How much is Metropolitan overcharging you for water?

Newly released data provides transparency for ratepayers and public

Cities across Southern California are struggling with fiscal challenges that are forcing them to make tough choices to keep police on the street, libraries open and parks maintained.  And local water districts have projects and programs they need to fund to provide a reliable and affordable water supply.

Against this backdrop, the Metropolitan Water District, which supplies imported water to 19 million people in Southern California, is stock-piling cash at unprecedented numbers. Over the past 21 months, Metropolitan has amassed cash reserves that are $600 million more than MWD needs to meet all of its budget requirements and is on pace to collect $320 million above its maximum reserve limit.

Metropolitan’s staff now wants to use this money to pay for new things it never included in its budget, rather than give the money back to ratepayers or provide relief from rising water rates.

It gets even worse: despite its huge pile of cash, Metropolitan has proposed even more rate increases for 2015 and 2016. And, it’s also planning to block automatic reductions of property tax increases in order to collect even more tax money from you.

To help ratepayers understand the impact of the overcharging on their water district, the San Diego County Water Authority developed estimates for how much money MWD is over-collecting from each water agency that buys water from Metropolitan. You can view how much your water district is being overcharged by clicking on it.

MWD Over-Collection by Member Agency

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What can you do?

  • Stand up and don’t let the Metropolitan Water District raise your rates. Send your email to MWD’s board at dchin@mwdh2o.com
  • Call or email your city or water district and tell them to say NO to the Metropolitan Water District raising your rates and say NO to higher property taxes.
  • Find out which MWD member agency represents your water district by clicking here.
  • Attend and speak out at MWD’s public hearing on rates and property taxes scheduled for noon March 11 at MWD headquarters. 700 N. Alameda St., Los Angeles

If we all demand answers, we can stop unnecessary water rate and property tax increases for the next two years.

Learn more about the over-collecting issue here.

Read Metropolitan’s report on how much it is over-collecting here.

Mayors call for no water rate increases at MWD

Fourteen San Diego County mayors joined together this week to call on their fellow mayors across Southern California to protest unnecessary water rate  increases and revenue over-collection by the Los Angeles-based Metropolitan Water District of Southern California.

For the past 21 months, MWD has amassed cash reserves in its Rate Stabilization Fund that are projected to reach $800 million this fiscal year. That is $600 million more than MWD needs to meet all of its budget requirements and $320 million above its maximum reserve limit. MWD staff has recommended to the MWD Board of Directors that these funds be spent on unbudgeted uses, instead of providing rate relief to Southern California ratepayers.  MWD has more than doubled its wholesale treated water rate over the past decade.

Learn more about MWD’s over-collection issue here.

Despite its huge pile of cash, MWD staff has proposed rate increases of 1.5% per year for 2015 and 2016. MWD management also asks its board to suspend the agency’s property tax limitation, imposed under its Act, again in fiscal years 2015 and 2016, which would result in the collection of at least $4 million each year more than its Act has limited it to collect.  Read the board letter and staff recommendation here.

“If we all stand together and demand answers, we believe it is possible that MWD will find that no water rate increases are necessary for the next two years,” these mayors said.

The mayors are also encouraging ratepayers to speak out against MWD’s planned rate hike by attending MWD’s first rate and budget meeting at 9 a.m., Feb.10  at MWD headquarters, 700 N. Alameda St., Los Angeles. The 2015 and 2016 rates will be discussed during MWD’s Finance & Insurance Committee meeting.

In addition, the mayors urged concerned residents to attend MWD’s formal public hearing about rates scheduled for March 11 at MWD headquarters.

The mayors also asked ratepayers to write to MWD’s board opposing the rate increase and expressing their concern about the agency’s habitual over-collection.  Those emails can be sent to MWD board at dchin@mwdh20.org.

 Read the Mayor’s letter, click here.

MWD Continues to Over-Collect from Ratepayers

The Issues: Rate Increases. The Metropolitan Water District of Southern California is on pace to have its maximum reserves exceed its board-adopted maximum by $319 million (or 66% more than maximum level) in fiscal year 2014.  Tax Hikes. Last June MWD’s board halted a scheduled property tax decrease, saying it needed more money in order to maintain its “fiscal integrity.” The result: An additional $4.4 million in taxes from property owners to MWD over and above water rates.

Option2-5050-041012 January 2012: MWD’s staff told the board it needed 5% rate increases in 2013 and 2014 to maintain critical water delivery infrastructure and avoid layoffs.  They said an alternative proposal of 3% rate increases in those years would threaten water supply reliability.

