Riverside County water agency fronting public relations campaign for MWD

Public records show a Riverside County water agency is funding a $15,000-per-month public relations campaign in San Diego County on behalf of the Los Angeles-based Metropolitan Water District of Southern California.

The full scope and objectives of the public relations effort are unknown because Eastern’s officials are refusing to comply with state public records law and turn over all unedited relevant documents.  The  San Diego County Water Authority  filed a lawsuit on January 22 seeking a court order compelling Eastern to release the records.

The Water Authority and Eastern both buy water from MWD, a wholesale water supplier for Southern California.  In 2010 and 2012, the Water Authority sued MWD, claiming that its water rates and charges illegally overcharge ratepayers in San Diego County to the benefit of ratepayers in other parts of MWD’s service area.  The cases are pending in San Francisco Superior Court.

“Eastern’s elected officials and staff can’t legally hide the true intent of a public relations contract just because Eastern is involved in litigation with the Water Authority,” said attorney Kelly A. Aviles, who specializes in California Public Records Act law and represents the Water Authority in its lawsuit against Eastern. “The California Constitution and state law require public agencies to promptly provide complete copies of documents, emails, calendars and other records relating to the conduct of the public’s business.”

Aviles also is vice president of open government compliance for Californians Aware, a nonprofit organization established to help state residents understand how to hold government agencies and other public institutions accountable.

On Nov. 2, 2012, the Water Authority sent a public records request to Eastern for a copy of a public relations contract the agency had issued.

Eastern initially gave the Water Authority a copy of the contract but didn’t include a June 1, 2012, letter that included details on the nature of the public relations campaign in San Diego County. The Water Authority pressed Eastern to comply with state law.  Eastern then sent the letter, but blacked out the section that detailed the scope of the public relations campaign.  The Water Authority  sent another letter, which then prompted Eastern to disclose some of the language that had been redacted.  It showed  that the public relations effort was being conducted on behalf of “…MWD and its member agencies.”   Unbeknownst to them, Eastern’s water ratepayers have spent $60,000 so far on behalf of MWD.

Further, surreptitiously funding a public relations campaign on behalf of MWD appears to be at odds with provisions of SB 60, a law passed by the Legislature in 1999 that prohibits MWD and its member agencies from “any association structure or identification that is likely to mislead the public as to the association’s true identity, its source of funding or its purpose.”  Passage of the legislation followed revelations of unethical behavior by MWD that played out in newspapers across the state.

To learn more about the California Public Records Act, visit: http://www.sunshinereview.org/index.php/California_Public_Records_Act#ixzz2HgZjpHmB

Local supply projects could reduce demand for imported water by as much as 1.2 million acre-feet by 2035

Southern California water agencies have plans to potentially develop between 400,000 and 1.2 million acre-feet local water supply by 2035.  These plans will have a direct impact on future demand for water from the Bay-Delta, helping achieve the dual goals established in the 2009 water bill package.

The data was collected from the Urban Water Management plans of the 26 member agencies of the Metropolitan Water District of Southern California. The San Diego County Water Authority compiled this data into a map and a list so that the public could more readily visualize the impact of the planned projects on future demand for imported water.

List of water projects in Southern California.

List of water projects in Southern California.

To give some perspective, a million acre-feet is 1.6 times Los Angeles’ annual water use. It is enough water to irrigate all the grain produced in California annually. It is enough water to satisfy the household needs of 6.7 million Californians.  (Source: The Pacific Institute)

Yet, Metropolitan – 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 the necessary size, scope and cost of a Bay-Delta facility.  For example, the San Diego County Water Authority recently announced plans to buy up to 56,000 acre feet of desalinated seawater beginning in 2017 – but this demand reduction has not been acknowledged by Metropolitan.  This is enough water to meet the annual needs of 110,00 families.

Planning for a Bay-Delta project that ratepayers will be asked to pay for should logically 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.

