the minimum 60 days working capital they would like to have.
Which brings us to the rates. As part of the CCSD’s 2 year budget, the District plans to obtain a $6,901,200 loan for the water enterprise (with payments of roughly $51,000 PER MONTH over the 20 life of the loan- assuming 4.25% interest) and a $1,198,800 loan for the wastewater enterprise (with monthly payment obligations hovering around $8220 per month at 4.25%). At the May 13 Budget Workshop, the staff described what the $8,100,000 was to be used for. I have heard the explanation at least four times from the Staff and/or Board and still don’t understand why we should use this kind financing mechanism or why we need to borrow this amount.
Here are the facts presented at the May 13 budget workshop about that money:
1. Stated actual proposed expenditures of $1,871,500 $3,550,000 for Water capital projects in the first 2 years.
2. Stated actual proposed expenditures of $1,015,500 $326,000 for Wastewater capital projects in the first 2 years.
3. DEBT ISSUANCE – WATER
CIP $ 795,000 CIP $1,012,000
Capital Outlay $ 1,178,000
CIP Reserves $ 2,321,100 CIP Reserves $2,538,000
Capital Outlay Reserves $ 2,606,600 $2,173,200
TOTAL $ 6,901,200
4. DEBT ISSUANCE – WASTEWATER
CIP $ 201,300 $326,000
Capital Outlay $ 483,000
CIP Reserves $ 0
Capital Outlay Reserves $ 514,500 $389,800
TOTAL $ 1,198,800
The question I still don’t feel has been answered is why the CCSD is borrowing $5,442,200 to hold in reserve. almost $3,000,000 more than the cost of the projects. This question could be fairly easily answered if there was a Capital Improvements long-term plan – whether its a 5 year or just far enough out to explain borrowing three times the amount we need for the identified projects. And while the use of capital outlay and CIP may be technically correct and useful for the CCSD, perhaps there is a simpler way to show the capital expenditures for those of us who don’t have advanced degrees in accounting.
Mistrust is a major issue for this community. A different debt financing mechanism (like a bond) would mean the CCSD would be subject to more restriction on the amount they could get, how it could be spend and require a vote by the community. Read more about the debt financing mechanism the CCSD plans to use here or in the aboutCambria Library – Look for the title “Guidelines for Leases and Certificates of Participation” in the rates and fiscal responsibility category.
But there are other considerations affecting rates and CCSD’s long-term financial health. As I understand it, when the audited financials were presented to the Board, Director Clift asked about an item marked as loan, which prompted a discussion of the policies (and lack thereof) governing inter fund transfers and loans. It was my understanding that they asked the auditor to change his report to reflect the cash used to pay for the Pine Knolls tanks as a transfer and NOT a loan. According to the PowerPoint shown at the May 13 workshop: ” No payback to the General Fund Reserves for prior year transfers for Water and Wastewater capital improvements is included.”
Why does any of this matter? The short answer is because a loan has to be paid back and a transfer does not. A loan would mean our rates would have to be even higher that the 27%. A longer answer has to do with how the CCSD is allowed to fund the governmental activities and the enterprise activities and the requirement that water rates must cover the cost of service for water and wastewater and nothing else. So the rates CANNOT be used to “replenish” the general funds monies spent to build the Pine Knolls tanks or to cover the shortfalls experienced in the enterprise fund in several of the last 7 years. Taken together, the conclusion would be that they cannot raise our rates just to pay back money they spent from the general fund. The CCSD has built that assumption into the budget.
Why, really, all of this matters to you and your wallet. If you trust your Board of Directors and the CCSD General Manager and staff, it doesn’t matter as much. But democracy demands participation, information and communication to thrive. Healthy democracy fosters discussion which provides for accountability. If the CCSD staff and Board know we are watching them, they are much more likely to do things the right way. Community participation and attention is really the only set of checks and balances a community like our has, since we have no mayor/city council structure. There have been a lot of changes at the CCSD, mostly for the better, over the last 8 months. AboutCambria.com will soon have a sister site: AboutCCSD.com to bring you information and keep you in touch with what your local elected officials and the CCSD staff are doing. Keep your eyes peeled for the launch of AboutCCSD.com in the coming weeks!
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Last 5 posts by Amanda Rice
- Gail Robinette Chosen to Complete DeMicco's Term as CCSD Director on Unanimous Vote
- California Coastal Commission Unanimously Denied Army Corps Desal Tests
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