July 2012: Just three months after adopting the budget and 5% rates increases for 2013 and 2014, MWD ended FY 2011/12 with revenues of $97 million over budget.

June 2013:  MWD projects it will over-collect $217 million in excess revenues, resulting in reserves exceeding its CurrentForecast-061013maximum limit by $75 million. The MWD board also voted to suspend the tax rate limitations in Section 124.5 of the MWD Act, resulting in an additional $4.4 million in unbudgeted revenues from higher-than-scheduled property taxes.  Staff claimed the action was necessary to maintain MWD’s “fiscal integrity”.

Despite efforts by ratepayers, business groups, community leaders, mayors and several Southern California water agencies asking to reduce the planned rate increase and allow the scheduled property tax decrease, the MWD board voted to raise taxes and spend $75 million on unbudgeted costs and programs; it chose to do nothing with its 5% rate increase scheduled to take effect in 2014. Leaving the 5% rate increase would generate MWD about $15 million, staff reported.

ReserveFundBalance-Jan2014January 2014:  Having already diverted $75M on unbudgeted uses, MWD still began FY 2014 with more than $62 million over its maximum reserve level, in violation of its own Administrative Code. MWD could have easily avoided the 5% rate increase in 2014 by using a quarter of the $62 million for that purpose.  Staff now reports MWD is on track to add another $270 million to its reserves this fiscal year, thus exceeding the maximum level by $319 million.

MWD says rules are for its convenience; not the public interest

When the board of the Metropolitan Water District of Southern California approved salary increases for its top executives late last year, it did so without following its own administrative code and procedures.  That allowed the Los Angeles-based board to effectively approve the pay increases with limited discussion and disclosure, and highlighted MWD’s “business as usual” to ignore inconvenient rules that promote public agency transparency.

During MWD’s Nov. 19, 2013  board meeting, delegates from the San Diego County Water Authority expressed concern that MWD’s board could waive its administrative code without a specific vote to do so. MWD’s Assistant General Counsel Sydney Bennion supported bypassing the rules. “If the board takes a specific action that is contrary to an admin. code provision, it is deemed a waiver of that provision,” Bennion said.

“So the board does not have to take a specific action to waive the admin. code? They just do whatever they feel like and if it doesn’t comport to the admin. code, its deemed waived for that action?” asked Keith Lewinger, a delegate from the Water Authority.

“Essentially, that’s correct,” Bennion replied.

The Water Authority raised concerns about MWD’s disregard for its own policies in a  Dec. 9 letter to MWD’s general counsel.  MWD confirmed its interpretation of the MWD Act in a Jan. 10, 2014 response to the Water Authority, which reiterated the position that MWD’s board can do whatever it wants and there are few rules its board can’t bypass.

Read the Water Authority’s December 9 letter:

San Diego County Water Authority Dec. 9, 2013 letter to MWD

Read  MWD’s response:

MWD Jan. 10, 2014 response to Water Authority

MWD Over-Collects by $24 Million in July and August

Just two months into fiscal year 2014, MWD has already over-collected nearly $24 million from Southern California water ratepayers.  At this rate, MWD is on pace to collect over its board-adopted maximum reserve by more than $140 million this year.

During its September 9, 2013 Finance and Insurance Committee meeting, MWD staff reported water sales are about 10 percent higher this year than projected, and $24 million higher than budget.

Over the past two years, MWD over-collected $314 million more in revenues than expenses, which caused its reserves to exceed the board-adopted maximum level by $75 million. In June, business groups, community activists, mayors and several Southern California water agencies tried unsuccessfully to convince MWD to refund the over-collected monies to ratepayers and roll back a planned 5 percent rate increase for 2014 to stop the over-collections.

Instead, MWD’s board voted to increase its spending by $75  million; kept its rate increase at 5 percent for 2014; and refused to refund money to cash-strapped cities and water districts. Further, at the same meeting, the board voted to hold MWD’s property tax rate at the current level, which suspended taxing limitation imposed by its own Act and will result in additional revenue for 2014 of $4.7 million.

MWD’s CFO said staff would give a more detailed financial picture during MWD’s October 7 Finance & Insurance committee meeting.

To view MWD’s September 9 Finance and Insurance Committee meeting, click here.
To view MWD’s June 11 Board meeting, click here.

Read more about this issue here.

Diverting recycled water could save Burbank thousands of dollars

Each year, Burbank releases more than 2 billion gallons of unused recycled water into the Los Angeles River, but a plan to divert some of that for use elsewhere could save the city thousands of dollars on the cost of importing potable water.

