CARLSBAD — Despite rising water rates, the city of Carlsbad has opted against prepaying fixed charges to the county’s wholesale water supplier in exchange for discounted rates in 2025.
In late May, the San Diego County Water Authority asked its 23 member agencies, including the Carlsbad Municipal Water District, to consider a prepayment option.
On June 27, the San Diego County Water Authority board approved a 4% increase in wholesale water rights. While that number is far less than the 15% to 18% increase that was previously projected, the water authority plans to consider additional charges to support its maintenance and operations and financial stability later this month during a public hearing scheduled for July 25.
According to the county water authority, the 4% increase is designed to cover passthrough costs from the Metropolitan Water District of Southern California, which started accruing this month. At the same time, demand has decreased due to water reuse projects, conservation and the recent rains, putting the agency in a financially tough position.
To ease the strain, the county water authority approved a pilot program that allows retail water districts like Carlsbad Municipal Water District and others to trim an estimated 1.5% from next year’s bill by prepaying the water authority their fixed costs.
According to city staff, the prepayment option could also help the water authority potentially reduce the cost of managing its debt, provide cash flow for negotiating the sale of surplus water and increase its cash on hand for investing in its infrastructure and maintenance needs.
While the prepayment option would benefit the water authority financially, city staff explained to the council on June 25 — two days before the water authority’s rate increase decision — that the choice didn’t make much of a difference to the city.
“It is likely that the prepayment would provide a small, estimated savings,” said Shoshana Aguilar, water distribution operator for the city. “There are no considerable savings or costs over CMWD’s estimated investment income.”
However, Aguilar noted that the water authority’s overall fiscal health would directly impact Carlsbad Municipal Water District and other member agencies.
The Carlsbad Municipal Water District accounts for 4% of the county water authority’s total water demand. Water purchases from the county water authority account for 75% of the city’s potable water budget.
Other member agencies are expected to soon decide on prepayment options. According to Aguilar, Olivenhain Municipal Water District has already refused the option.
In the end, the City Council voted 4-1 to not take action on moving forward with prepaying the water authority.
Mayor Keith Blackburn said he could not support the prepayment option.
“I think we do a fine job with our own money,” Blackburn said. “I don’t think we need to give it to the water authority to invest on our behalf.”
Mayor Pro Tem Priya Bhat-Patel also wouldn’t support the prepayment option.
“I’m a little concerned with prepaying just because I don’t know what the calculated risks associated with it are,” Bhat-Patel said.
Councilmember Teresa Acosta, who represents the city on the county water board, was the only council member who supported the prepayment option.
“We’ve been talking about this at the water authority for some time,” Acosta said. “I do think that having the flexibility to prepay will be helpful to reducing the overall rate increases.”
