A daily compilation of significant news articles and comment
October 17, 2008
2. Supply –
Economy could force water bills to increase
Higher interest rates on loans hurts district
By Zeke Barlow, staff writer
Keeping
But with Metropolitan Water District of Southern California's short-term loan interest rates shooting through the roof, and the shaky economy's effect on municipal bonds and investments unknown, another hurdle has risen.
The district that supplies most of
"If this whole situation blows up, all bets are off," Brian Thomas, Metropolitan's chief financial officer told the Ventura County Association of Water Agencies on Thursday at its monthly meeting.
The challenge Metropolitan and other public agencies face is how their debt will be managed in the short- and long-term, and how much access they will have to credit.
"If it were to stay as it were today, liquidity would really be tight," Thomas said.
He said water rates are expected to rise, but that's because of the increasing challenges of delivery, energy and lack of water coming from
Thomas said it would take a long-term downturn before ratepayers would see an increase because of the economy.
But that doesn't mean Metropolitan isn't taking a hard look at its books. About half the agency's $4 billion in debt is in short-term variable interest rate loans, Thomas said. Some of those weekly rates have shot up from the reliable 2 percent range to 9 percent in recent weeks.
Because Metropolitan has so much debt, when interest rates increase 3 percentage points, it can cost the agency $40 million, Thomas said.
He said local water providers are following the agency in cutting back on capital improvement projects.
"This adds to the management difficulties because the only response we have for our lean district is to cut capital improvements," said Don Kendall, general manager of Calleguas Municipal Water District, which supplies water to most of eastern
He also said rates will likely go up because of problems on the Sacramento River Delta. But if the credit market isn't fixed for a long time, rates could go up more.
"Down the road, if these challenges are not worked out and the credit markets don't ease, that could happen," said Jeff Borenstein, treasurer at Calleguas.#
http://www.venturacountystar.com/news/2008/oct/17/economy-could-force-water-bills-to-increase/
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