Under the proposed deal, the Burbank Water Reclamation Plant would redirect 110 million gallons of recycled water to North Hollywood each year, earning the utility credits that would be applied to the cost of importing potable water from the Metropolitan Water District of Southern California. Those credits would effectively save the city about $180,000 annually.

Click here to read the story.

If They Build It, Who Will Come?

Plans by Southern California water agencies to reduce their demand for imported water were highlighted this week by the National Geographic Newswatch blog and the Los Angeles Times.

National Geographic  reported on the efforts of Santa Monica, Camarillo, Ventura County Waterworks District No. 1, Long Beach Water Department, and Los Angeles Department of Water and Power to reduce their demand for imported Bay-Delta and Colorado River water by more than 40 billion gallons per year, equivalent to the amount of water 1.11 million people would use in one year. The article highlights efforts by these jurisdictions to boost local supplies through recycling, conservation and development of more local supplies.

The Los Angeles Times article discusses how a proposed project of the Los Angeles Department of Water and Power might make that a reality. LADWP announced plans to build the largest groundwater treatment plant in the world to reduce its purchases of costly imported water.

“By 2035, we plan to reduce our purchases of imported water by half,” said James McDaniel, LADWP’s senior assistant general manager.

Similarly, many of MWD’s member agencies have plans to reduce their demands for imported water over the coming decades. In January, a  report compiled by the San Diego County Water Authority using the member agencies’ Urban Water Management Plans found that planned local supply projects could reduce demand for imported water by as much as 1.2 million acre-feet by 2035. To view a map of the planned local projects, click here.

Yet, MWD – Southern California’s water wholesaler and  the biggest buyer of water from the State Water Project – has not considered many of these  projects in its decision-making about support for a proposed Bay-Delta facility. Ratepayers are being asked to pay for a project that currently does not take into account the reality that most water agencies in Southern California are planning to decrease their imported water purchases from Metropolitan, and thus, in turn, lessen the demand for water from the Bay-Delta. A coalition of environmental groups, water agencies, and businesses has asked the state to include the following in its analysis:

■ What is the real demand in Southern California for water imported from the Bay-Delta?

■ What size project are agencies willing to pay for, as demonstrated by firm, long-term financial commitments by those who will benefit from it?

MWD acknowledges that its member agencies are not obligated to purchase any of the water available from MWD. If MWD’s member agencies continue to reduce their purchases of imported water from Metropolitan, as they already are doing, who will be left to pay Metropolitan’s share of the Bay-Delta costs?

Despite Protests from Community and Water Agencies, MWD’s Over-Collection from Ratepayers Will Continue

Despite efforts by business groups, community activists, mayors and several Southern California water agencies to stop  unecessary rate hikes and increased property tax collection by the Los Angeles-based Metropolitan Water District of Southern California, the board voted to increase spending by $75 million instead of returning the money or rolling back rate increases.

The Southeast Water Coalition Joint Powers Authority on Monday sent a letter to MWD’s board of directors urging the giant water wholesaler to maintain current water rates instead of charging 5 percent more in 2014.

“Given that MWD has evidently underestimated its FY2014 water sales, SEWC calls on the Board to… hold the current rate,” the letter said.

The coalition also criticized MWD’s plan to suspend the state’s limit on the agency’s property tax rate, saying it appears to be an “end run around the California legislature’s corrective action of 1991 to hold MWD’s property tax rate to bond costs actually paid.”

San Diego Mayor Bob Filner, working with a business alliance including the San Diego Regional Ecomonic Development Corporation and Chamber of Commerce, led the charge to protect the regional economy.  The Mayor, Chamber and EDC submitted letters to MWD protesting the rate and tax increases.  Oceanside Deputy Mayor Jerome Kern and Poway City Councilman Jim Cunningham also spoke on behalf of their ratepayers to show MWD  how its rate increases hurt the average family.

The San Diego County Water Authority also objected and sent a letter questioning MWD’s budget actions because MWD has not developed a long-range financial plan to ensure its ongoing obligations and investments will be supported by its member agencies. Water Authority delegates to the MWD board asked MWD to refund the $75 million in overcharges to ratepayers across the region, including $16.4 million to San Diego County, and forego additional tax money.

Officials at Burbank Water and Power also sent MWD a letter of concern on Monday, saying they were “disappointed, to say the least” about the rapid growth of MWD’s reserves.

“It appears that MWD has missed an important step for good governance,” said Burbank’s letter. “The lack of clear and direct communication as to the current state of MWD’s budget and reserves has done real damage to the credibility of MWD management.”

Burbank officials said they don’t support MWD’s plan for a 5 percent rate increase in 2014. “The facts simply no longer support it,” their letter said.

