UT SDWD Water Rates Go Up Monday
...
She said she recognizes the need for a rate increase, “but we have to get our house in order as well before we continually ask the ratepayers to pay more.”

Barth suggested implementing a lower rate increase temporarily, and drawing on reserves, to give the city time to analyze its personnel costs and reopen talks with employee unions.

NCT SDWD Votes (4-1) to raise rates

The Encinitas City Council, in its role as the board of the San Dieguito Water District, voted 4-1, with Councilwoman Teresa Barth opposed, to increase water rates starting March 1.

The conformation came in just under a month after being promised some explanation for how the City's lease-revenue bonds work and documented confirmation that the SDWD pays nothing directly or indirectly toward city hall or park bonds.

Because this issue had been brought up several times during previous meeting and not adequately dismissed by the City, this was an issue worth considering.

The City sent us a part of the City's financial statement. The City Finance Department also answered the following questions.

Which of the bonds listed in the attachment are (or could be) a liability for the SDWD?

See p. 58
2004 SDWD Water Revenue Refunding Bonds
2007 SDWD Note Payable to R.E. Badger Water Facilities Finance Authority

Which of the bonds listed in the attachment are paid directly or indirectly with direct or indirect contributions from the SDWD?

See p. 58-59
2004 SDWD Water Revenue Refunding Bonds
2007 SDWD Note Payable to R.E. Badger Water Facilities Finance Authority

Are any of the payments related to the bonds that SDWD pays structured such that the amount is related to the overall debt of the Encinitas Public Finance Authority (EPFA)?

No.

Conversely, are all of the bonds clearly compartmentalized
such that the SDWD is completely shielded from liabilities related projects that most folks consider to be city projects?

Yes.

In response to our inquiry regarding the use of SDWD staff and equipment for City of Encinitas projects, the City admits that staff and equipment have been used for City work. Our sources in the SDWD who tipped us to the practice gave no indication that the City has reciprocated the efforts. Because the Water District does not track the efforts, we won't be able to assess the scope or balance of the costs. We are told that the City jumps on the opportunity to nickel and dime the Water District.

An independent board of directors for the San Dieguito Water District would be able to determine if the current practices are fair to the ratepayers.

Here is the City’s response:

The San Dieguito Water District in one of four divisions within the City of Encinitas Public Works Department. There are times assistance is needed by each division in order to respond quickly to emergency situations in a cost-effective manner. Emergency cooperative response by various divisions could include sewer spills, major storm related damage, water main breaks, etc. When inter-department assistance of less than one day during normal working hours is requested, the cost for assistance is typically not tracked or charged to the other division. However, when there is overtime involved, the division being requested to assist will be reimbursed from the overtime or contractual budget by the division requesting assistance. There have been no large scale emergencies within the City that have occurred in the past two years that have required the use of District staff.

We asked the City how the city allocates the costs of operations with the SDWD. We also requested a copy of the cost allocation policy between the SDWD and the City.

RESPONSE: see attached file

The attached file does not appear to be a policy.

We also asked how much of the budget is subject to cost allocation. We also request documentation on the total cost/amount subject to the allocation rules in the most recent fiscal year.

RESPONSE: see attached file

Same file as above.

Under the proposed rate structure the SDWD will add money into the rate stabilization fund.

From the SDWD staff report: Operating Reserve Rate stabilization reserves are used to help offset unexpected or unforeseen costs for purchased water or system repair True to its purpose the District has used this reserve to absorb some of the unexpected cost increases due to drought conditions The reserve will be below target for the next few years but will be built up over time and at target again by FY14 The Rate Stabilization Reserve is shown the figure.

UT Council to consider pay increase.
The council also will consider giving Cotton an 11 percent raise, which would bring his compensation, including wages and deferred compensation, to $242,640. His last raise was in May 2007.

UPDATE: The council postponed the vote for two weeks.

From the SacBee Saturday, February 13, 2010
Sacramento city officials acknowledged Tuesday they misused utilities funds to pay for general government expenses.

... The 1996 voter-approved initiative bars local governments from using ratepayer funds such as water and sewer to cover general government expenses...

Marty Hanneman, the city's utilities director, addressed the City Council on Tuesday night, outlining a number of steps the city has taken to address Proposition 218 violations and proposing additional measures. He said there had been memos indicating possible problems.

...

Councilwoman Lauren Hammond said she was upset the violations could have caused utility rates to go up for residents because the money for utilities was being diverted elsewhere. She said her own bills went from less than $79 in 2003 to more than $106 in late 2009.

"I have no confidence in your cost allocations. It's not personal. I just don't believe you," she told the utilities director. "Obviously the city of Sacramento has never complied with Proposition 218 … Something is seriously wrong here and we have not fixed it and management has not fixed it."

...

