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).

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.

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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.

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.