As Arroyo Grande increases its water rates, residents and officials try to escape the costly drought cycle 

Amid extreme drought conditions on the Central Coast, water rates in Arroyo Grande are about to shoot up.

Being more mindful about daily water use seems like the obvious solution to save both money and parched land—but not according to the city's new water and wastewater rate study.

"We're stuck in the cycle of the less water you use, the more your rates need to go up to account for the less usage. As people conserve more, it doesn't cost us less to run our systems as a general rule. The only additional cost then is the actual water itself," Arroyo Grande City Manager Whitney McDonald said at the March 8 City Council meeting. "I understand it can be hard because we're asking people to cut back and they have to pay more for less water that they're using. We're all in that together, we're trying to make sure we can continue to provide service. That's what our goal is here."

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• File Screenshot From Arroyo Grande Staff Report
• COMPARITIVELY CHEAP Even with Arroyo Grande's new water rate increase, bimonthly bills for the average single-family home would still be some of the lowest in SLO County, second to Grover Beach.

McDonald explained to New Times that water costs in Arroyo Grande don't tend to fluctuate wildly, depending on the amount used. However, the city still has to maintain its water system. As customers cut back on their water usage, Arroyo Grande ends up with less revenue to keep operations running smoothly—and increasing rates is the solution that gets the city back in the black.

"It's just a cycle that every organization that goes through Prop. 218 struggles with," McDonald said.

The Arroyo Grande City Council held a Proposition 218 hearing on those proposed increases on March 8, where residents could send in their written opinions as part of the rate protest process. If the majority of the city's water customers didn't protest the rate increase, Arroyo Grande could adopt the new water and wastewater rates. The city needed 4,444 protests against the proposed billing structure to reject it, but only received 15 by the end of the meeting. Starting on April 19, customer bills—arriving every other month—will reflect the hike.

"I think in a number of ways, it's a good system because it's transparent and open. It's effective and it ensures that we keep moving forward in a way that provides service at a low cost while also providing us a mechanism to make investments in our system and keep moving forward," McDonald said.

But at the hearing, some of the dissenters complained about how expensive the rates were going to be for them. Water will cost them 6.4 percent more this spring, and the price will continue to increase by the same percentage each year through 2026. Wastewater rates are set to increase by 8.3 percent over the same time period.

This means that customers would pay an average of $8.51 more overall each billing period. Currently, the average single-family unit that uses 1,900 cubic-feet of water pays $131.22. By fiscal year 2025-26, they would have to pay $179.07 for the same quantity. Likewise, 1,900 cubic-feet of wastewater presently sets back customers by $68.49, and by fiscal year 2024-25, it would cost $77.

City staff tabulated these rates accounting for Arroyo Grande's participation in the Central Coast Blue recycled water project, where it will pay for 25 percent of the $55 million cost.

Arroyo Grande residents Dennis and Kelly Royer questioned the Proposition 218 process at the hearing. The city has to notify customers about the hearing 45 days in advance, but the Royers claimed they received their slip only three weeks prior to the meeting. The whole process, they said, made them feel very uncomfortable.

"Probably the most democratic way of soliciting true input from the community is not this letter of opposition that requires all this testament statement that you live there," Kelly said at the meeting. "You say you need a quorum of 51 percent to overturn this effort to increase the rates. As a resident, we'll never know how many people actually submitted letters opposing this rate increase. We have no way of knowing that, so it doesn't feel very fair."

Others like Ken Leonard, who has been living in Arroyo Grande for 24 years, said his large family of eight would be unfairly impacted by the new rates even though they are already conserving water.

"I turned off my irrigation seven years ago. We're very careful with how we use water, that's how I was raised. Right now, we run about 20 units per bill that puts us mostly in tier 1 under the current system," Leonard said. "In the new scheme, as I understand it, half of our water use is in tier 2, and we're doing the absolute minimum that we can do in the house: full laundry loads, no leaking fixtures anywhere, there's nothing else we can do to cut our water use. Yet, we're being penalized as though we're being careless with our water use."

Arroyo Grande officials informed the public that the rate increases are overdue because water rates were last set for fiscal years 2014-15 through 2018-19, and wastewater rates have been frozen since 2009. As part of the latest rate study, the city even planned to add a stormwater fee but received pushback from a watchdog organization.

In December 2019, the Howard Jarvis Association challenged Arroyo Grande for trying to implement stormwater fees, which it said was legally noncompliant. Later, when COVID-19 struck, the city was forced to pause an updated rate proposal. It used American Rescue Plan Act funds to cover operational costs during that time. But now those reserves have shrunk, and McDonald said that the new charges are also supposed to build back reserve targets.

"As part of that vicious cycle, in addition to you using less water and paying more for the units you use, the longer we wait, the higher the increase," she said.

Even with escalating costs, the city's average bimonthly water bill for a single-family unit would be one of the lowest in San Luis Obispo County, according to city data, second only to Grover Beach.

McDonald said Arroyo Grande achieved this with cautious investments, highly dedicated staff, and being proactively involved with the Lopez Reservoir Project.

"We're able to provide a highly cost efficient service to our customers. If you look at rates across the county, and not even comparing our rates to private providers like Golden State Water Company that's regulated by [the California] Public Utilities Commission, we're able to provide people water at a really low competitive rates and our rates study shows that," she said. Δ

Reach Staff Writer Bulbul Rajagopal at [email protected].