The district collects “replenishment assessment charges” from well owners across the valley to cover costs associated with importing water to replenish the aquifer.

Those rates vary in different parts of the valley. In the West Whitewater area, which stretches from north of Palm Springs to Bermuda Dunes, well owners as of July 1 will pay the recently increased rate of $128.80 per acre-foot. In the adjacent Mission Creek sub-basin near Desert Hot Springs, the rate is $123.20 per acre-foot. In the East Whitewater area – which stretches from Bermuda Dunes to the Salton Sea – groundwater pumpers pay $66 per acre-foot.

“The rates are based on the cost of service in each area,” Powell said. Water that flows from the Colorado River to the East Valley via the Coachella branch of the All-American Canal costs much less, he pointed out, than water the district obtains in the West Valley by trading its State Water Project allocation for an equivalent amount from the Colorado River Aqueduct.

“The west rate’s higher because the cost of water’s higher – by 10 times,” Powell said.

At one point last year, the district considered making the replenishment rates the same in all of those areas. A presentation from a CVWD study session on March 17, 2015, recommended increasing the East Whitewater rates to $116 per acre-foot starting in 2017, matching the other two areas. The presentation said the East Whitewater Replenishment Fund “has never fully recovered its costs due to its rate structure.”

But the board rejected that proposal and instead decided to stick with the lower rate of $66 per acre-foot for East Valley well owners following a study by Hawksley Consulting, which concluded that those rates “reflect the cost of providing the associated service.”

Roberts also objects to the district’s use of a portion of property tax revenues for the East Whitewater Replenishment Fund, and argues that money should be used for purchasing water supplies from the State Water Project, not for groundwater replenishment in the East Valley.

Increasing revenues from the district’s State Water Project tax have accounted for a large share of the cash flow into the fund. In the 2013 budget year, the CVWD board approved an increase in the State Water Project tax from 8 cents to 10 cents per $100 of assessed property value. The district has also decided to allocate more of the tax – two cents instead of the previous one cent – to the fund.

A rate study report prepared for CVWD by Hawksley Consulting projected the tax to generate more than $100 million for the fund between 2016 and 2020.

A 2012 legal opinion by the board’s attorney backed the practice of using the State Water Project tax revenues for groundwater replenishment in the East Valley. In March 2015, though, as the board was considering consolidating the rates, a CVWD presentation said a legal opinion from the district’s new attorneys concluded that the “SWP tax can only be used to pay SWP invoices.”

Roberts said that indicates the tax revenues should be used for expenses directly related to buying water from the State Water Project, and not for projects that involve the use of Colorado River water in the East Valley.

Asked about the 2015 legal opinion, Powell said “that’s privileged and it’s not in the public domain.” He said he couldn’t comment further about it, but he insisted that using the tax revenues for the East Valley costs of replenishing the aquifer is legal and fair.

“The legal opinion that we have on the State Water Project tax is solid, and we went forward on that basis,” Powell said. “The purpose of those funds is to replenish the aquifer, and that’s what we’re doing.”

The debate over water rates hasn’t been limited to rates for well owners and domestic water service. Roberts has also criticized recent changes to the rate structure for water from the Colorado River that is delivered by canal. He called it “disturbing” that Powell, who is president and CEO of Peter Rabbit Farms, has cast votes in support of low rates that benefit his business.

But Powell pointed out that it’s perfectly normal for board members of water agencies to be subject to the rates they approve – whether domestic rates or agricultural rates. And he insisted the entire rate-setting process has been carried out properly, guided by extensive studies of the costs for different categories of customers.

Questions about reserves, chromium-6

Some of the customers who are speaking out against the rate increases have questioned why CVWD needs to charge more when it holds substantial reserves.

As of December, a financial report showed the district had more than $484 million in total cash and investments, of which about $423 million was listed as “total unrestricted funds.” Last year’s budget projected reserves of $386.7 million at the end of the fiscal year.

The district’s reserves are split up into separate funds for purposes ranging from domestic water service to stormwater and sanitation. The district also has a policy that outlines its goals in maintaining sufficient reserves to prepare for risks such as unanticipated shortfalls in revenue.

The reserves for the Domestic Water Fund now total about $80 million, which Powell said is in line with the district’s guidelines. That’s good, he said, because the district needs cash to begin construction of chromium-6 treatment plants while it pursues a low-interest loan from the Drinking Water State Revolving Fund.

“We anticipate that we’re going to use before the end of this year about half of that reserve, about $40 million,” Powell said. “If we didn’t have that reserve, we would not be able to do this. So having the reserve has actually saved us quite a bit of money in terms of not having to go into the bond market and pay much higher costs to finance this project.”

The district is pursuing a state loan that at present offers an interest rate of 1.6 percent, Powell said.

“We don’t have excess reserves in domestic. We have the right amount of reserves,” Powell said. “We are going to use those funds.”

CVWD’s managers say treating water to remove chromium-6, also known as hexavalent chromium, will be their costliest infrastructure project ever.

California regulators adopted a new drinking water standard for the carcinogen in 2014, and water districts have been given until 2020 to comply with the limit of 10 parts per billion. CVWD officials have questioned the science behind the new state limit but say they’re obligated to meet the state’s requirements.

In large portions of the aquifer beneath the Coachella Valley, the groundwater has levels of chromium-6 that exceed the new state limit. While water agencies say the heavy metal occurs naturally in the area’s water supply, chromium-6 can also be released into the environment as pollution from sources ranging from cooling towers to industrial plants.

The water district, the largest of six water suppliers in the area, plans to install ion-exchange treatment units at about 30 of its 92 wells across the Coachella Valley.

The rate increases will affect the bills of nearly 93,000 single-family homeowners, as well as more than 3,400 multi-family accounts, more than 4,800 landscape irrigation meters and more than 4,500 commercial customers.