Further, there are critical questions that haven’t been answered — and must be answered — to know what size, scope and cost of a Bay-Delta project makes the most sense, including:

  •  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?  Metropolitan acknowledges that its member agencies are not obligated to purchase or use any of the water available from Metropolitan.  If Metropolitan’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?

MWD’s spending on public relations and plane fares questioned by investigative news team

An investigative news team from KGTV-Channel 10  recently examined how the Metropolitan Water District of Southern California spent ratepayer money over a five month period.  The expenditures include the hiring of a $150,000- salaried PR person in San Diego and nearly $25,000 for airfare for out-of-state executives to fly to meetings.  The spending occurred as MWD justified raising rates for the sixth consecutive year for infrastructure improvements and water treatment. 

To watch the KGTV investigation, click here:

Water Authority calls for the public’s business to be conducted in public at MWD

The San Diego County Water Authority is calling for MWD to hold its policy discussions in the MWD board room, not in backrooms across Southern California.  On October 4, the Water Authority’s General Manager sent a letter asking several MWD member agency managers to end MWD’s practice of discussing MWD agenda items in a series of monthly “caucus” meetings – most of which are not open to the public – and instead hold these discussions where they belong: in MWD’s publicly noticed standing committees and board meetings. To read the letter, click here.

The call to end the private meetings is reinforced by documents obtained by the Water Authority under the California Public Records Act that  exposed a disturbing pattern and practice by MWD and its member agencies of meeting in secret. Earlier this year, thousands of documents revealed that a voting majority of MWD member agencies have been meeting in secret since 2009 to develop policy positions, including rate discussions, and to organize votes to  ensure their passage.  Many of these documents were posted by the Water Authority on this website.  To view a PowerPoint overview of the documents and the findings, click here.  To view the documents released in a binder to the media and the community, click here.

 

MWD’s Hopeful Expectations

 Long before financial advice came from Suze Orman and Warren Buffett, there was Mr. Micawber. A character from Charles Dickens’ novel, “David Copperfield,” Mr. Micawber’s “hopeful expectation” that something will turn up wasn’t enough to keep him out of debtor’s prison.

 Now known as the “Micawber Principle,” the simple idea of living within one’s means takes discipline to accomplish. Many cities and public agencies have recently had to make painful budget decisions in order to live within their means. But the Metropolitan Water District of Southern California has been the exception, continuing to ignore troubling warning signs and refusing to make the spending adjustments necessary to live within its means based on realistic long term sales projections. Instead, it continues to base its spending decisions on the hopeful expectation that its water sales will one day return to past levels – this, in spite of statewide conservation mandates and plans by its member agencies to develop alternative local water supplies.

 Over the past several months, the San Diego County Water Authority has written a number of letters to MWD’s executive staff and board members about critical issues that are not being addressed, including Metropolitan’s failure to develop or adopt an update to its outdated 2004 Long Range Finance Plan. Similarly, MWD has failed to update its central resources planning document, its “Integrated Resources Plan” or “IRP” to reflect the substantially reduced demands on its imported water supply system. Because it lacks coherent water resource and finance plans, MWD continues to spend money on projects that may not be needed and no one is willing  to pay for.

 Due to its size and the importance of its mission, MWD’s refusal or inability to grapple with core business issues should be a matter of concern to all,  because the fallout will ultimately impact every Southern California water ratepayer.  That is because, if MWD doesn’t have enough revenue to pay its bills, its board of directors has the power to continue to raise water rates as well as an option to increase taxes under specified circumstances. Either way, Southern California residents will end up paying the tab.

In an effort to bring these  issues to light before the financial crisis hits, the Water Authority is establishing a library of the letters it has sent over the past two years on MWD finances, rates, water sales and other critical issues.  The first set of letters deals with concerns over information that MWD is putting forward about its finances to Wall Street.

 In its Official Statement for a potential refunding of Water Revenue Bonds, the MWD  Board  voted in August  to accept financial projections  that:

  • Fail to adjust current and future spending to reflect the reduced sales projections.
  • Fail to identify the amount of water that will be sold at a discount to meet projections.  For 2012, it sold 225,000 acre-feet at a discount.  Even with these discounted sales, MWD’s firm water sales were 268,000 acre-feet below its budget.
  • Fail to identify the financial and water rate impacts and risks associated with discounted water.

