Tackling St. Helena's Middle-Class Affordability Crisis: Water & Wastewater Rate Stabilization

St. Helena’s shrinking middle class is at a tipping point. Year after year, the rising cost of living, compounded by surging water rates has forced many full-time residents to leave the town. Since 2019, our population has dropped by 8.25%, signaling a crisis we cannot ignore. As we look for solutions, we must start by addressing the increasing water rates, which disproportionately affect middle-income families and are driving people out of our community.

The Water Rate Conundrum and Proposition 218

In St. Helena, conserving water—a positive action—ironically has contributed to higher rates. With fewer water deliveries, the city’s fixed costs remain, resulting in higher rates to make up for the lost revenue. Unfortunately, our ability to address these rising rates is further limited by Proposition 218, which restricts how the city can increase or adjust water rates. This law requires that rates are tied to the cost of providing water service, limiting flexibility in how we respond to changing financial pressures.

While Proposition 218 ensures transparency and accountability, it creates a challenge when the city needs to adjust rates to cover operational costs without overburdening residents.

A Hidden Burden on Ratepayers: How City Staffing Costs are Driving Up Water Rates

One of the less visible but significant contributors to rising water rates in St. Helena is the way the city allocates administrative costs. A disproportionate percentage of city administrative staff time, including roles like the City Manager, Assistant City Manager, and Administrative Services Director, is being billed in part to the Water Enterprise rather than the general fund. In fact, over $550,000 of city administrative salaries are being funded by water and wastewater revenues.

This practice shifts the financial burden onto water ratepayers, increasing water rates to cover costs that, in many cases, are only partially related to water services. By placing these costs squarely on the Water Enterprise, the city is avoiding the challenges of managing the general fund, but at the cost of putting additional pressure on families already struggling with high utility rates. Redirecting a portion of these salaries back to the general fund, where they arguably belong, could provide immediate relief to residents by helping stabilize or lower water rates.

Potential Rate Reduction: A 17-17.65% Reduction in Water Rates

St. Helena is facing an urgent need to address its rising water rates while keeping the town affordable for middle-class families. To meet this challenge head-on, the city can implement a comprehensive, four-part solution that could reduce water rates by an estimated 17.5%. This multi-faceted approach would tackle the immediate financial pressures without sacrificing essential services or long-term sustainability. Here's how:

A Four-Part Solution for Immediate and Near-Term Relief

Shifting 80% of Administrative Salaries to the General Fund

One immediate move to provide water rate relief is to shift 80% of the administrative salaries currently being paid by the Water and Wastewater Enterprises to the city’s general fund. The proportion the city is currently allocating to the Water and Wastewater enterprises for these positions have been controversial with a strong case to be made that it violates proposition 218 (Article XIII D, Section 6) unless the city can provide evidence that the positions charged the Enterprise fund have been accurate--it's hard to imagine the city manager spends 50% of his time working these issues.  

These charges would shift to the general fund and would need to be paid for by reserves/cost reductions/or additional revenue.   

If we reallocate 80% of these costs, we will more accurately account for the actual time spent for these positions and it will save the Water and Wastewater Enterprises $440,222. This would provide substantial relief for water ratepayers, allowing us to avoid or reduce future rate increases.  

This would result in an immediate 12% rate reduction impact.

Utilizing a Performance-Based Grant Writer

A third critical piece of the solution is bringing in external funding through state and federal grants. These methods are something that Michelle Deasy is also very keen on & like me has first-hand experience. Water infrastructure grants are available at both the state and federal levels, particularly through programs like the Department of Water Resources (DWR) Integrated Regional Water Management (IRWM) Grant Program and the Federal Environmental Protection Agency. While the city has likely engaged traditional grant consultants at fixed fee or hourly rates, we could benefit by engaging a performance-based grant writer.

