Fully, one-fifth of a city ratepayer's water bill goes to the water district.

We pay too much.

We pay too much because your costs are high. We pay too much because some costs that should be paid by others are assigned to municipal water systems. And, we pay too much because the city does not receive a benefit equivalent to our payments to the district.

Don't get us wrong. Morgan Hill does benefit from many of the district's groundwater programs. We just pay more than the value of those benefits. By your staff's own calculations, municipal water systems pay $1.61 for every $1 of benefit received. For Morgan Hill that is an annual surtax of $800,000.

Our message has been consistent over the past 10 years, but there has been little change in the district's practices or approach to the pump tax. There are at least three good reasons why your response this year should be different:

First: The imbalance between what we pay and what we receive only adds to the erosion of public confidence that we know you are working hard to restore.

Second: Holding pump tax rates steady will provide a powerful incentive for staff to reduce administrative overhead, to reduce the costs of collecting the pump tax itself, and to focus on high value added activities that benefit the groundwater basin.

Third: The decade long legal uncertainty about the applicability of Proposition 218 to water rates has now been resolved. The district is now required to comply with both the procedural and substantive requirements established by the voters of California when they amended the Constitution in 1996.

As the city manager of a city with a retail water business I know the challenge of raising water rates. Our cost structure, our practices, and our water supply strategy are constantly under scrutiny. I know that rate proposals must be carefully justified. And I know that Proposition 218's restrictions must be adhered to. We can't raise water rates to pay for new police officers, and we can't raise rates to pay for new parks or open space. Water rates must be set in proportion to the benefits.

So, for all of the legal and equity reasons I have outlined, we believe Morgan Hill pays too much. We certainly hope you will agree, but I urge you to confront the serious, unintended consequences that flow from a fundamentally flawed rate structure.

When rates are skewed to so great an extent, you and your staff respond to ratepayer objections at the margins: trying to reduce the amount of increase … even when the benefit of expanding groundwater protection activities would be more than worth it. In addition, when most ratepayers are already paying 61% more than can be justified, the pressure is to cut back on any new programs, no matter how valuable. As examples, this year's recommendations cut back staff's efforts to monitor the perchlorate contamination case as well as defer capital projects that would increase the amount of less costly water that can be recharged.

It is the rate structure that is flawed.

Morgan Hill asks you to decline to increase the pump tax rates and to launch a thorough review of what is fair. If an outside review is needed, we would support it. If changes are needed in the District Act to achieve fairness, we would join you in advocating them.

We recently received a "Dear Well-Owner" letter advising us of this hearing. Although the letter did not advise us of our right to protest under Proposition 218, we do indeed protest the proposed rate increase.