Time to Stop the Shell Games .. Time to Start the Transparency

Once again the giant Metropolitan Water District of Southern California is playing games. This time, they are playing shell games with our ratepayer money. Unfortunately, these shell games have real consequences – we could be facing increases in water rates of at least $15 per acre-foot.

Here’s how the ratepayer shell game works:

Piecemeal Decisions with Huge Price tags: Staff puts forward Items of huge financial impact without a comprehensive financial plan. It recommended to the Board in May to spend $350 million on unbudgeted conservation expenditures – namely turf removal — that now staff says the action has placed MWD in a precarious fiscal position. This situation was completely foreseeable but was not told to the Board.

The Shell Game – Draining an Important Fund: The May action not only spent MWD’s not-yet-realized excess revenue collection, it also completely drained its Water Management Fund. This fund was established for the very purpose of covering future costs associated with buying water to replenish storage and to pay for water transfers – not to fund turf removal.

Lack of Transparency: Staff expressed no concern when it recommended that the Board spend down the Water Management Fund. In fact, the Board was repeatedly told in May that staff’s recommendation would not result in any rate impacts.

Oops – Now We Need to Borrow Money: But this month’s action to borrow $300 million to cover potential costs associated with replenishing storage and water transfers was precipitated entirely by May’s unbudgeted expenditures. MWD staff reported in the past that every $20 million in debt issuance equates to $1 per acre-foot increase in water rates based on 2 million acre-feet of water sales; the rate increase will be higher for lower water sales volumes. This action will in fact result in increases in MWD water rates by at least $15 per acre-foot. But like the action in May, staff is not telling the Board what this borrowing will do to MWD’s water rates.

The Shell Games Must Stop: This month’s action is just another financial shell game. The Board memo states that the debt issuance would provide MWD the “financial flexibility” desired because of the projected draw down of reserves as a result of the May action. All in order to pay for the unbudgeted conservation programs, and that “expenditures for water management activities such as replenishing storage and funding transfer and exchange programs could significantly [further] draw down financial reserves in the near future.”

Did staff not foresee when it made the recommendation to spend down the Water Management Fund in May to pay for more turf removal that it would have less flexibility to purchase transfer supplies and to replenish depleted dry-year storage?

While this month’s action clearly has rate implications, the board memo yet again makes no reference to rate increases.

The shell games must stop. We need to usher in a new era of transparency in which big financial decisions are made with all the facts on the table – including potential rate increases and impact on the overall budget.

The San Diego County Water Authority delegates to the MWD Board oppose the July 14, 2015 Board Item 8-4 and urge fellow Board members to vote no on this action as well. This action is an inappropriate attempt to debt-finance very expensive turf rebates that produce no significant or immediate supply relief during the drought.

Click here to read our letter. Click here to read the MWD letter.

It’s time to stop the shell games…and long past time to start the transparency.