January 2025 Update to MPWD Water Rates

The 2024 Water Rate Study recommended a realignment of the existing Water Volume Rate tiers to reflect current water use patterns. With this realignment, beginning January 1, 2025, residential water use shifted from 4 tiers to 3 tiers and all other use (commercial, institutional, irrigation, and multi-family residential) shifted from 2 tiers to a uniform rate. With an expanded first tier, more low water users will be able to stay within Tier 1. The new water rates are shown below. To help understand how your bills compare before and after January 1, 2025, we have provided a handy tool (at top of this page) that will calculate your new bill and the change from the previous rates. (Question added September 26, 2024)

The MPWD Board of Directors adopted a rate change effective January 1, 2025. The 2024 Water Rate Study is a 5-year study, and sets the maximum amount MPWD can change rates through Fiscal Year 2028-2029. (Question added September 26, 2024)

The exact increase to your bill will depend on your water usage, size of water meter, and whether your account is residential or commercial. To help understand how your bills are likely to change after January 1, 2025, we have provided a handy tool at the top of this page that will calculate your new bill and the change from the current rates. (Question added September 26, 2024)

MPWD retained HF&H Consultants to conduct a Water Rate Study. This rate study was designed to ensure that the District does not collect more revenue than is necessary to cover its costs, and that the proposed rate structure aligns with the proportional cost of providing the services. The detailed study and analysis can be reviewed here.

All revenue that MPWD receives is used to pay for the water that customers use every day and is directly invested into less visible expenses like water system operations, maintenance, replacement, and improvement of the distribution system infrastructure, as well as costs for administration, and maintaining prudent financial reserves consistent with its Financial Management Policy. The 2024 Water Rate Study carefully analyzed current customer water use patterns and the District’s current and anticipated revenue needs. The proposed adjustments in water rates are needed to continue providing reliable service and cover the costs associated with:

• Purchasing treated water from the San Francisco Public Utilities Commission (SFPUC),
• Maintaining, replacing, and rehabilitating aging water infrastructure,
• Anticipated Operations and Management (O&M) expenses,
• Planned infrastructure improvements per its Capital Improvement Program (CIP), and
• Meeting legal and regulatory requirements, and other administrative and operating expenses.

The largest portion of MPWD’s expenses is for the District’s Capital Improvement Program. MPWD will make necessary investments in its operations and water infrastructure to secure water supplies, prevent costly emergency repairs, and prepare for major seismic events. (Question added September 26, 2024)

The proposed rate increases were determined through a detailed financial analysis conducted as part of the 2024 Water Rate Study. The study considered the District’s operating costs, infrastructure needs, and future water supply requirements. The Board of Directors considered and reviewed the study and water rate change at 10 public meetings from December 2023 through September 2024 to make sure that the water rate changes were necessary, proportional, and in the best interest of the District, its customers, and the community. The rates were adopted following outreach to the public and a public hearing held on November 21, 2024. (Question added September 26, 2024)

Meter charges are assessed to every customer based on the size of the water meter. The District allocates “fixed” costs through the meter charge, which are costs incurred by the District that do not vary based on water use or demand. The fixed charges represent the customer’s fair share of the system cost, based on the maximum safe flow/capacity as determined by meter size.

Fixed charges include account management, such as meter reading, billing, accounting, and customer service; and capacity in the system, such as a portion of the distribution storage tanks and distribution mains to customers. The District incurs costs associated with these services regardless of the volume of water a customer consumes each month. (Question added October 17, 2024)

Meter charges are assessed to every customer based on the size of the water meter. The District allocates “fixed” costs through the meter charge, which are costs incurred by the District that do not vary based on water use or demand. The fixed charges represent the customer’s fair share of the system cost, based on the maximum safe flow/capacity as determined by meter size.