City officials say they still don't know how much the violations cost ratepayers. The grand jury cited a 2008 consultant's report that found violations had cost the utilities funds more than $21 million since 1996.

...

As a result, it's not uncommon for localities to stretch the limits of the law. "The issue goes way beyond the city of Sacramento," he said.

Friends,

I am writing to urge you to protest the planned water rate increase for San Dieguito Water District (SDWD). You can do that by filling out the attached protest form and mailing it to the Encinitas Taxpayers Association so that it gets there by February 24.

The problem with the rate increase, as I see it, is twofold. First, the City is shifting some of its expenses to the SDWD, which results in higher rates. Second, the SDWD gives developers, businesses and the City a discount on rates. This results in higher rates to homeowners.

To prove my point, compare the proposed SDWD rates with the rates charged by the Olivenhain Municipal Water District's (OMWD). (The proposed SDWD and existing OMWD rates are in the attachments.) The SDWD serves Western Encinitas. The OMWD serves Eastern Encinitas. [OMWD uses more imported water and should be more expensive.] But, the proposed SDWD rate for homeowners is more than 50% higher than the OMWD rate. The differential is even greater in a drought, like the one we are in now.

Read more »

This was posted to the ETA blog. We've been able to confirm with SDWD staff that this is a draft of an essay submitted several years ago to the SDWD/City of Encinitas as part of a scholarship contest. It discusses reasons for wanting the SDWD to be independent from the City. The City/SDWD did not select this as the winning essay.

Today in California there are approximately 3,400 special districts. Each has a separate identity for their own specific interest. Each special district provides a variety of services from water distribution to fire protection. A board of directors governs each district. A special district can be defined as, “any agency of the state for the local performance of governmental or proprietary functions within limited boundaries.”

I believe the biggest benefit of special districts are the ability to serve specific needs of a community that might not be the needs of an adjacent community or a special district can fulfill the needs of several communities which might form to become one special district. The case in point is the San Dieguito Water District, which serves potable and recycled water to approximately 37,000 residents in Encinitas, Leucadia, and Cardiff by the Sea. These are three very different communities with the same need for a safe, reliable water supply for domestic, agriculture and industrial purposes.

Read more »

Back in January the ETA asked Mayor Dalager to speak with us, so that the ETA Board and members could ask him about the water rate increases and the relationship between the city and the water district. Dalager never responded.

An Encinitas resident recently forwarded us this response from Dalager. ETA comments are in italics:

People have been doing a good job of cutting back their water usage in response to the drought. It’s ironic, but as consumption of water goes down, fixed costs on everything from maintenance to debt service on the state system remains the same. Therefore, as usage declines, they charge us more per unit.

[Drought rates are going up ~20%, but so are non-drought rates (~13%/year). Mayor Dalager does not address this or the ETA’s main recommendations.]

I will not eat those costs and risk running this district into insolvency.

[We see no reason to think insolvency is an issue for the SDWD. The Council has already agreed to give raises this year and next year to SDWD staff and can afford to continue to issue generous pensions to its employees. More importantly, the water district has a rate stabilization fund, which should be used to keep rates from spiking. Times are tough and this is right time to use up the rate stabilization fund.]

Thank your lucky stars we and SFID (with whom we own Badger filtration plant) have water rights to Lake Hodges. The water from there costs us a fraction of state water. I have no intention of merging with some other district such as OMWD and having to share those rights.

[Because of this, we should wonder why OMWD water is cheaper than SDWD water. Merging with the OMWD would disadvantage SDWD customers. Dalager does not address the possibility of the SDWD merging with the SFID.]

Our district is run very efficiently and any cost savings would be more than offset by restricted access to our cheap local water.

[We do not know how Dalager measures efficiency and there is no reason to believe that if the council is not running the SDWD we would have to give up access to local water.]

Also, as much as I’ve looked at it, I have seen no upside to creating an extra level of bureaucracy that a second board would entail.

[The ETA has not suggested any new bureaucracy be created. However, it is correct that it would be necessary for the SDWD to hire its own legal counsel during negotiations with the City of Encinitas.]

We are in a very unique position; we have our own cheap, local supply. An increase in that is our real opportunity to get some rate relief. Pray for rain!

Dan Dalager
Mayor, City of Encinitas

[The increase in rates are not conditioned on water levels in Lake Hodges (our local supply). Perhaps, retail rates should be tied to Hodges water levels.]

From Jim Bond:

I do agree with you that we should reduce employees in the district and have done so with 2 employees retiring and no replacements for them.

[The city council did not discuss reduced staffing during the last budget adoption and it appears that at least one of those retirees is still working for the city as a contractor.]

As far as the cost of water goes, we have seen double digit increases for the last three years from our supplier, the San Diego County Water Authority who has not passed along the full increases to them from their supplier, the Metropolitan Water District of Southern California. SDWD too, has not passed along the level of rate increases we have received from SDCWA.