Long Beach representatives also implored the board to roll back next year’s planned increases and Mayor Robert Foster from Long Beach sent a letter.

MWD over-collects from ratepayers… and demands more

The Los Angeles-based Metropolitan Water District of Southern California is pushing ahead with water rate increases despite projections it will over-collect from Southern California ratepayers more than $217 million in excess of its needs this fiscal year alone. In spite of this fact, on April 9, MWD’s board decided to increase its readiness-to-serve charge by 17 percent, increase its capacity charge by 34 percent, and, keep in place its previously approved 5 percent water rate increase beginning January 2014. Since 2009, MWD rates have increased more than 100 percent.

Before the vote (item 8-2) to increase rates, the San Diego County Water Authority and the cities of Compton and Long Beach asked MWD to rethink whether these large increases in MWD charges and 5 percent rate increase were really necessary in 2014, when it is so clear that MWD’s actual water sales and costs once again varied substantially from those estimated by management. MWD set rates in 2012 for rates in 2013 and 2014, which were based on the assumption that 2012 revenues would roughly equal expenditures. MWD ended 2012 by over-collecting $100 million more than it needed.

MWD delegate Diana Sanchez, who represents the city of Compton, told the board that in her city there are families working multiple jobs just to make ends meet, and others on fixed incomes that cannot afford another rate increase. “This increase will not break MWD, but it could break a family struggling to survive.”

“We know for a fact that MWD is collecting substantially more revenues than its budget or cost of service supports,” wrote the San Diego County Water Authority’s MWD delegates in an April 8 letter. “To move ahead with higher 2014 rates is a disservice to the cities and ratepayers we serve, many of whom are struggling with their own budgets and to make ends meet. MWD does not need a 5 percent water rate increase in 2014.”

The Water Authority delegates objected to increased Readiness-to-Serve and Capacity charges being voted on by the board. In addition, the Water Authority asked MWD to return to its practice of adopting rates annually instead of every two years in order to respond to changed conditions and material differences between actual water sales and costs as contrasted with those estimated by management in setting the water rates and charges. The Water Authority delegates urged MWD to adjust its budget and water rates to better reflect its actual revenues and costs in order to be more sensitive to the cities and ratepayers it serves. Read the Water Authority letter objecting to the rate increase and over-collection by clicking here.

Further, MWD has a long track record of materially overestimating or underestimating its water sales and costs, resulting in poor financial practices such as raiding funds intended for capital projects in years when revenues are insufficient to pay operating costs.

In years like this, when MWD ends up with revenues substantially in excess of its costs – and even in excess of its allowable reserves, MWD looks for new, unplanned ways to spend the money rather than return it back to weary ratepayers.

Fighting for fair rates is nothing new for the Water Authority. Last year, the Water Authority successfully protested a 7.5 percent rate increase MWD had planned for 2013. The Water Authority instead asked the board to consider adopting a 3 percent increase, which would have preserved funding for water supply and infrastructure needs, while cutting unnecessary operational expenses. The Water Authority also asked MWD to perform a new cost of service analysis in compliance with Prop. 26 to ensure its rates are reasonably proportional to the costs of the services it provides. MWD’s board refused to consider or study this option and is continuing on this course by moving forward with the planned additional 5 percent increase in January.

Read the Water Authority’s proposal and letters here.

MWD’s $545 million debt for lifetime medical benefits to be passed on to ratepayers, reports OC Watchdog

oc_register_logoOC  Watchdog reporter Keegan Kyle reported recently on MWD’s growing mountain of debt to fund an uncommon retirement benefit: lifetime health care for employees and their spouses.  These costs, he wrote, will eventually be passed on to water ratepayers in the form of higher rates.

He also reported that MWD has accumulated $545 million in debt to fund the benefit, mostly because they have not been setting any money aside to cover the cost for current employees.  And, despite plans to incrementally fund the benefit over time,  projections show that those funds are not  enough.

MWD’s consultants project that the debt is currently growing by more than $30 million annually. Since 2005, the tab  has grown 76 percent. It could rise even higher,  if more people than expected retire, live longer and health care costs keep rising.

Concern over  the rising cost of MWD’s retiree medical benefit, and its impact on water ratepayers was also expressed last fall  by former San Diego Mayor Jerry Sanders.  In a letter to MWD Chariman John Foley, Mayor Sanders wrote to MWD and asked MWD for an accounting of the impact on water rates.

MWD Chair Foley responded by saying that MWD will continue to fund and approve rates that pay for this benefit.

MWD will be required to update its numbers and report those to the board this spring.  Once it becomes available, that presentation and update will be posted on this website.

To read the OC Watchdog story, click here.