Fixed charges include account management, such as meter reading, billing, accounting, and customer service; and capacity in the system, such as a portion of the distribution storage tanks and distribution mains to customers. The District incurs costs associated with these services regardless of the volume of water a customer consumes each month. (Question added October 17, 2024)

The MPWD, like most public agencies that provide essential public services, is constrained in the way it sets rates due to the substantive requirements of Proposition 218. Proposition 218 requires that water districts only collect rates and charges in an amount necessary to cover the cost to provide the service, and requires that customers only pay their proportional share of the total cost. The determination of the tier breakpoints are based on actual customer water use patterns, which tend to change over time. The last time the District conducted a rate study and considered the tier breakpoints was 2015. The updated 2024 Water Rate Study goes into detail on how the tier breakpoints were determined based on the cost to provide service at each volume based on the current customer water use patterns. (Question added October 26, 2024)

As a local government agency (a special district), MPWD does not and cannot generate a profit. The 2024 Water Rate Study was designed to ensure that the District does not collect more revenue than is necessary to cover MPWD’s costs, and that the proposed rate structure aligns with the proportional cost of providing the services. This does include maintaining adequate and appropriate reserve funds, which are outlined in the Board-adopted Financial Management Policy, and are consistent with applicable IRS codes and Governmental Accounting Standards Board standards.

Under the District’s Financial Management Policy, the District has the following specific reserve funds:

• Working Capital (Operating) Reserve. The purpose of the Working Capital (Operating) Reserve is to ensure that the District will always have sufficient funding available to meet annual operating costs, including temporary cash flow deficiencies that might occur because of timing differences between the receipt of operational revenue and expenditure requirements and unexpected costs that might occur because of doing business. Adequate operating reserves provide financial flexibility in the event of unanticipated expenditures or revenue fluctuations. This has a target level of 50% of the District’s annual budgeted expenditures, which is consistent with the Government Finance Officers Association (GFOA) best management practices standards.
  
  
• Capital Reserve. The purpose of the Capital Reserve is to ensure that the District can fund the repair, maintenance, or replacement of the water system’s infrastructure assets, during normal operations and emergencies. The reserve level combined with the District’s managed risk pooled insurance coverage should adequately protect the District and its customers in the event of a catastrophic loss. This reserve has a target level of $8.0 million, consistent with the 2023 Annual Water Main Replacement Cost Analysis developed by the District Engineer and included in the FY 2024-2025 CIP Update.
  
  
• Internal Revenue Code (IRC) Section 115 Irrevocable Exclusive Benefit Trust Plan for Other Post Employment Benefits (OPEB) and the Pension Rate Stabilization Program (PRSP) Reserve. The purpose of the IRC Section 115 Irrevocable Exclusive Benefit Trust Plan is to fund MPWD’s OPEB and PRSP IRC Section 115 Trust Account, established to pre-fund post employment healthcare and pension benefits for eligible retired employees, and to ensure that the District will have sufficient funding available to meet these obligations in the event of unanticipated operating expenditures or revenue fluctuations. The target level for this reserve is:
  • 100% of the District’s projected Total OPEB Liability plus 5% contingency, based upon its most recent GASB 75 Actuarial Report; AND
  • 100% of the District’s projected pension liability (Unfunded Accrued Liability) plus 5% contingency, based upon its most recent CalPERS Actuarial Report.
    
    
• Rate Stabilization Fund Reserve. The purpose of the Rate Stabilization Fund Reserve is to ensure that the District will always have sufficient revenues available to meet its annual rate covenants required by any outstanding debt issuance of the District. Adequate reserves for its debt service covenants provide the MPWD with financial flexibility in the event of unanticipated expenditures or revenue fluctuations and avoids or delays the requirement for imposition of a water rate increase to comply with the covenant requirements of any outstanding bond issue. This results in stabilization of the rates and charges imposed by the District. This reserve has a target level equal to one (1) year of debt service requirement ($1.2 million) on the MPWD’s 2016 Certificates of Participation Financing Program for capital improvements, or $500,000 if no bonds are outstanding.

