Report 2014-132 Recommendation 1 Responses

Report 2014-132: Apple Valley Area Water Rates: Differences in Costs Affect Water Utilities' Rates, and One Utility May Have Spent Millions of Ratepayer Funds Inappropriately (Release Date: April 2015)

Recommendation #1 To: Hesperia Water District

To assist low-income water customers, Hesperia should work with its governing body to consider the feasibility of using revenues from sources other than water rates to implement a rate assistance program.

Annual Follow-Up Agency Response From October 2019

As stated in the Hesperia Water District's previous responses, the Audit recognizes that state law prohibits public utilities such as the District from using rate revenues to offer rate assistance programs. Presumably the Auditor is suggesting that the City of Hesperia - a separate legal entity - donate taxpayer funds to subsidize a rate assistance program. Even if this were allowed by law, neither the District nor the State have the authority to commit City funds to such a program. The City is obligated to provide a broad range of services to its residents with limited sources of revenue. Such services include public safety, which in Fiscal Year 2019-20 consumes 53% of the City's General Fund Budget. City staff continue to work diligently to avoid a General Fund shortfall in next year's budget. The addition of a rate assistance program is not feasible.

Instead, we believe the best way to maintain the lowest water rates possible for our Water District customers is through efficient operations, which result in a lower cost of water for every ratepayer. The Audit shows that Hesperia's rates are among the lowest in the area and are, in fact, substantially lower than the "rate assisted" rates of water utilities in the Audit that offer a low income assistance program with Hesperia's rates being between 36% and 83% lower than the rates offered by Liberty Utilities (formerly Apple Valley Ranchos) under their rate assistance program. The Audit highlights that all Hesperia Water District Customers have very affordable rates for their water.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

As stated in previous assessments, although we understand that the City of Hesperia must make tough choices with how to spend its general fund monies, we encourage it to continue to seek to ensure that its citizens with limited resources have access to vital water services.

Annual Follow-Up Agency Response From October 2017

As stated in the Hesperia Water District's previous responses, the Audit recognizes that state law prohibits public utilities such as the District from using rate revenues to offer rate assistance programs. Presumably the Auditor is suggesting that the City of Hesperia -- a separate legal entity - donate taxpayer funds to subsidize a rate assistance program. Even if this were allowed by law, neither the District nor the State have the authority to commit City funds to such a program. The City is obligated to provide a broad range of services to its residents with limited sources of revenue. Such services include public safety, which in Fiscal Year 2017-18 consumed 52% of the City's General Fund Budget. City staff are currently working diligently to avoid a General Fund shortfall in next year's budget. The addition of a rate assistance program is not feasible.

Instead, we believe the best way to maintain the lowest water rates possible for our Water District customers is through efficient operations, which result in a lower cost of water for every ratepayer. The Audit shows that Hesperia's rates are among the lowest in the area and are, in fact, substantially lower than the "rate assisted" rates of water utilities in the Audit that offer a low income assistance program. Hesperia's rates are between 36% and 83% lower than the rates offered by Liberty Utilities under their rate assistance program. The Audit highlights that all Hesperia Water District Customers have very affordable rates for their water.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

Our recommendation that Hesperia work with its governing body to consider the feasibility of using revenues from sources other than water rates to implement a ratepayer assistance program is not in violation of state law. As we state on page 25, public utilities are not prohibited from using other revenues, such as money from a city's general fund, to offer rate assistance programs. We do not see how Hesperia considers spending its tax payer revenue to benefit its residents to be illegal.

Although we understand that the City of Hesperia must make tough choices with how to spend its general fund monies, we encourage it to continue to seek to ensure that its citizens with limited resources have access to vital water services.

Annual Follow-Up Agency Response From October 2016

As stated in the Hesperia Water Districts previous responses, the Audit recognizes that state law prohibits public utilities such as the District from using rate revenues 2 offer rate assistance programs. Presumably the Auditor is suggesting that the City of Hesperia - a separate legal entity - donate taxpayer funds to subsidize a rate assistance program. Even if this were allowed by law, neither the District nor the State have the authority to commit City funds to such a program. City is obligated to provide a broad range of services to its residents with limited sources of revenue. Such services include public safety, which in FY 2015-16 consumed 54% of the Citys General Fund (GF) Budget. City staff are currently working diligently to avoid a GF shortfall in next years budget. The addition of a rate assistance program is not feasible. Instead, we believe the best way to maintain the lowest water rates possible for our Water District customers is through efficient operations, which result in a lower cost of water for every ratepayer. The Audit shows that Hesperia's rates are among the lowest in the area and are, in fact, substantially lower than the "rate assisted" rates of water utilities in the Audit that offer a low income assistance program. Hesperia's rates are between 36% and 83% lower than the rates offered by Liberty Utilities under their rate assistance program. The Audit highlights that all Hesperia Water District Customers have very affordable rates for their water.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

Hesperia did not submit a 1-year response.

Estimated Completion Date:
Response Date: July 2016

California State Auditor's Assessment of 1-Year Status: Will Not Implement

We contacted Hesperia and it stated that it will not be changing its statement from the 6-month response. Please see its 6-month response and our assessment of that response below.

6-Month Agency Response

Instead, we believe the best way to provide assistance is to maintain the lowest water rates possible for our Water District customers through efficient operations, which results in a lower cost of water for every rate payer. An outcome of the Audit shows that Hesperia's rates are among the lowest in the area and are, in fact, substantially lower than the "rate assisted" rates of water utilities in the Audit that offer a low income assistance program. Hesperia's rates are between 36% and 83% lower than the rates offered by AVRWC under their rate assistance program. The Audit highlights that all Hesperia Water District Customers have very affordable rates for their water.

Response Date: October 2015

California State Auditor's Assessment of 6-Month Status: Will Not Implement

60-Day Agency Response

The Audit identifies that state law prohibits public utilities from using rate revenues to offer rate assistance programs. Presumably the Audit is suggesting that the City of Hesperia, a separate legal entity, utilize its limited resources as a donation of funds to subsidize program, as it is outside of the statutory authority of the Hesperia Water District to commit the funds of another entity. With 54% of the City's Fiscal Year 2015-16 General Fund Budget dedicated to Public Safety (which is an increase $654,301 over the prior year just to maintain the existing Police workforce), the addition of such a program, would negatively impact the City's ability to provide the broad range of services the City is currently obligated to provide to its citizens. Instead, we believe the best way to provide assistance is to maintain the lowest water rates possible for our Water District customers through efficient operations, which results in a lower cost of water for every rate payer. An outcome of the Audit shows that Hesperia's rates are among the lowest in the area and are, in fact, substantially lower than the "rate assisted" rates of water utilities in the Audit that offer a low income assistance program. Hesperia's rates are between 36% and 83% lower than the rates offered by AVRWC under their rate assistance program. The Audit highlights that all Hesperia Water District Customers have very affordable rates for their water.

Response Date: July 2015

California State Auditor's Assessment of 60-Day Status: Will Not Implement

All Recommendations in 2014-132

Agency responses received are posted verbatim.