ROBERT SIEGEL, HOST:
Cities across California have been cutting their water use to meet strict drought rules. Some are knocking it out of the park, cutting more than 40 percent. But there's a downside. Residents using less water means that cities are selling less water. Lauren Sommer reports from member station KQED that some areas are now facing budget shortfalls.
LAUREN SOMMER, BYLINE: It's not hard to see how serious residents of Pleasanton are about water conservation. Driving around the Bay Area city, you see pickup trucks carrying big 300 gallon water tanks in the back. They're all going to the same place.
WARREN VEST: Watch your feet. You're going to get wet.
SOMMER: To pick up free recycled water. It's Warren Vest's second trip of the day.
VEST: It's just fabulous.
SOMMER: The water comes from the local wastewater treatment plant. You can't drink it, but it's clean enough for watering plants.
VEST: You have to put signs up that you're using this, or your neighbors get all bent out of shape, you know? They think you're using all the drinking water.
SOMMER: This conservation ethos has made Pleasanton a drought rock star, one of the top water saving cities in the state.
DAN MARTIN: It really is amazing, the level of conservation.
SOMMER: Even Dan Martin can't quite believe it, and he runs the utilities department. The city has been giving out rebates, even finding residents who don't cut back.
MARTIN: And we found that it was a little controversial.
SOMMER: Lots of unhappy phone calls. But it worked. In July, the city saved 47 percent, almost double what state officials required. Martin was elated but then had another thought.
MARTIN: How are we going to make this work?
SOMMER: Conservation has a hidden downside. When residents use half as much water, Martin's agency is selling half as much.
MARTIN: There is a gap in the revenue. Last year, we were probably around a million under what we would have been otherwise.
SOMMER: A million dollars short, but the agency still has to pay for water treatment, electricity, personnel. So to make up the difference, Martin used funds that would've been spent on maintaining the water system.
MARTIN: That's how you end up with pipes and facilities that are past their useful life and you don't have the money to pay to replace them.
SOMMER: Other water agencies are facing the same shortfalls, some in the tens of millions of dollars. But in the city next door, it's an entirely different story.
DANIEL MCINTYRE: We're hitting the number that we need to. We're not seeing any kind of financial trauma.
SOMMER: Daniel McIntyre is with the Dublin San Ramon Services District, which is also conserving a lot of water - 45 percent in July. But his district is not in the red.
MCINTYRE: So what we did here a year and a half ago is implemented our water conservation rates.
SOMMER: A small surcharge on each gallon of water. If you don't conserve water, your bill goes up. But if you use less water, you probably won't notice the charge.
MCINTYRE: Your bill's going to stay substantially flat.
SOMMER: Which means, McIntyre says, his agency's revenue is also flat instead of plummeting. His agency set up these emergency rates years ago so it would be ready for a drought.
JOHANNA DYER: I think it's definitely been a wake-up call for many agencies.
SOMMER: Johanna Dyer of the Natural Resources Defense Council says most California water agencies don't have drought rates and now are paying the price.
DYER: No one could've anticipated the severity of this drought. But this shouldn't be a surprise to anyone, and there definitely should've been more preparation taking place.
SOMMER: Many cities are trying to get drought rates approved now, but it can take six months or longer. By then, they'll have dug an even deeper financial hole, one that their customers could be paying off for years. For NPR News, I'm Lauren Sommer in San Francisco.
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