Rate hike alternative kept open

The valley's largest water utility is running out of places to cut costs and might need to raise its rates if the economy continues to tank, officials said Tuesday.

The warning came during a public workshop on the Las Vegas Valley Water District's proposed budget for the next fiscal year, which begins July 1.

No rate increase has been proposed, but water district General Manager Pat Mulroy said the possibility can't be ruled out.

And unlike last year's rate increase, which targeted mainly high-volume users in an effort to curb waste, this one could hit everyone.

"You can only cut so far," Mulroy said, adding that any increase would be intended to bring in money rather than encourage conservation.

"It will be to survive financially," said Dick Wimmer, deputy general manager for the water district.

Like many public entities, the district prepared itself for a revenue decline, but the severity of the financial downturn caught the utility by surprise. As Mulroy put it, "This is more than a slowdown; this is a crash landing."

Since 2000, the district's customer base has expanded by 53 percent, but total water use has remained essentially flat because of conservation and, more recently, the faltering economy and sharp rise in housing vacancies.

The water district saw applications for new service fall to 1,139 last year, down from a peak of 24,078 in 2005.

In the past four months alone, the district has had to refund $2.2 million in connection charges to developers who have canceled their construction plans.

Utility officials now expect to sell about $39 million less water this year than they projected when the current budget was drawn up.

"We're seeing a dramatic reduction in our revenue streams," said Finance Director Cary Casey.

As a result, the district has cut its current budget by $11.5 million. The proposed budget for the next fiscal year would reduce spending by an additional $11.7 million to $332.5 million.

The Clark County Commission, which serves as the water district's board of directors, will hold a public hearing on the tentative budget at 9:45 a.m. May 18.

Tom Collins and Chris Giunchigliani were the only commissioners to attend Tuesday's workshop.

Even with the cuts, the district could end up siphoning $8.1 million from its reserve fund during the next fiscal year. That would leave the district with about $85 million in reserve.

Without a healthy reserve fund, Casey said, the district might lose the strong credit rating that allows both the district and the Southern Nevada Water Authority to borrow money for major capital projects.

The Las Vegas Valley Water District is the largest member agency of the Southern Nevada Water Authority, which serves as the region's wholesale water supplier. Mulroy serves as general manager of both entities.

Other water district cost-cutting moves for the coming year include a four-day workweek for most employees, minimal travel, deferred vehicle replacement and the elimination of all cost-of-living raises.

Most, if not all, of the district's 1,504 full-time employees still will be eligible for performance-based merit raises and longevity increases during the upcoming fiscal year. Overall, though, the district expects to reduce its payroll costs by 2.5 percent, or about $3 million, from the current year.

About 75 vacant positions will be left unfilled. Roughly 157 paid interns, contract employees and temporary workers already have been, or soon will be, let go.

That part was hard, Mulroy said, but "it was the only way. Our mission is to save every permanent job that we can."

The reason is simple, she said: Bad economy or not, the district must keep water flowing to about 1.3 million valley residents, a task that involves the operation and upkeep of 4,600 miles of transmission lines, 51 pumping stations and 900 million gallons of storage.

The belt tightening also extends to the district-owned Springs Preserve, where spending will be cut by $2.5 million over the next fiscal year. Because the sour economy is expected to cause a 45 percent drop in ticket and retail sales, however, the preserve is still slated to cost the district almost $8.5 million.

That's up more than $160,000 from this year's subsidy of $8.3 million, but down from the $10.2 million the district shelled out for the $235 million attraction during its first year of operation.

Mulroy said she is hopeful the water district will be able to get through the upcoming fiscal year without having to discuss a possible rate hike.

"We're going to monitor this very closely to see what the economy does," she said. "Hopefully we'll see a rebound in the next year."

Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350.