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1. How is the Soquel Creek Water District funded?

The Soquel Creek Water District (District; SqCWD) is a public, not-for-profit agency that is funded in large part by the water rates customers pay. Payment for water service ensures the District’s ability to deliver high-quality, reliable water in a manner that values our environment and community, and sustains the resources entrusted to our care. The District is committed to good governance, fiscal accountability, and transparency, with systems and policies in place to earn the trust of our customers.   

2. What do water rates pay for?

Water rates are an investment in the water District today to secure our water future. Revenues derived from water rates ensure the continuity of operations and reliable delivery of water to the community we serve. As an example, water rates pay for: 

• Pumping and treatment of local groundwater 
• Maintain, repair, and replacement of  critical infrastructure, such as pipes, pumps, groundwater wells, monitoring wells, storage tanks, seawater intrusion wells, and the Pure Water Soquel advanced water purification treatment center 
• Maintaining 168.5+ miles of water pipelines to ensure water delivery to homes, businesses, schools, parks, etc  
• Water for fire protection 
• Hiring and retaining highly skilled, qualified, and licensed staff to operate the water system and provide respective and responsive customer service. 

3. Does the District make a profit?

No. By law, we cannot charge customers more than what it costs to provide the service. As a public agency, our system is owned by our customers and governed by the SqCWD Board of Directors; we do not have shareholders or pay dividends like private companies. 

4. Why is the District conducting a water rate study?

Rate studies are conducted as an industry best practice to ensure that a utility’s financial health is maintained and that the District is setting a course toward meeting future financial obligations. The industry standard is to perform comprehensive rate studies every three to five years; our last study was in 2018 with new rates adopted in early 2019.   

Since the last rate study, the costs to operate and manage the water system and ensure environmental protection of our groundwater supply, have increased. The water industry is experiencing the same global impacts of inflation. The District is self-funded, so revenues must equal expenditures. Water rates must cover the cost of service and maintain prudent reserves in case of seawater intrusion or an emergency, such as an earthquake or wildfire, that could damage major critical infrastructure.  With water rate adjustments, the District is able to sustain the annual level of capital reinvestment needed to maintain and upgrade our infrastructure and provide financially and operationally sustainable water service. 

5. Why do we have to adjust water rates now?

The most recent District water rates study was completed in 2018 and implemented in 2019. Ideally, rate studies should be performed every 3-5 years. Regular rate studies are critical to the healthy operation of District operations. Utility systems must keep up with rising costs, annual inflation rate,  and be able to implement critical capital projects that are mandated or necessary for the health and safety of our customers.  

Performed regularly, water rate studies provide transparency into what the District can expect in the years ahead and ensure we have the financial resources to meet our budget, maintain our infrastructure, prevent seawater intrusion, safeguard the groundwater basin against overdraft and towards sustainability, keep pace with new technologies, address existing and new state and federal regulations, be adequate for planned growth by the County of Santa Cruz and the City of Capitola, implement our Capital Improvement Program (CIP), and operate our water system so that water can be delivered 24 hours/day; 7 days a week (or something like this)..  

Other elements of rate studies include the development of a reserve policy that considers the different types of risks we face and ensures revenue stability while maintaining affordability. 

6. What is the rate study process?

The District hired Raftelis Inc., a consulting firm with expertise in water rate studies in California and across the country. Their scope of work includes developing long-range financial plans for water service and assisting with the California Proposition 218 process and Public Hearing for rate adoption. The rate study consists of a series of steps involving data evaluation, performing technical analyses, deriving customer rates, and understanding customer impacts of any modifications. Once a rate proposal is determined, the complete study is documented in a Study Report to serve as part of the District’s administrative record. 

In California, all parcels connected to a utility system must be given notice of any rate changes with the ability to protest the proposed rates. The notice details the proposed rates, the basis for calculating the proposed rates, the reason for the proposed rate increase, details of the public hearing, and ratepayers’ or property owners’ right to protest. After a protest period of no less than 45 days, the District Board of Directors can conduct a Public Hearing. Absent a majority protest to the rate proposal, the District Board may choose to adopt the rates as noticed. 

2023–24 Rate Study Schedule: The anticipated schedule to complete the rate study and consider new rates in a Public Hearing is mid-February 2024, for proposed implementation on March 1, 2024. A presentation and public comments are scheduled to be heard at the Board of Directors meeting on December 19, 2023.  We encourage the community to stay informed about the water rate study through the District’s website at www.soquelcreekwater.org/ratestudy. To submit questions or comments, send an email to ratestudy@soquelcreekwater.org  or call (831) 475-8500 and ask for Leslie Strohm. 

7. How are rates set?

Proposed rates are determined following evaluation and analysis of cost escalations related to operation and maintenance, water treatment, capital projects’ costs, general inflation, and material cost increases due to supply chain shortages. California’s Proposition 218 requires local utilities, special districts, and municipalities to follow certain procedures when proposing a rate adjustment to services. A property owner has an opportunity to protest the proposed rate increases if they feel they are unwarranted.  

Under Proposition 218, ratepayers will receive a public notice detailing the proposed rate adjustment, petition process, and the time, date, and location of the Board of Directors Public Hearing. Customers have 45 days to petition rate adjustments through a written process. In the Public Hearing, the District Board will review customer petitions and consider approving or denying rate adjustments. Each parcel is allowed one protest. Should the District receive a majority (50% +1) protest from water customers, rate adjustments will not be implemented.

8. Who approves rate changes?

Establishing new rates is a collaborative effort with input from District staff, financial experts, community members, and the District Board of Directors. The Board of Directors has the final say and vote to approve rate changes.  

9. Does the District inflate forecasted expenses when setting rates?

The District’s objective is to have 40% of projected annual operating costs maintained in reserves to ensure continuity in the event of business disruption. Adequate reserves are necessary to address unforeseen conditions such as emergency repairs, drought, and seawater intrusion. Rate revenues must cover these reserves. Water utility reserves are not used to fund other District expenditures.  The District sets aside less money in reserves than most agencies its size in an attempt to keep rates as low as possible. 

The water rate study will include projected expenses and forecasted cost increases over the next five-to-10-year period. If there is additional revenue or expenses the fund will either be slightly in the positive or slightly in the negative, with the objective of a healthy fund to balance revenues with expenses over multiple years. The purpose of a five-year rate study is to reconcile differences in projected expenses and revenues and factor actual expenses and surpluses or deficits into the projected revenue needs for the next five years. 

10. What is the District doing to ensure adequate water supplies in the face of seawater intrusion?

All drinking water provided by the District is from the Santa Cruz Mid-County Groundwater Basin, which is shared with other pumpers (municipal and private wells) and is our sole source of drinking water.  This Basin is critically overdrafted, meaning more water is collectively pumped out of the basin than can naturally be replenished through rainfall. This has resulted in   seawater moving inland and contaminating our only water supply. 

The District has made and will continue to make investments in the water system to protect drinking water supplies and ensure the delivery of safe and reliable drinking water supply for generations to come. In order to ensure future success, we must be prepared to continue investing in our water system, meet state and federal regulatory standards, obtain the necessary infrastructure and permits, and address the challenges from climate change and rising costs that many water systems in the United States are facing.  

The Capital Improvement Program (CIP) lays out short- and long-term infrastructure projects needed to continue delivering high-quality water to our community. One of the most recent critical CIP projects is Pure Water Soquel, which provides a sustainable, drought-proof supply of water that is available year-round to supplement our overdrafted groundwater supply and helps prevent seawater intrusion from moving farther inland and contaminating drinking water wells. Learn more about Pure Water Soquel.