Last month the ETA ran a campaign to alert the city about the relationship between the water district and the City of Encinitas. Click here for the campaign background.

Here are some of the public comments from the Council Meeting.

The whole meeting can be viewed here (Feb 24, 2010).

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 December we approached Mayor Dalager and Water Board President Houlihan in the hopes of having them address some of the concerns and possible misconceptions the public has about the SDWD and the City of Encinitas. Mayor Dalager never responded.

President Houlihan shared her knowledge and thoughts on Monday (Jan. 25). She is not in favor of an independent board of directors for the SDWD and not interested in making a citizen’s review commission part of the rate increase process. Houihan saw no reason to change the current arrangement, however she could not offer any reasons against an independent Board of Directors.

Houlihan addressed the questions sincerely and to her fullest ability. Here is what she told us:

Staff
One of the three finance staff that was recently transferred to the SDWD from the City was already being paid 90% out of the SDWD. This staff member was a receptionist.

Public Works Yard
The SDWD pays the city for use of the new public works yard, but only for maintenance and cleaning costs. It was not clear how those costs are apportioned.

The cost to the SDWD for moving into the new public works yard was apportioned and approved by the Council. Houlihan said she based her vote for the approved apportionment on the fact that consultants had written a report that supported the vote. Herb Patterson, explained that he had corresponded extensively with the City regarding the report. He believes the report does not satisfy the requirements of Prop 218 and probably overestimates the SDWD’s share of the cost for the new public works yard (more on this will be posted by Saturday).

Patterson also stated that he had not been able to find documents that explicitly describe what is being called the City’s “perpetual use rights” to the public works yard. Houlihan did not know about this particular detail, but expressed interest in helping the public obtain the details of the agreement between the City and the SDWD.

Bonding
Houlihan was adamant that the SDWD is not involved in bonding for city projects and was clear to state that the SDWD is a separate legal entity from the City (but run by the same elected officials). However, it is unclear how the little known Encinitas Public Finance Authority (EPFA) fits in. The EPFA is used by the Council to issue municipal bonds for public projects. Houlihan did not mention that the EPFA does have a history of ties to both the city and the water district.

Although Houlihan made a clear statement that the SDWD was not on the hook for city bonds, that statement was later hedged a little by saying the bonds for the golf course were unusual.

She made another key statement that the SDWD does not pay into the EPFA, the paper entity that issues millions of dollars in bonds. This is important because ETA members have long standing concerns that the SDWD is involved in this bonding authority.

Houlihan said she would ask staff to present the ETA with a flowchart of the liabilities from all the bonds and the different legal entities. As of Jan 28, we have not received the flowchart. If the relationships are as portrayed by Houlihan, it should not take the finance staff long to produce the document. It is important to get that documentation out to the public because we have one ETA member, Gerry Sodomka, who has publicly addressed this issue many times over the last few years.

He spoke four times before the council in 2006 challenging the city on the issue of the SDWD being involved with bonding for city projects. Sodomka reports to the ETA that he was never told he was incorrect. The City Manger or any of the Council could have corrected him during those public meetings. The City’s bond consultant, Mark Northcross, was involved in the city meetings and he did not correct him. When former mayor Christie Guerin publicly asked the City’s finance staff whom had repayment responsibility, a clear response was not given.

There has not been a clear sign that the SDWD wasn't responsible until Monday night, when President Houlihan addressed the issue directly.

It will be good to get this particular issue straightened out.

To receive notification that the city has presented the ETA documentation on the bonding responsibilities, sign up for Encinitas Taxpayers email advisories.