Water District Earns Clean Audit, Eyes Rate Review as Sales Lag

The Coastside County Water District's board covered a lot of ground on Jan. 13 — accepting a spotless financial audit, green-lighting $166,000 in engineering contracts for aging pipeline replacements, and beginning to build a political lobbying arm that could reshape how the small district fights for resources in Sacramento. Beneath the procedural calm, though, a tension is building: water sales are running below budget after a cool summer, and board members are already asking whether the third year of a three-year rate plan will hold.

• Clean FY2025 audit shows $2.7M gain in net position; auditor calls the district a "model" agency

• Below-budget water sales drive operating shortfall, offset by $476K in supply savings — but rate review may loom this summer

• $66K pipeline design contract bundles three Miramar-area street replacements; one board member recuses over proximity conflict

• Christmas Eve windstorm totaled a district truck and knocked out a backup generator; staff scrambled on Christmas Day to restore water service

• New government relations committee proposed to pursue grants and lobby Sacramento; formal action tabled to February

• Pilarcitos Reservoir at just 56% capacity — far below every other SFPUC reservoir — raising long-term supply alarms

Auditor Calls District a 'Model' After Clean Financial Review

Why it matters: A clean audit is table stakes for a public agency, but the details underneath it reveal how the district's revenue picture is shifting — and where new costs are landing.

Where things stand: External auditor Jonathan Abadesco presented an unmodified opinion on the district's FY2025 financial statements, finding no material weaknesses, fraud, significant deficiencies, or noncompliance. Net position grew $2.7 million, powered by $2.3 million in revenue growth from water consumption sales and non-operating revenue, including transmission and storage fees tied to the Stone Pine affordable housing project.

On the expense side, costs climbed $2.1 million, driven by Crystal Springs Pump Station operations, maintenance, and costs associated with a certificates of participation issuance — $243,000 in issuance costs and $130,000 in interest.

Board Member Ken Coverdell pressed the auditor directly: "Can you unequivocally say the district is doing a fantastic job managing the finances and reporting them in a totally transparent and open and competent way, meeting all requirements or whatever be expected of financial managers?"

Abadesco did not hedge: "I would say if I would compare the district with other agencies that we have audited. It's one of the model districts that is always on top of stuff, you know, being transparent, able to deliver proper guidance based communities and making sure that the things are being in place in proper order as always."

Vice Chair John Miller raised a forward-looking question, noting that if SFPUC completes repairs on the Pilarcitos Reservoir, the district could potentially save significant money by reducing its reliance on the costly Crystal Springs Pump Station: "We all drive by it every day and I'm wondering if SFPUC completes the repair on pillar Sheetas reservoir. We would be saving a lot of money from Crystal Springs pump station."

Decision: Approved 5-0 (For: Coverdell, Mickelsen, Reynolds, Miller, Feldman).

Cool Summer Drags Water Sales; Rate Review on the Horizon

Why it matters: The district is in the second year of a three-year rate structure. If water sales continue to underperform, the board may need to revisit the assumptions baked into that plan before the third year kicks in — a decision that would directly affect ratepayers' bills.

Where things stand: Staff member Jeff presented the quarterly financial report through December 2025, showing an overall $312,000 favorable position. But the headline number masks a worrying trend: "Our volumes, water sales volumes are below last year, below budget. And that is driving negative variance."

The shortfall stems from a cool summer that depressed outdoor water use. The district is being buoyed by expense savings — $476,000 in source-of-supply costs and $133,000 in PG&E savings from not running the Crystal Springs Pump Station — plus non-operating revenue including an $88,000 water recycling program study and $48,000 in favorable interest income, though interest rates are declining. Cash balances stand at $13.1 million.

Jeff cautioned the board about the trajectory: "We do expect to see a little decrement versus the budget for the balance of the year. But it's just something we're effectively managing, trying to acknowledging the fact that our volumes are flat to down."

Board Chair Bob Feldman raised the rate question directly: "We have the second year of our three year budget rate now in fourth, we have another budget coming up January 1st with the same rate. The question was simply is there any likelihood that we would have to look at that and deal with it in some fashion going forward."

General Manager Mary Rogren suggested patience: "I think we need to get through this next six months and see how we're doing. I mean one of the issues is that we had a really cool summer and so we'll see what happens."

What's next: The board plans to revisit rate adequacy this summer once another full season of water sales data is in hand. Capital improvement program spending through six months was $7.1 million, with $6.1 million concentrated on the Hill tank project.

Miramar Pipeline Bundle Advances With $66K Design Contract

Why it matters: The district is replacing aging cast-iron water mains in the Miramar neighborhood — infrastructure work that improves fire protection and prevents costly emergency breaks. Bundling three street projects into one bid package could yield construction savings.

Where things stand: General Manager Rogren described the scope of the newest addition to the bundle: "The Alto Avenue project actually involves replacing 880 linear feet of 4 inch cast iron pipe with new 8 inch Vento pipe and replacing existing service lines and meters on Alto Avenue and replacement of hydrant." The upsized pipe ensures adequate fire flow near the Miramar tank. The $66,000 amendment to the district's agreement with EKI Environmental and Water Inc. adds Alto Avenue to an existing package that already includes Alcatraz Avenue and Santa Rosa Avenue.

Board Member Coverdell recused himself and left the room because he lives within 1,000 feet of the Alto Avenue project area.

