$56M in water, wastewater upgrades planned for Calexico
CALEXICO — The city of Calexico is planning to spend more than $50 million on improvements for its outdated water and wastewater infrastructure as part of its five-year capital improvement plan.
The monies will come from a combination of recently approved — and controversial — water and sewer rate changes, as well as the anticipated sale of up to $50 million in bonds.
Already, the city has spent about $4.4 million on water and wastewater capital projects during the 2017-18 fiscal year, and plans to spend $16 million this fiscal year, City Manager David Dale said.
“This is a very aggressive schedule,” Dale stated in an email.
With the City Council’s approval on Nov. 28 of the water and sewer rate changes, as well as the authorization to issue the bonds, the proposed CIP projects can be undertaken while still maintaining “healthy” cash reserves in the utilities’ funds, o cials said.
In the absence of the gradual water and sewer rate increases, as well as the pending bond sales, the proposed CIP projects would have required funding primarily through greater rate increases and by drawing more heavily on the utility systems’ cash reserves.
“It’s a little more equitable approach,” said Dan Massiello, senior vice president of Kosmont Transactions Services, a contracted financial adviser for the city. “It seemed a little bit unfair to ask ratepayers to pay for the majority of the capital improvements.”
Massiello’s remarks came during the City Council’s regular meeting of Nov. 7, during a presentation explaining the proposed $30 million wastewater and $20 million water bond sale and debt.
During that meeting, council members had sought assurances that the bond sale and repayment plan was structured in a manner that did not leave the city overly exposed to potential insolvency, and that the funding and scheduling of the proposed CIP projects would be transparent.
When it came time on Nov. 28 for the three members of the council present, Mayor Lewis Pacheco and members Maritza Hurtado and Bill Hodge, to authorize the bond sale, they did so without much discussion, hesitation or attendance by members of the community.
“Issuing of the bonds essentially guarantees to the public that these projects will be completed within the next four years, because it is part of the covenant with the bond holders,” Dale said in an email on Wednesday.
The only resident to speak out on Nov. 28 against the bonds’ approval was former councilman Joong Kim, who warned the city’s leaders against taking on additional debt at a time when the water and wastewater systems’ funds had considerable cash reserves of $20.6 million and $14.5 million, respectively.
“You guys are going to leave a history of making debt for Calexico,” Kim said. “Please don’t do that.”
As part of the water bond, an estimated $15 million in interest will be paid over 30 years, while an estimated $22 million in interest will be paid for the wastewater bond, Massiello said during the Nov. 28 council meeting.
City o cials also indicated that cash reserves for the city’s utility funds would be maintained at levels allowing them to operate for six months in the absence of any incoming revenues.
The atmosphere surrounding the council members’ consideration and approval of the bond sales stood in contrast to their discussion and approval of the city’s water and wastewater rate changes, which drew strong opposition and rebuke from many of the community members who packed City Hall on Nov. 28.
An informational presentation of the utility rate study by a representative of Willdan Financial Services, which had conducted the study, was repeatedly lambasted by many of those present for allegedly lacking pertinent information or misrepresenting information.
At one point, one community member let loose a string of profanities directed at Pacheco, while another resident accused Hodge of financial improprieties unbefitting an elected official.
During the public comment period, some community members requested the council postpone its vote until all five members were present (Councilman Jesus Eduardo Escobar was absent), or until the two newly elected council members are seated at the start of the coming year.
Councilman-elect David Romero said he was confused by reports that stated the water utility was operating at an annual deficit and also generating revenue that exceeded operating costs.
Romero also pointedly asked how the city could claim its water and sewer utilities were strapped for money when in September the council authorized the potential hire of 10 utility employees, whose salaries would draw from the system’s enterprise funds.
“I quite frankly think it’s not the time for this right now,” Romero said, referring to the rate changes.
The newly approved water and wastewater rate changes are set to go into effect at the start of the new year, or possibly early February at the latest, Dale said.
About the only person who spoke in favor of the rate changes was Ben Horton, a member of the city’s economic and financial development commission.
Horton warned those in opposition about a potential state takeover if the utilities’ infrastructure is further allowed to deteriorate to the point where the public’s health and safety become threatened.
“If you have a better idea on how to run (the city), I suggest you come up here and say how to do it,” Horton said.
The new sewer rates for residential households will be $38.08 per month. Monthly charges for multifamily units after the first unit will be $20.43 per month. The new residential water rates include a fixed base rate of $17.24 for the current fiscal year, plus $1.99 for every cubic foot of water used. Increases of 2 percent to the base rate are also scheduled over the next four years. The current monthly base rate is about $44. City officials contend the new rates are equal to or lower than other local municipalities, while residents counter that their utility bills can be expected to increase significantly.
The last time the city changed its water and sewer rates was in 2009. The city had attempted to adopt a utility rate change in July, but balked after receiving strong opposition from the community. That proposal would’ve similarly adopted a $17.24 base rate, which would’ve increased 4.5 percent annually over the following four years. Prior to voting for the utility rate hike, Councilman Armando Real said the infrastructure problems were 20 years in the making and that although the current council did not bear the entire blame, it fell to them to finally address the issue.
“We have to take the bull by the horns,” he said.
“It will prevent Calexico from turning into a dangerous infrastructure wasteland as some would like to see,” Hodge said.
“It’s actually to improve our living conditions,” Hurtado said.