Willow board backs sale of equipment to Ukiah and forwards modified rate plan after consultant warns of steep increases

The Willow County Water District board on Oct. 23 approved a straight purchase by the City of Ukiah of the district27s vehicles and equipment and agreed to forward a modified financial plan — including near-term rate increases — to the Ukiah Valley Water Authority executive committee for consideration.

The action followed a presentation by Mark Hildebrand, the consultant leading the district27s financial plan and rate study, who said Willow will need substantial rate increases over the next several years to sustain planned capital work unless the district receives a one-time cash infusion from asset sales. "The basic premise is that you can't charge more than the cost of providing service," Hildebrand said while explaining state rate-setting constraints and the study's ten-year cash-flow projections.

Why it matters: Willow27s operations and financial management have moved under the City of Ukiah. The shift removed operating revenue Willow previously earned from serving other districts and left the district facing higher net costs and a need to rebuild or maintain reserves while funding capital replacements. The board heard two term-sheet approaches for the district office building (a five-year lease-purchase with a $1 bargain purchase option or an outright sale) and a proposed purchase of the district's fleet and equipment; staff estimated the equipment basket at roughly $215,000 and the building valuation near $499,999 (subject to appraisal).

Key details from the meeting: - Equipment vote: Directors voted to recommend a straight cash purchase of the vehicles and equipment by the City of Ukiah. The city staff said a straight purchase is the "cleanest way to go" and could be on the council agenda within weeks. The board recorded the motion and a second and adopted the purchase.

- Building term sheet: City staff outlined a five-year lease-purchase structure presented as an option for the office building: a principal near $499,999 (appraisal required), an illustrative 4% interest rate, and a bargain purchase of $1 at the end of year five. Dan, the City finance director, described that structure and emphasized the city would be responsible for maintenance and repairs during the lease even though title would remain with the district until the bargain purchase was exercised.

- Rate study and projected increases: Hildebrand presented a financial-plan-style study (the board is not changing rate design) that targets reserve policies similar to prior guidance: a 25% operating reserve (roughly three months of operations) and a capital reserve to smooth volatile capital spending. The consultant modeled a baseline that requires significant near-term increases to avoid dropping below reserve targets: examples shown included two consecutive years of 20% increases, then two years at 12%, then 5% thereafter (a cumulative, long-run percent change approaching the plan's modeled endpoint). He also modeled alternatives. If the district realized a one-time infusion of about $700,000 from asset sales (equipment plus building), the board could adopt smaller, steadier increases (roughly 12% yearly in modeled scenarios) and avoid the most severe front-loaded hikes.

- Board concerns and contingencies: Directors repeatedly cautioned against relying on sale proceeds that might not materialize quickly. Several directors said they preferred an outright sale that would speed receipt of cash for rate smoothing; others favored protections that would accelerate bargain-purchase obligations if annexation or dissolution occurred. Staff said equipment proceeds could be available by December; building proceeds depend on market timing. Dan stressed that while the city currently manages Willow's cash on its books, those funds remain Willow funds and must be used for the benefit of Willow ratepayers unless the district is legally dissolved or annexed.

Votes at a glance: - Urgent agenda item (Performance Pump quote for a VFD drive) — motion to add: moved by Director Hildreth; seconded by Director Gordon; outcome: approved (unanimous). This item was added to new business as agenda item 3. - Equipment/vehicles purchase by City of Ukiah — motion for straight purchase: moved by Director Hildreth; seconded by Director Gordon; outcome: approved (recorded as adopted by board vote). - Recommendation of the financial plan (modified at tonight27s meeting) to the UVWA executive committee — motion to recommend: moved by Director Gordon; seconded by Director Hildreth; outcome: approved; board instructed staff to present the revised plan to the UVWA executive committee on Nov. 6.

What the board did not decide: The district did not finalize a sale of the office building. That term sheet remains a negotiation point; directors directed staff and the city to refine terms and pursue appraisal and drafting of purchase documents. The board also reserved its right to solicit an independent auditor for future years but discussed transitioning to the city's auditor for 2026 for continuity as accounting fully moves onto the city's platform.

Context and next steps: Staff said the city took over district billing and many administrative functions July 1; quarterly financial statements for Willow are expected for the board's November meeting. Hildebrand said the plan seeks to keep the district above reserve targets and to fund an increased capital program (model average roughly $226,000/year in nominal dollars). If the board and the UVWA executive committee approve the schedule, the consultant recommended mailing Proposition 218 notices by mid-November, holding the public hearing in early February, and implementing the first rate adjustment in March (with subsequent adjustments timed to the fiscal year start).