The District’s reserve funds are reported to the Board of Directors monthly at its public meetings. Agendas for public meetings are available here. (Question added September 26, 2024)

The MPWD had not increased its customer water rates except for pass-through SFPUC wholesale rate increase from July 2019 until January 2025. Below is a summary of the rate increases to our customers during this period:

• July 1, 2024 – SFPUC raised its rates by $0.46/HCF. MPWD passed the $0.46/HCF increase through to customers.
• July 1, 2023 – SFPUC raised its rates by $0.46/HCF. MPWD passed the $0.46/HCF increase through to customers.
• July 1, 2022 – SFPUC raised its rates by $0.65/HCF. MPWD passed the $0.65/HCF increase through to customers.
• 2021 – No Rate Increase
• 2020 – No Rate Increase

(Question added September 26, 2024)

If water rates are not periodically increased, it could impact the District’s ability to fund essential operations and infrastructure projects. Without adequate funding, the District could face challenges in maintaining the current level of service, and most of the planned capital projects that will improve our system’s reliability would be delayed indefinitely. (Question added September 26, 2024)

With the exception of the first year rate increase, rate increases may be less than identified in the 2024 Water Rate Study. The proposed water rates, if approved, are the maximum rates that MPWD can implement in the coming five years. However, each year the MPWD Board will evaluate budget conditions and may elect not to raise rates to the maximum approved. For example, after adopting the last 5-year rate study in 2015, the MPWD Board elected not to raise rates to the maximum allowed within the first 5 years, and has not raised rates since 2019, except for SFPUC pass-through costs. Several factors that could reduce the District’s revenue needs and corresponding rate increases include:

• Obtaining a lower interest rate on financing than the 5.5% assumed in the rate study,
• Capacity charge revenue generated from new commercial or multi-family housing development in the MPWD service area,
• Successfully obtaining alternative tax-based funding sources such as grants and local, state, or federal funds,
• Lower than anticipated inflation, and
• Lower than anticipated costs of materials.

The MPWD is committed to funding its necessary projects through a comprehensive funding strategy, and will continue to seek all opportunities to reduce the impact on customers. (Question added September 26, 2024)

The MPWD, like most public agencies that provide essential public services, is constrained in the way that it structures its water rates due to the substantive requirements of Proposition 218. Proposition 218 requires that water districts only collect rates and charges in an amount necessary to cover the cost to provide the service, and requires that customers only pay their proportional share of the total cost. This means it is not possible for a special district to charge a fee for use that is considered excessive. (Question added October 26, 2024)

As a public agency, all major policy and financial decisions are made in public meetings, which are accessible and available to the public. In addition, the District has a strong practice of transparency, well beyond the minimum requirements, and has received and maintains a District Transparency Certificate of Excellence from the California Special Districts Association.

The information used to develop the water rates can be found on our website. The 2024 Water Rate Study identifies the projected operational and capital expenditures assumed over the next 5 years, and is available via a link at the top of this page. Our updated Capital Improvement Program (CIP) identifies CIP projects completed in the last 10 years as well as all projects identified for the future, including costs, and is available via a link at the top of this page. Our annual budget, annual audits, and other financial information is available here. These documents are all reviewed and approved by the Board of Directors at public meetings. Agendas and minutes for these meetings area all posted here. Every month at its regular meeting, the Board receives updates on District expenditures and revenue and the District’s current financial position. The Board also reviews and approves all major District investments and expenditures. (Question added October 26, 2024)

The MPWD CIP is the backbone of the District’s efforts to ensure a reliable and sustainable water supply for the future. The CIP is a comprehensive plan that outlines the projects necessary to maintain and upgrade the District’s water infrastructure to enhance the quality of its services, increase system reliability, and meet the growing demands of the community. MPWD completed an update of its CIP in 2024, which is available here.