[The ETA agrees that the ratepayers should pay for those costs. The ETA is also skeptical that the there has been a vigorous effort to contain expenditures and overhead costs at the region water agencies. The SDWD is is a member of those agencies.]

I agree that we should be cost effective and believe we could be a bit more so by subsuming the Water District into the City to reduce administrative/overhead costs just as we have with the old Fire District and the two Sanitary Districts; Encinitas and Cardiff.

Warm Regards,
Jim

[The way in which the City has absorbed the SDWD, it would be interesting to know which costs could be reduced. Note, the fire district does not generate revenue and the sanitation districts have very high charges compared to the Leucadia Water District, which covers part of Encinitas but is not run by the City Council.]

We need to fill this box.

Rain fills the SDWD's reservoir, providing cheap water, but it keeps ETA fliers off the streets. There is little time to get the word out and rain stops us in our tracks. We are definitely going to need more help if it keeps raining. If you are willing to distribute fliers in your neighborhood, even if only on your block, send us an email at eta@encinitastaxpayers.org.

TS Eureka rejects water, sewer rate hikes

After several meetings and public outcry, the Eureka City Council voted unanimously to hold off on raising water and sewer rates and establish a citizen task force to help create new rates.

Although not enough protest letters were sent in to legally stop the hike, council members agreed that the rates were too high for people to handle at this time, the notification process was too confusing and senior citizens shouldn't be hit with such high rates.

If it had been approved, the rates would have increased by 66 percent for water and 87 percent for sewer in the next five years. The rates also included a method for calculating rates, which included Proposition 218 guidelines...

From the Gilroy Dispatch:
If more than half the well owners in South Santa Clara County protest next year's groundwater charges, then the fees will not be levied as they have in the past.

When the Santa Clara Valley Water District begins the annual process of setting groundwater extraction charges next week, one topic of discussion will be the "majority protest procedure" allowed under Proposition 218, a constitutional amendment that requires voter approval for taxes and property related fees.

... if a majority of well owners protest in writing to the charges, then the district cannot collect them, based on Proposition 218.

But allowing a majority protest is not enough to satisfy Proposition 218, according to Tim Guster, general counsel for San Jose-based Great Oaks Water Co. If a majority of well owners end up protesting next year's groundwater charges, that only means the water district cannot take a vote and there will be no imposition of the fees.

"If there is not a majority protest, a vote must still be taken," Guster said. Such a vote can be cast among either the well owners or the general electorate.

Note: The Encinitas City Council have already indicated that they do not intend on letting the public vote on water rate increases and, instead, they intend to vote for a rate increase without seeking the approval of the majority ratepayers. ETA members are divided on whether or not this is a reasonable way to proceed, but it does make all non-responses function as yes votes for any rate increase. The council cannot claim they have no other option, because they do.

When the city council purchased the Mossy Dealership for a public works yard the city told the public the site would be turnkey, and that justified the $9 million dollar purchase. It was not turnkey and the city has put in well over a million dollars in undisclosed needed upgrades. The purchase price of the property was highly suspect at the time and the public warned the council to review the appraisal. This warning was not heeded, and immediately after the purchase Deputy Mayor Houlihan admitted to not knowing about some basic facts about the appraisal. Assuming Houlihan was attentive during the closed-door meetings about the purchase, this is indicative that the council did not discuss the basics of the appraisal. Since that time, professional appraisers have publicly criticized the appraisal (and other city appraisals) and recommended simple policy changes to improve the land transaction process. The council has not discussed changes.

The appraisal can be found here.

The city paid a million over the fair market value in their own appraisal and that fair market estimate was at least a million dollars too high. The San Dieguito Water District ratepayers are paying for that mistake. The city moved the SDWD staff to the new PWY and charged the SDWD for part of the cost of the purchase. The cost allocation was never approved by people representing only the SDWD ratepayers.

Herb Patterson, who is a frequent Hoodlink contributor, reviewed the cost allocation report produced for the city staff. He concludes that, no rational person could examine the deal and believe the Council had done their fiduciary duty toward the ratepayers of the SDWD.

The City Manager responds by saying that by looking at the number of employees using the site, either SDWD or city staff, the SDWD could have been charged more than they were. The Manger goes on to say that all parties decided that would not be fair [It would have also increased scrutiny]. The City Manager does not mention that none of the parties involved had the unconflicted duty to watch out for the SDWD ratepayers.

Read, review, and comment on the report and exchange here.

If the SDWD customers got a fair deal in the Mossy deal it is not obvious that the ratepayers were safeguarded. The City Manger seems to make the point that they could have easily been charged more. Adding independently elected water district officials to negotiate for the water customers with the city could eliminate that vulnerability.