West Basin advances $112.6m budget with 3% rate hike and debt-free capital plan

West Basin advances $112.6m budget with 3% rate hike and debt-free capital planThe district is proposing a $20.6 million capital improvement program funded through pay-as-you-go revenues and a modest reserve drawdown, avoiding new borrowing as it navigates declining standby revenues.

The proposed FY 2026-27 budget includes 34 capital projects totaling $20.6 million, focusing on operational stability and ongoing projects like solids handling.

The Reliability Service Charge will increase by 3% ($10 per acre-foot) to $331/AF, while recycled water irrigation rates will remain flat.

The district plans a $2.6 million drawdown from cash reserves to fully fund the capital program without issuing new debt and to maintain a 1.83 debt coverage ratio.

Overall wholesale rates will drop in January 2027 due to a renegotiated business model with the Metropolitan Water District that shifts treated water surcharge costs.

West Basin Municipal Water District’s Finance & Administration Committee has advanced its proposed $112.6 million fiscal year 2026-27 budget to the full board for final approval. The budget focuses on lean capital spending and avoids new debt issuance as the district prepares for future revenue shifts. To support the budget, staff proposed a 3% increase to the Reliability Service Charge (RSC), raising it by $10 to $331 per acre-foot. Recycled water irrigation rates will be held flat at $2,027 per acre-foot for inside service areas and $2,127 for outside areas to incentivize recycled water use. The $20.6 million Capital Improvement Program (CIP) includes 34 projects. Chief Financial Officer Wendy O'Kelley noted the capital plan was deliberately streamlined to prioritize operational stability and ongoing efforts, such as solids handling improvements. All capital spending will be covered by existing pay-as-you-go revenues and a planned $2.6 million drawdown from cash reserves. O'Kelley emphasized that this funding strategy avoids new borrowing and maintains a debt coverage ratio of 1.83, comfortably exceeding the 1.5 threshold required by creditors. The district is also eliminating a $100,000 budget line item for commercial paper program fees, as no new debt is proposed. General Manager EJ Caldwell highlighted a significant billing shift regarding imported water costs. Despite a 6.2% overall rate increase from the Metropolitan Water District (MWD), West Basin’s ratepayers will see their total per-acre-foot cost drop from $2,099 in the first half of the fiscal year to $2,082 beginning January 1, 2027. Caldwell attributed this to a renegotiated MWD business model that shifts treated water surcharge costs to agencies that benefit from the system but do not receive the treated water. The district is actively preparing for long-term revenue changes, specifically the gradual phase-out of standby fixed charges. O'Kelley noted that while standby revenue and debt obligations will both decrease by 2031, the net difference will result in a $4.2 million revenue reduction, making current cost-control efforts critical. The committee agreed the budget was ready for a final vote at the next full board meeting without the need for additional workshops.