Through its implementation of its CIP since 2015, MPWD has completed 28 system improvement projects, including replacing and installing more than 31,000 feet of old pipe, replacing two key water storage tanks, installing a much-needed new pressure regulating valve at a turn-out from the SFPUC system, modernizing its SCADA system, and more. As detailed in the 2024 CIP update, 78 additional infrastructure projects are needed to modernize the District’s complex distribution system so that it can provide drinking water and firefighting water for generations to come. The District has identified a subset of these projects as highest priority for the District, taking into account many factors to ensure that we continue to serve the needs of our community. (Question updated October 26, 2024)

The MPWD updated its comprehensive Capital Improvement Program in 2024. The full CIP identifies 80 separate projects to maintain and improve our aging infrastructure and to make sure the District continues to provide the community with the level of service and quality that it has enjoyed for over 95 years. The Board of Directors met and carefully considered the needs of the District, the community, and the proposed rates at 10 public meetings, and through this process prioritized a subset of projects to be completed within the next 5 years. These projects were prioritized based on a number of factors including their benefits to the community and their potential impacts should the District face an emergency, especially a major earthquake. The Board of Directors weighed each of these considerations carefully and determined that the prioritized projects are necessary and in the best interest of the community. (Question added October 26, 2024)

MPWD’s planned capital projects fall into three main categories:

• Replacement and Material Upgrades to Aging Water Mains
• Storage Tank Projects to Improve Seismic Resiliency and Increase Longevity
• Modernization of Operations & Administrative Buildings

• REPLACEMENT AND MATERIAL UPGRADES TO AGING WATER MAINS The District’s distribution system includes more than 95 miles of water mains, which bring water from SFPUC turnouts to each home and business within MPWD's service area. Most of these water mains were installed from the 1930s through 1960s, as the community was built out. These pipes have aged and the needs of the community have advanced. Therefore, the MPWD’s 5-year CIP budget includes projects to proactively replace aging pipelines before they see end-of-life failures. By installing new pipelines with new materials and technology that extend their lifespans (like cathodic protection), the MPWD’s system will meet the needs of the community today and into the future.
  
  
• STORAGE TANK PROJECTS TO IMPROVE SEISMIC RESILIENCY AND INCREASE LONGEVITY The District maintains 11 water storage tanks at six sites. Thes tanks are used for maintaining system pressure on a day-to-day basis and in times of emergency, to ensure delivery of water to households and business, as well as for use by the fire department to respond to fires. The 5-year CIP budget includes plans to replace two tanks originally constructed in 1952 with tanks designed to withstand a major seismic event. The 5-year CIP budget also includes projects to recoat and extend the lifespan of tanks at three locations, proactively investing in their maintenance and avoiding more costly replacement or rebuild of such tanks in the future
  
  
• MODERNIZATION OF OPERATIONS & ADMINISTRATIVE BUILDINGS MPWD’s Operations Center at 3 Dairy Lane in Belmont was flooded during the New Year’s Eve storm at the end of 2022. This resulted in administration staff being relocated to a leased office space since the event. The District conducted a comprehensive assessment of its operations and administrative buildings and identified two facility modernization projects. These projects will mitigate identified risks, including climate change, sea level rise, and earthquakes, as well as the Bay Area cost of living impacts on workforce. Modernization projects are included in the MPWD’s 5-year CIP budget and are integral to making sure that the District can continue to serve the community with excellent reliability and customer service for years to come.

(Question added September 26, 2024)

The rate adjustments will help ensure that we have the resources needed to keep our facilities operating efficiently and continue delivering safe, high-quality water to all customers. Maintaining our high-water quality and service is always a top priority. (Question added September 26, 2024)

Yes! We encourage community participation. A public hearing was held on November 21, 2024 at 6:30 pm at 1075 Old County Road, Suite A, Belmont as part of the Proposition 218 process. This was an opportunity for customers to share their feedback and ask questions of the Board before the rates were finalized.

