Possible water rate increase to be studied
By a narrow margin, the City Council decided Tuesday to learn more about financial maneuvers that could result in higher water rates.
The council voted 3-2 to hire consultants to study Redlands' water rates and an accounting problem involving the city's water fund and general fund. The multi-million dollar problem, as reported by City Manager N. Enrique Martinez and interim utilities chief Chris Diggs, happened because Redlands' water utility never repaid the city's general account for Mill Creek water rights that were acquired with bonds that were authorized in 1926.
The way Martinez and Diggs describe things, taxpayers have improperly subsidized Redlands' water operations and the water utility should have to repay the general fund. Payback could involve a $17-million bond (if the utility buys the water rights) or some kind of lease arrangement. Increased water rates could finance any deal made between the water utility and general fund. Ultimately, a portion of customers' water bills could pay for projects that are traditionally paid for with tax dollars or other revenue sources.
And that's where things get controversial. Councilmen Jerry Bean and Mick Gallagher voted against the consulting contracts, and Bean bluntly accused city administrators of attempting to manipulate water rates to skirt California's law that requires cities to call a public vote before raising taxes.
"We can't do it (balance the budget) with financial schemes such as this one," Bean said. "This is a water department, water utility tax without a vote of the people."
Martinez said the possible $17-million bond issue won't be a used to raise employee salaries. He told council members $1.5 million would be spent on street resurfacing, and an equivalent amount would flow into budget reserves.
The remaining funds, Martinez said, would be used to create an endowment fund that would generate interest and possibly enhance Redlands' credit rating.