These broad concerns, along with specific comments on the draft Official Statement were submitted to MWD’s board on August 20 by the San Diego County Water Authority’s four MWD board members.  To read the letter, click here:

To read the rest of the Water Authority’s letters on MWD’s Official Statements, click here:

We will continue to post new letters to ensure that the public has more access to information and an opportunity to be heard as important spending decisions are being made that will impact not only today’s water ratepayers but future generations.

 

 

All-American Canal

$50K “independent” report seeks to undermine historic water transfer agreement

UPDATED:   More than a month ago, the Water Authority released a draft report produced by several Southern California water agencies that was to be the centerpiece of a major p.r. campaign to confuse the public about the costs related to the Water Authority’s water transfer agreement with the Imperial Irrigation District.  The draft report, discovered as part of a California Public Records Act request by the Water Authority, revealed a plan to surreptitiously commission the Los Angeles Economic Development Corporation to produce what the water agencies hoped would be viewed by the media and the public as an “independent” report.   The public records revealed that the consultants were handpicked for their point of view, and that MWD staff worked on the report and helped to edit the draft.

Read the North County Times, now U-T San Diego, story on the report and the consultants that produced it.

Watch the KPBS-TV interview regarding the study.

Following its disclosure, the Water Authority requested to meet with the LAEDC and correct a number of factual errors and omissions in the report’s data.  Additionally, the Water Authority suggested an independent peer review of the report by an independent economist that would be selected jointly by MWD and the Water Authority.  Although an LAEDC staff person initially agreed to meet, no effort to follow-up on the Water Authority’s offer was made.

Now, more than 18 months and $50,000 later, the agencies released the final report on April 23 with numerous factual errors and omissions, including:

  • The price that the Water Authority pays the Imperial Irrigation District for its independent transfer supplies have nothing to do with whether or not MWD’s transportation rates are legal.
  • The Water Authority’s court challenge is over the price that MWD charges it to transport water purchased from Imperial Valley.  The Water Authority is NOT suing IID over the price we’re paying for the water supplies.
  • The 45-to 75-year water transfer agreements are now in their tenth year.   Those transfer supplies have greatly benefitted not only San Diego County, but all of Southern California.  During the last drought in 2009 and 2010,  when MWD was forced to cut back water deliveries to its member agencies by 13 %, these supplies possibly averted even greater cutbacks.  In San Diego County, the transfer supplies allowed the Water Authority’s cutback to its member agencies to be 8% instead of 13%.  They also reduced regionwide demand on the system, which helped all of MWD’s member agencies during a during a time of  limited supply and uncertainty.
  • Because the facts matter, the Water Authority is currently analyzing the final report, and will publish the results on this website.

To view the Water Authority’s March 8 letter to the LAEDC with its initial concerns with the report, click here.

Water agencies beginning to listen to ratepayers’ calls for MWD to cap rate increases and cut budgets

 Water agencies across Southern California are beginning to listen to ratepayer’s calls for cutting costs and capping rate increases at the Metropolitan Water District of Southern California. Central Basin Municipal Water District, which serves about 2 million people in the southeast Los Angeles-area, sent a news statement asking MWD to rescind the rate increases it adopted last week.

Central Basin’s General Manager Art Aguilar said in the news statement, “We implore the Metropolitan Water District to rescind their recently adopted rates and freeze their water rates at current levels.  The lion’s share of our rates belongs to Metropolitan. It won’t be until they begin making cuts similar to ours that our ratepayers will really start to feel the effects…. But how have we gotten to a point where residents are being forced to decide between paying for water and buying food for their families? This question remains unanswered.”

Jim Knott, a resident of Oceanside, asked MWD’s board a similar question during its April 10 board meeting. “What should I tell senior citizens who have to split their medicine in order to pay their water bill? I asked this question last month, and I’m still waiting for an answer.”