Decision: Approved 4-0 (For: Mickelsen, Reynolds, Miller, Feldman; Recused: Coverdell).

Separately, the board renewed EKI's $100,000 annual retainer for capital project management, engineering support, and hydraulic modeling — critical given that the district's capital improvement program now stands at $69 million and growing. That passed 5-0.

Board Lays Groundwork for Government Relations Committee

Why it matters: For a small special district, political connections can mean the difference between winning competitive state grants and going without. The proposed advisory committee would formalize what has been ad hoc outreach into a structured effort to lobby elected officials and pursue funding.

Where things stand: The idea emerged from a recent strategic planning session that multiple board members praised. Board Member Coverdell made the case: "I actually really appreciate us having some kind of a political action standing committee. And I think we have, you know, Director Michelson has a lot of contacts, been a long time, and I think he would be an excellent candidate for that."

Legal Counsel Patrick walked the board through the Brown Act implications, explaining that "a standing committee is subject to all the requirements of the Brown Acts," while an advisory committee is not. The distinction matters: a standing committee of two or more board members would require posted agendas, public access, and minutes, while an advisory body would operate with more flexibility.

Vice Chair Miller volunteered for the role, citing his Sacramento connections: "I would be an honor. Really. And as I said over the years, going to the state capitol for the leadership program."

What's next: Legal counsel will prepare a formal agenda item for the February meeting to restore the board president's authority to create advisory committees and to officially establish the new body.

Christmas Eve Storm Tests Staff, Board Praises Emergency Response

Why it matters: A severe windstorm on Christmas Eve delivered a one-two punch — totaling a district truck and knocking out a backup generator at Tank 3, threatening water service to customers during the holiday.

Where things stand: A large tree branch from city-owned property fell through the cab of the district's on-call operator truck, destroying it. No one was injured, but the loss left the district short one vehicle. An operations manager volunteered his personal truck to fill the gap. To expedite replacement, the board waived competitive bid requirements and authorized purchase of a Ford F-150 4x4 for up to $55,000. Insurance is expected to reimburse approximately $39,000, with potential additional recovery from the city whose tree caused the damage. The purchase counts toward one of two vehicles already budgeted for the next fiscal year.

The generator failure at Tank 3 was the more urgent crisis. Staff secured a temporary generator and had an electrician wiring it in on Christmas Day to keep water flowing. Board Member Glenn Reynolds highlighted the significance of prior board investments during the operations report: "For a point of reference before we did the upgrades we would not be running right now because it was only because of the upgrades that the board authorized years ago. It's producing 300 gallons a minute or more." He was referring to the Denison Creek water treatment plant, which restarted at 30 NTUs — a turbidity level that would have been impossible to handle before board-authorized upgrades raised the operating limit from 20 to 50 NTUs.

Board Chair Feldman commended the team: "The fact that you did and as quickly as you were able to Is again a statement to the, the good work that you do."

Decision: Emergency vehicle purchase approved 5-0 (For: Coverdell, Mickelsen, Reynolds, Miller, Feldman).

Pilarcitos at 56%: A Water Supply Warning

Board Member Reynolds flagged a stark data point from the latest SFPUC reservoir report: "In the San Francisco PUC report, the list of reservoirs, all the reservoirs are. Are in about 80% or better except one. It's ours. The pillar Cetos reservoir is at 56%."

The Pilarcitos Reservoir is a key local water source for the Coastside district. Its lagging level — while every other SFPUC reservoir sits at 80% or above — raises questions about long-term supply reliability and the district's continued dependence on the expensive Crystal Springs Pump Station as a backup. An SFPUC presentation is expected in March.

Meanwhile, Board Member Chris Mickelsen voiced frustration over a separate but related regional water issue at BAWSCA: "I'm really sick and tired of paying legal. I would far rather be paying a lobbyist. We need to get this done in Sacramento." He was referring to a river negotiated settlement that has dragged on for 12 years without resolution. Mickelsen also flagged an upcoming discussion about retiring the district's unfunded PERS liability, noting the board will need to choose among three tracks for how quickly to pay it down.

Minor Items

• Consent calendar approved 5-0, including claims review.

• LAFCo alternate representative designated 5-0, following the district's seniority protocol for participation in San Mateo LAFCo elections.

• Hill tank construction is 357 days in, with completion now expected around July 2026, pushed from an original spring target. Work in December included interior 16-inch HDPE inlet pipe installation and fiber optic communications; very few change orders have been issued.

• WaterSmart customer portal now has 44% enrollment among district customers, with 777 leak alerts sent in the past year; managed by staff member Emma Rodriguez.

• Aqua JPIA award received for exceptionally low property insurance claim costs.

• GSW well drilling mobilization expected in late January or early February.

• The board entered closed session for general manager performance evaluation under California Government Code Section 54957.

What to Watch

The next few months will test several of the themes surfaced at this meeting. The summer water sales season will determine whether the third-year rate structure holds or whether the board faces a politically difficult mid-cycle adjustment. The formal launch of a government relations advisory committee in February could give this small district a louder voice in Sacramento — and potentially unlock grant funding for a $69 million capital program that keeps growing. And the March SFPUC presentation on Pilarcitos Reservoir will put hard numbers behind a water supply vulnerability that board members are already flagging as a serious long-term concern.