SUBSIDIZE EID RATES:
EID annually receives some $10.4 million of Property Tax revenues from El Dorado County which EID uses to subsidize rates. Without these Property Tax subsidies, EID’s already “sky-high” residential Sewer rates would be an additional $202 higher annually… or $979 annually including Property Tax subsidy. Contrast this to the $777 that EID reports. Similarly, average annual residential Water rates would be $171 higher… or $697 per year in total. (Source: Derived from Draft Rate Models in January 24, 2011 Board package)
SEWER CUSTOMERS PAY
More than 75% of Property Tax revenues come from EID customers receiving both Sewer and Water services, while under 25% come from EID customers who only receive Water-only services.
THREATENS SEWER CUSTOMERS:
At least one EID Board member is advocating changing EID’s present Property Tax allocation methodology from 60% Water/40% Sewer, to a 100% allocation to Water. Such a change would increase total Sewer/Water residential rates to more than $1300 annually, while decreasing Water-only average residential rates to approximately $350 annually.
EID PROPERTY TAX
This same EID Board member continues to propagate a long-standing myth that the reason EID receives Property Tax revenue is because it is an “IRRIGATION” district. Yet South Tahoe PUD (which serves more Sewer customers than Water customers) also receives Property Tax revenues from El Dorado County. The REAL reason both EID and South Tahoe PUD receive these Property Tax revenues is because BOTH are “SPECIAL” districts. (Note: EID first received Property Tax revenues in the early 1950’s, when it received a mere $28,000 in Property Tax revenues. Yet, this EID Director now proposes to allocate $10.4 million annually based on how just $28,000 was allocated in 1953.)
The current Property Tax allocation methodology slightly shortchanges combined Sewer/Water customers, albeit to a modest degree.
If any change is made to the current Property Tax methodology, it should address a major Proposition 218 compliance problem: EID’s current rates subsidize $8.0 million interest cost annually on $137 million of excess facilities capacity for “future customers”…in violation of Proposition 218 proportionality requirements. Current customer rates include this extra interest cost which many current customers will never recoup.
By using Property Taxes to pay for “future customer” financing costs (instead of including “future customer” financing costs in current customer rates) would eliminate this Proposition 218 compliance violation. All amounts above this $8.0 million annual financing cost could be used to amortize a portion of the $137 million FCC “Accounts Receivable”, thereby replenishing restricted FCC reserves wrongly diverted to past operating costs.