Report 2014-132 Recommendation 5 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 #5 To: Hesperia Water District

To demonstrate to water customers how they are working to keep rates reasonable, the four water utilities should document their cost-saving efforts and quantify, to the extent possible, any specific cost savings achieved from their respective efforts.

1-Year Agency Response

Yes there are written examples of cost saving measures, as well as verbal dissemination of this info. Attached is transmittal letter from the City's Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended 6/30/15(the full report is available on the City's website at cityofhesperia.us by clicking on "Your Government", "Financial Documents" , and "2014-15 CAFR"). The CAFR reports info for the City as a whole, including its component districts(i.e. Hesperia Water District). I've attached the transmittal letter for your review and highlighted areas within the letter that discuss cost saving measures affecting the Water District directly.Included is a link to a video of the City's 2015 State of the City Address (http://www.cityofhesperia.us/1156/2015-state-of-the-city-address)wherein the City/District's efforts toward water conservation are discussed, w/additl efforts for long-term solutions to water concerns, such as the construction of a recycled water reclamation facility located on the west side of Hesperia which will recycle 1 mil. gallons of water per day. Highlighted on the City's website is information highlighting Energy Efficiency and Emergency Repairs Rehabilitation Programs available to homeowners in Hesperia for improvements that increase energy & water efficiency of their home. These grants utilize funds provided by the U.S. Department of Housing and Urban Development's (HUD) Community Block Grant Program (CDBG) Program which assists income eligible homeowners w/grants for water and energy efficiency improvements. The info. provided above highlights multiple efforts made by the City/District which have helped to provide some of the lowest water rates in the local area w/additional efforts being made for future conservation of water resources as well as the administration of programs to assist homeowners in the City w/grants to make water efficiency improvements to their homes which assist in lowering their bimonthly water bills.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

The Audit also suggest that water utilities document cost-saving efforts and quantify, to the extent possible, any specific cost savings achieved from their respective efforts. Hesperia Water District has been able to operate the District without a rate increase since 2011, all the while maintaining the comparatively low water rates mentioned in the audit report. As indicated in the District's response to the draft Audit report, Hesperia Water District articulated several cost savings measures during the Audit period, including a reduction in personnel costs due to salary and benefit reductions and demonstrating that electrical costs have not increased for several years by pumping during off-peak periods. While a specific dollar value of these savings was not quantified, the impact of the savings is clear; Hesperia water rates have not increased despite ongoing increases in electrical rates as well as other increases in the cost of goods and services utilized by the District. Some benefit can be derived from promoting District cost savings measures to its customers. Therefore, wherever reasonably possible, information about District cost savings measures will be disseminated. The FY 2015-16 Budget document includes information within the Water District accomplishments section promoting staff efforts which have resulted in the notification of award of a $2 million Proposition 84 Drought Relief State Grant to be utilized for the construction of a recycled water distribution system. The District will continue to look for opportunities to inform its customers about additional savings measures as circumstances allow.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

While Hesperia has identified a cost saving measure and quantified its benefit, we hope that Hesperia will continue to document its cost saving efforts and provide additional examples in its one year response to demonstrate that it has fully implemented the recommendation.

60-Day Agency Response

The Audit also suggest that water utilities document cost-saving efforts and quantify, to the extent possible, any specific cost savings achieved from their respective efforts. Hesperia Water District has been able to operate the District without a rate increase since 2011, all the while maintaining the comparatively low water rates mentioned earlier. As indicated in the District's response to the draft Audit report, Hesperia Water District articulated several cost savings measures during the Audit period, including a reduction in personnel costs due to salary and benefit reductions and demonstrating that electrical costs have not increased for several years by pumping during off-peak periods. While a specific dollar value of these savings was not quantified, the impact of the savings is clear; Hesperia water rates have not increased despite ongoing increases in electrical rates as well as other increases in the cost of goods and services utilized by the District. Some benefit can be derived from promoting District cost savings measures to its customers. Therefore, wherever reasonably possible, information about District cost savings measures will be disseminated. The draft FY 2015-16 Budget document includes information within the Water District accomplishments section promoting staff efforts which have resulted in the notification of award of a $2 million Proposition 84 Drought Relief State Grant to be utilized for the construction of a recycled water distribution system. The District will continue to look for opportunities to inform its customers about additional savings measures as circumstances allow.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

While Hesperia has identified a cost saving measure and quantified its benefit, we hope that Hesperia will continue to document its cost saving efforts and provide additional examples in its six-month response to demonstrate that it has fully implemented the recommendation.

All Recommendations in 2014-132

Agency responses received are posted verbatim.