By hiring a performance-based grant writer, who is only compensated if they successfully secure grant funding, the city can seek out these opportunities without incurring upfront costs. The writer's compensation would come from the wastewater funds rather than the awarded grant (to comply with grantor rules), allowing us to maximize the grant’s impact on upgrading water infrastructure, funding conservation programs, and reducing operational costs—all without directly increasing water rates. While I cannot forecast additional revenue leveraging this method, I would say it's better to have 10% of something than 100% of nothing. The grant landscape is constantly changing, and often federal grants are left untapped at the local level even while grants at the state level are leveraged. We have nothing to lose and everything to gain--we might be surprised at the impact.

Housing Stipends to Retain City Staff and Stabilize Water Rates

In addition to the measures aimed at reducing water rates, St. Helena should consider another step to help stem the flow of middle-class families leaving town while at the same time supporting our great employees: providing housing stipends for city staff. Offering housing stipends between $2,000 and $4,000 per month (based on classification) will encourage more city employees to live within the community they serve, addressing multiple challenges at once. These stipends are exempt from CalPERS liabilities.

By incentivizing city staff to live in town, we create a ripple effect:

1. Retaining Middle-Class Families: City employees often fall within the middle-class income bracket. By providing housing support, we help them stay in St. Helena, contributing to the stability and diversity of the local population.

2. Increased Water Usage: When more families live in town full-time, water usage naturally increases. This increased demand helps stabilize water revenues, providing a cushion against the fluctuations caused by conservation efforts.

3. Strengthening Community Ties: City staff who live where they work are more likely to be engaged with the community and invested in its long-term success. By living in town, they’ll also contribute to the local economy, supporting businesses and schools, and reinforcing St. Helena’s sense of community.

   
   

While offering housing stipends may initially seem like an added expense, these would be paid for in lieu of additional scheduled raises and belt tightening measure within the city budget along with a balanced and equitable shared burden revenue package. It is an investment in keeping key members of the workforce in the community, thereby contributing to the long-term financial health of the city. This approach not only helps stabilize water rates but also helps preserve the middle-class families that are vital to maintaining the character and vibrancy of St. Helena.

By combining immediate water rate relief measures with strategic incentives like housing stipends, we can begin to reverse the trend of families leaving town and build a stronger, more resilient community.

Securing Revenue from the Noble House Hotel

In addition to salary shifts, the upcoming Noble House Hotel development is projected to use 40 acre-feet of water annually. Based on FY 2027 rates, the hotel would generate between $179,445 and $188,600 annually, depending on the meter size (4-inch or 6-inch). This significant contribution could further help offset costs and alleviate water rate increases.  This would represent a 5.5% rate reduction impact. For those not in support of Measure B this example can illustrate the impact to our rates if we do increase our water deliveries.

The Future Without Addressing our Middle-Class Working Family Affordability Crisis

If we fail to meaningfully address our Water and Wastewater rates the impact on our middle class will continue to deepen. Without a stable middle class in St. Helena:

1. Schools will suffer from declining enrollment forcing staffing adjustments.

2. Local businesses will struggle as families leave, reducing local spending.

3. City services will be strained, as fewer residents bear the burden of rising costs.

4. Increased tourism development may be required to fill financial gaps, further shifting the town’s character toward a tourism-centric economy, much like Yountville.

   
   

Long-Term Stability: Joining the Napa County Water District

While these steps provide immediate relief, the long-term solution to St. Helena’s water rate crisis lies in joining the proposed Napa County Water District. Regionalizing our water management would allow us to benefit from shared resources, reduced operational costs, and greater resilience in times of drought.

A Call to Action

St. Helena’s middle class is the backbone of our community. Addressing the affordability crisis means taking immediate steps to reduce water rates. By reallocating administrative costs, leveraging new revenue sources like the Noble House Hotel, aggressively pursuing grant funding through a performance-based model, and incentivizing our city staff to live here in St. Helena, we can provide near-term relief while pursuing long-term stability through regional water management.

The time to act is now. Without immediate and decisive action, the St. Helena we know—a thriving, diverse, and vibrant community—may be at risk. Let’s work together to secure St. Helena’s future for everyone, ensuring that our schools, businesses, and city government remain strong and supported by a thriving middle class.

 

 

Thank You

November 15, 2024, 6:00 – 9:00 PM|St. Helena

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