While board members had the opportunity last week to adopt a more ratepayer-sensitive proposal by the San Diego County Water Authority, a majority of MWD’s board members rejected it.  Instead, they hastily adopted a proposal – with literally no comment or discussion – that increased “average” rates by 5 percent in 2013 and another 5 percent in 2014. No one pays “average” rates at MWD.  The rates MWD’s board approved April 10 increase its Tier 1 Treated water rate by 6.7 percent in 2013 and another 5.1 percent in 2014.  Water rates to many ratepayers could be even higher, as the costs their local water purveyor incur are also added to the retail customer’s water bill.

To see which delegates voted for the 5% increase, click here.

 

 

MWD approves higher than necessary rate increases for 2013-2014

MWD Board shoots down ratepayer-sensitive Water Authority plan that would have capped average MWD rate increases at 3 percent a year for next two years

Disregarding public concern over rapidly rising water rates, the Metropolitan Water District of Southern California’s board of directors today approved raising its “average” water rates by 5 percent in 2013 and another 5 percent in 2014.  No one pays “average” rates at MWD.  The rates MWD’s board approved today increase its Tier 1 Treated water rate by 6.7 percent in 2013 and another 5.1 percent in 2014.

MWD’s board voted down an alternative proposed by the San Diego County Water Authority that was more sensitive to water ratepayers.  The Water Authority’s proposal called for reducing spending and capping average rate increases at no more than 3 percent per year for the next two years.

“By its vote today, MWD’s board continues to spend more than is necessary to provide a safe and reliable water supply,” Water Authority Board Vice Chairman Thomas V. Wornham  said.  “In doing so, MWD rejected a more sensible option to reduce its operating costs and discretionary spending, as most other water agencies and cities in Southern California have.  We are deeply disappointed that MWD’s board and staff did not give meaningful consideration to our proposal, which would have funded all of MWD’s core needs and provided some much-needed relief to 19 million water ratepayers in MWD’s service area.”

Wornham was part of a contingent of San Diego County water officials, city leaders and ratepayers who traveled to Los Angeles to testify at MWD’s board meeting.

MWD board approved the rate increases for 2013 and 2014 to support a $1.78 billion budget for fiscal year 2012-2013 and $1.89 billion spending plan for 2013-2014.  MWD has pointed to rate increases as necessary to fund repair and replacement of aging infrastructure, including maintenance and repair of MWD’s Colorado River Aqueduct.   In reality, the budget recommended by MWD staff increases funding for travel expenses, staffing levels and consulting services.  MWD’s rates are mostly being driven by reduced water sales, which are down more than 30 percent since 2006.  To learn more about the real reasons that MWD needs to raise rates, click here to read the first four installments of Fact vs. MWD Fiction.

The Water Authority’s alternative proposal, submitted to MWD’s board on March 21 after previous attempts to have MWD’s board and staff explore additional budget cuts to lower rate increases failed, would have made the 3 percent rate increase cap possible though $116.5 million in reduced spending.  The proposed spending reductions would have left funding for necessary repairs and maintenance of aging infrastructure intact, but would have reduced overall operations and maintenance spending by 10 percent.  It also would have suspended conservation funding for two years, to give a break to weary water ratepayers who have heeded MWD’s call to conserve water – but are still paying more.  Significant reductions in MWD’s water sales also show a diminished need at this time to fund its expensive rebate programs.

During the public comment period of MWD’s Board meeting today, the Water Authority also presented evidence that questions the legality of MWD’s proposed rates and charges.  The documents demonstrate that MWD’s rate structure favors some member agencies over others, and does not adequately recover the costs to provide some services, while overcharging for other services.  Under its rate structure, ratepayers in San Diego will be overcharged by $40 million this year, an amount set to grow with MWD’s approved rate increases for 2013 and 2014.

Under California law, public agencies must prove that rates charged bear a fair and reasonable relationship to the cost of providing those services and the customer’s burden on the system.

