Marin Municipal Water District defends plan for huge rate hike

The Marin Municipal Water District is poised to adopt one of its largest rate hikes in decades on Tuesday — a move that will increase water costs for customers by about 20% — but staff costs are not the driver, utility officials said.

Agency staff and governing board members said one of the primary reasons behind the increase is to create new water supplies to avoid what occurred in 2021, when the agency faced the possibility of depleting its reservoirs amid a historic drought.

“Here in Marin, we’re faced with a lot of catch-up because there has been underinvestment in water supply for decades,” said Ranjiv Khush, vice president of the district board. “We are paying the consequences for that.”

A common point of debate among ratepayers is how much of their water bills are going to staff wages, pensions and other benefits.

Staffing costs account for about 40% of the district’s overall budget, but only comprise 4% of the proposed rate hike set to go before the board on Tuesday, said Bret Uppendahl, the district finance director. In 2022-2023, the district operated on a $116.1 million budget, which includes an operating budget of $92.2 million and a capital budget of $23.9 million.

If approved, the rate hike would take effect July 1.

The majority of the millions of dollars in new annual rate revenue would be used to fund new water supply projects, address a backlog of repairs to its existing water delivery system and rebuild emergency reserves that were significantly depleted during the drought, he said.

“I think those are really critical components for the long-term water security here at the district, as well as our financial stability,” Uppendahl said.

Currently, the district has a budget for 243 full-time employees, which is 20 fewer than it had in 2013, according to Uppendahl. Only about 205 positions are filled. Uppendahl said the rate increases will allow the district to fill those positions to begin work on its backlog of maintenance.

The district plans to add two new positions: a watershed ranger trainee position and a training specialist to oversee staff certifications. The agency plans to add two more positions in the 2024-2025 budget that would be responsible for turning the many valves in the water supply system to prevent them from freezing and corroding.

“I think the ambitions in terms of new recruitment are still pretty tempered or moderate compared to where we used to be with staffing,” Khush said.

The district pays an average salary of about $118,152 and a median salary of about $112,560, according to Uppendahl. Salary negotiations are ongoing between the district and its employee unions for a new contract beginning July 1.

Larry Minikes, board secretary of the Marin Conservation League and former member of the water district’s citizen oversight committee, supports the rate increase. He said complaints about salaries in relation to rate hikes have been happening for decades.

“In all areas, including the water business, you have to pay competitive salaries. When you pay below, what occurs is you become a training ground,” Minikes said. “We are simply paying at a competitive rate and for good reason. For running a water district, institutional knowledge is critical and maintaining that institutional knowledge is critical.”

Even with the wages, about 75% of the district’s staff lives outside of Marin County, Khush said. Cutting staff or keeping salaries stagnant would only lead to higher turnover and prompt employees to look at other water suppliers in the Bay Area, he said.

“If 75% of your staff don’t live in the county, they are more likely to go to jobs more closer to where they live,” Khush said.

Similar to other public agencies, the water district also faces significant pension expenses.

Bob Bunnell, a Novato resident and founding member of the Citizens for Sustainable Pension Plans, said two factors play into pension costs. One is the normal cost of benefits that an agency must cover each year, and the other is the unfunded liability, which is prior benefits that the California Public Employees’ Retirement System, known as CalPERS, did not have enough assets to cover.

“So many of these public plans just promised way more benefits than the contributions and investment returns have kept up, so that’s why they have these huge unfunded liabilities,” Bunnell said.

The average pension benefit for a retired Marin Municipal Water District employee is about $42,121, which is up from $38,102 in 2017, Uppendahl said.

The Marin Municipal Water District’s share of unfunded liabilities was at $85.8 million as of July 2022, a $22 million reduction from the prior year, Uppendahl said. The decrease was largely driven by CalPERS’ improved investment earnings in 2021. The district is required to pay about $8.6 million annually toward its unfunded pension liability.

Both employers and employees are required to make contributions to the pension system. For the district, its normal yearly pension benefit payments make up about 12% of its payroll expenses, while unfunded liabilities from previous years make up another 32% of its payroll expenses, Bunnell said.

Combined, about 44% of the district’s payroll expenses are for pensions, with ratepayers as the funding source, he said.

“That’s incredibly high,” Bunnell said. “I would say it’s borderline abusive to taxpayers.”

With poorer stock market returns in 2022, the unfunded liability is likely to increase this year, Bunnell said.

Said Khush: “I think with legacy employees we’re very limited in what we can do with their pension benefits. There is always an interest now with new employment MOUs to try to reduce those pension burdens. I hope we’ll make progress with that with this new collective bargaining agreement.”

Water district board members also receive compensation and health care benefits through the district. For each board or committee meeting they attend, board members receive $200 and receive compensation for up to 10 meetings per month, Uppendahl said.

Board members can also elect to receive the same health care coverage as other district staff. The district pays premiums of $1,035 or $2,070 per month based on the number of dependents under the plan. Board members Larry Russell and Monty Schmitt receive health care coverage.

A compensation report for the 2021-2022 fiscal year showed board member benefits ranged from about $22,000 at the lowest paid to Schmitt to about $50,000 paid to Russell. These benefit totals also include attendance to other advisory committees, councils and forums as well as to conferences and training sessions.

The meeting is set for at 6:30 p.m. at 220 Nellen Ave. in Corte Madera. Teleconference access is available by dialing 1-669-444-9171 and entering Zoom ID 881 3485 2296.

More information is at: marinwater.org/2023RateSetting.