Additionally, all District water customers and property owners were provided an opportunity to protest these proposed rate changes by submitting a written protest by mail. (Question added September 26, 2024)

Ordinance No. 128 (Ordinance) was adopted by the MPWD Board at its September 26, 2024 Regular Board meeting. The full text of the Ordinance is available here. The Ordinance was adopted to provide customers who have an objection to the water rate change to submit those objections and for the District to provide them with a written response, prior to the Board taking action on the water rates. (Question added September 26, 2024)

The exhaustion procedure is separate from the Proposition 218 protest hearing and an objection will not be counted as a protest; the protest process is described in the Proposition 218 Hearing Notice, and the hearing was held during the November 21, 2024 Board meeting. The Ordinance was developed to give customers the opportunity to provide the District with a reason(s) that they object to the water rate change, and for the District to provide a response to such objections prior to the Board taking action on the rate change. This differs from the Proposition 218 protest process, where customers and property owners are not required to provide a specific reason for their protest, and the District is not required to provide a response. Customers were able to participate in either or both processes if they wished. (Question added September 26, 2024)

No. These processes are only for customers who wished to protest and/or object to the water rate change, and were provided as options if a customer wishes to protest and/or object. (Question added September 26, 2024)

The protest procedures for challenging a property-related fee or charge are described in Section 6 of Article XIIID of the California Constitution, Government Code Section 53755, and are further described in the FAQs on this page.

State law provides that written protests must be received by the District by the close of the Public Hearing. The protest must include a signature and legibly printed name of the record owner or customer of record who is submitting the protest. This information is to verify whether the person submitting the ballot is a property owner authorized to submit a protest. (Question added October 17, 2024)

MPWD, like most public agencies that provide essential public services, is constrained in offering low income rate assistance due to the substantive requirements of Proposition 218. Unlike PG&E or AT&T, MPWD is a public agency and cannot generate a profit. Proposition 218 requires that water districts only collect rates and charges in an amount necessary to cover the cost to provide the service, and requires that customers only pay their proportional share of the total cost. This means it is not possible for a special district to provide a financial subsidy to one group of ratepayers, without resulting in another group paying more than their fair share.

State and Federal programs for financial assistance have been available in the past, including the federally funded Low Income Household Water Assistance Program (LIHWAP), which was established by Congress in December 2020 and ended on March 31, 2024.

In the last legislative session, for example, a federal bill was introduced to make the LIHWAP permanent, and a state bill was introduced to create a universal water rate affordability program (Senate Bill 1255). While neither passed this year, you may wish to reach out to your elected officials to indicate your support for this type of legislation in the upcoming session. (Question added October 17, 2024)

MPWD receives a small amount of revenue from property taxes. In Fiscal Year 2022-2023 (FY 2023), it received $412,183 from property taxes, which represented just 2.5% of its revenue. The District also received a small amount of Educational Revenue Augmentation Fund (ERAF) funds, which are related to property taxes. In FY 2023, it received $93,962, or an additional 0.58% of its revenue from ERAF funds. The District does include the revenue from property taxes in its budget, and the 2024 Water Rate Study does take into account property tax revenue included projected growth in this revenue source. However, as it comprises such a small portion the District’s revenues, growth in property taxes does not address all of the District’s funding needs. (Question added December 6, 2024)

MPWD provides drinking water service to over 8,000 homes and businesses in its service area, but does not provide sewer service. The sewer collection systems in our service area are primarily owned and operated by the Cities of Belmont and San Carlos, and the wastewater collected is treated by Silicon Valley Clean Water (SVCW). Therefore, taxes and fees associated with sewer services are used by the cities and SVCW to operate their systems, and not MPWD’s drinking water system. (Question added December 6, 2024)

MPWD is transitioning from CivicPay to Xpress BillPay for electronic customer payments. This bill payment service change is being made to provide a better service to the customer and to reduce costs and staff time on bill processing. The change over to Xpress BillPay is expected to result in a net cost savings to the District and is entirely unrelated to the rate change process.