For example, the Los Angeles Department of Water and Power buys different amounts of water every year, depending on how much of its own water it receives from the Sierra Nevada via its own Los Angeles Aqueduct.  MWD’s rates do not reflect the costs MWD incurs to provide standby supplies and capacity to accommodate these annual demand fluctuations.  As a result, LADWP receives a $35 million to $40 million annual benefit while MWD’s other member agencies, including the Water Authority, pick up a disproportionate share of those costs through MWD’s rates.

MWD’s decision today perpetuates its rate structure that the Water Authority contends is illegal and is challenging in court.  The Water Authority filed suit over MWD’s 2011 and 2012 wholesale water rates in 2010.  The Water Authority alleges that MWD improperly overcharges for the transportation of water and uses that money to subsidize the cost of MWD water.  By 2021, if left unchallenged, the overcharges could grow to more than $217 million annually. To learn more about the rate challenge, visit www.sdcwa.org/mwdrate-challenge.

Fact vs. Fiction: MWD Has a Spending Problem

MWD Fiction: MWD water rates and charges continue to increase, driven primarily by the need to maintain and repair important MWD water facilities such as the Colorado River Aqueduct.

FACT: The truth is that MWD has a spending problem.  A business that experiences a sharp drop in sales or a cut to its income normally has to cut spending in order to balance the books and stay in business and pay its bills.  The same is true for a household budget.  Less  money coming in means expenses need to be cut.

But MWD is avoiding making these difficult  decisions. While its sales have dropped by 30%, its annual operating budget has steadily increased.  Since 2006, MWD’s operating budget has grown from $290 million to $394 million (proposed for 2014), an increase of 36 percent.

 

 

 

 

 

 

 

 

 

 

But it gets worse.  MWD has been spending more money than it has collected.  Even with sharply higher water rates, MWD has not collected enough money to cover its expenses in six out of the last eight years.  Which takes us back to the budget and water rates the MWD board will be voting on April 10.

What can MWD do to reduce spending and water rate increases in 2013 and 2014?  Reduce its operations and maintenance budgets and suspend conservation subsidies for the next two years.

To read more about how MWD can cut its spending and reduce water rate increases, read this: Recommendation to MWD Board to Cap Rate Increases at 3%.

Stubborn things, facts are.
Check back for the next installment of MWD Fiction vs. Fact.

Fact vs. Fiction: Why Does Water Cost More When We’re Using Less?

MWD Fiction: Recent increases in MWD water rates and charges are driven primarily by the need to maintain and repair important MWD water facilities such as the Colorado River Aqueduct.

FACT: When MWD’s water sales decline, the cost of each unit of water sold rises. This is really the primary driver behind  MWD’s water rates, which have increased by 101 percent since 2006 (through 2013 and 2014, proposed). 

In fact, MWD’s two-year water sales are projected in its proposed budget to be about 30 percent lower in 2013 and 2014 than they were in 2006 and 2007.While MWD’s water sales are declining, its fixed costs are increasing, some of which can be reduced. This confluence of high fixed costs and lower revenue is causing water rates to rise.  MWD’s fixed costs must be paid from reduced sales revenues. 

Table 3 shows that in 2006 and 2007, MWD sold 4.38 million acre-feet over a two-year period.  MWD projects it will sell 3.04 million acre-feet of water in 2013 and 2014.

 

 

 

 

 

 

 

 

 

 

Lower water sales are an especially big problem for MWD because it has very high fixed costs and very low fixed revenues:  more than 80% of its expenses are fixed (like a “mortgage”) as contrasted with 15% fixed revenues.  And, this problem is getting worse, not better. Fixed revenues as a percentage of MWD’s total revenues are steadily declining under MWD’s current rate structure.  The rest of MWD’s revenues come from water sales — a variable source of revenue.

 

 

 

 

 

 

 

 

 

 

MWD has another BIG problem: spendingWe’ll focus on that in the next edition of Fact vs. Fiction.

Stubborn things, facts are.
Check back for the next installment of MWD Fiction vs. Fact.