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Historic win for County Water Authority over MWD villains

On Friday, the San Diego County Water Authority won a historic victory — and sweet vindication — when a judge affirmed its contention that it has been systematically overcharged by the giant Metropolitan Water District of Southern California, known as MWD.

Click here to read the story.

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.

CalAware’s President urges you to citizen up

The California Public Records Act (CPRA) is based on the fundamental principle that the public has a right to public documents. Passed into law in 1968, it has been a part of our lives for so long that it’s easy to take it for granted—believing that it will always remain as it is.

But as recent state budget-related votes have shown, that’s not always true…

So why does this even matter? Well, it matters because information is power and what you don’t know can hurt you.

Take, for example, the ongoing battle between two public agencies—he San Diego County Water Authority (SDCWA) and the Metropolitan Water District (MWD) of Southern California. The SDCWA is a wholesale supplier of water and MWD is its main supplier. MWD sets the rates charged for your drinking water and passes those rates on to SDCWA. Setting those rates is a complicated process, so the more information about how those rates were set, the better. And that’s where this battle gets even more interesting.

Click here to read the story.

Water agency unfair to San Diego

Founded in 1928, the Metropolitan Water District (MWD) is a confederation of 27 local water agencies that stretches from the Mexican border north to Santa Barbara.

MWD has been the dominant purveyor of imported water to this region for most of its history, acting as a secret, shadow government. It created an impenetrable megalith that did as it wished until the San Diego County Water Authority (SDCWA) dared to guarantee its own source of this vital resource and secure its own water supply.

This quest began in 1995 as a result of MWD’s arcane “preferential rights” policy, which gives the Los Angeles region privileged access to MWD’s water during a drought. About 85 percent of San Diego’s water supplies came from MWD. Los Angeles’ need for backup water in a drought could balloon from 34 percent to 65 percent or more.

Click here to read the story.

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 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.