Driven by drought and a state conservation order, Napa has cut its water consumption to its lowest level in more than 20 years, driving down Water Division revenues.

The Water Division is expecting to take in $7.1 million less revenue in the fiscal year ending in June — $19.5 million instead of the projected $26.6 million, the City Council learned Tuesday.

Revenues were driven mostly by plunging income from water sales — $5 million off the forecast for sales within Napa and down $1 million from expected sales outside city limits.

That decline has water officials looking for a strategy to pay for its pipes, water treatment plant and equipment, expenses that remain constant even as sales drop. A series of workshops between staff and the council could start as soon as April 4, according to Joy Eldredge, manager of the Water Division.

When the current budget was adopted two years ago, “we anticipated revenue to continue to grow, and instead we’ve seen increased conservation go the other way,” said Bill Zenoni, Napa’s interim finance director and former treasurer.

Napa’s latest budget took effect in the depths of a statewide drought that began in 2012 and saw the city receive barely 8 inches of rain for the whole of 2015. In April of that year, Gov. Jerry Brown ordered California cities to cut their water usage by at least 20 percent, a standard Napa exceeded during the year the conservation order was in effect.

But such cutbacks have upended Napa’s financial forecasts that assumed that water customers would not achieve 20 percent savings until 2020, according to Eldredge.

“The infrastructure is there and needs to be invested in, and that doesn’t change whether we sell 20 percent less water or not,” she said Wednesday.

A response to the drop in water revenue could attack the problem from the income side, expenses or both. If Napa seeks to raise water rates to cut into the deficit, Proposition 218 will require the city to mail notices to customers and hold a hearing at least 45 days after the mailing. Any pricing or other changes likely would be timed for October when the city usually introduces rate increases, including its most recent one in 2015, according to Eldredge.

Discussion about Water Division funding also is likely in May, when the City Council and staff hammer out a new budget for 2017-19, said Zenoni.

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Meanwhile, various one-time cash infusions have softened the impact of dwindling water revenue. The city saved $3.1 million last year by refinancing $45 million in bonds, won a $2.5 million refund from the State Water Project in connection with water entitlements purchased from Kern County, and pulled in a further $1.4 million in an exchange of state water rights with the Santa Clara Valley Water District.

Napa also is seeking federal and state reimbursement to fix four east-to-west water mains passing beneath Highway 29 that have been out of service since the 2014 earthquake.

While Napa has deferred some capital improvements with the fall in water sales, Eldredge warned such savings cannot be sustained in the long run.

“Like I said to some Realtors, it’s like your house; if you don’t invest in maintaining things; it costs you more in the long run,” she said.

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Howard Yune covers the city of Napa and the town of Yountville. He has been a reporter and photographer for the Register since 2011, and previously wrote for the Marysville Appeal-Democrat, Anaheim Bulletin and Coos Bay (Oregon) World.