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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.

Raise a glass to greater water independence

Take a close look at that next glass of water from the kitchen faucet. Squint hard and you may see a reflection of the blood, sweat and tears it took to get it into your home.

A little history may help you see it. Think back to 1991. At the time, San Diego County got 95 percent of its water from the wholesaling bully up the coast in Los Angeles, the giant Metropolitan Water District of Southern California. The state was in the midst of severe drought. The water bully cut supplies to San Diego by fully 31 percent and warned of even more cuts, threatening economic disaster here until the “Miracle March” rains rescued the region.

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?

Battling Water Districts Feud Over PR Contract

An L.A.-based water district, which has long been at war with San Diego’s regional water municipality, secretly hired local lobbyists, and hid the work through a small, member agency in Riverside County, according to the San Diego County Water Authority.

California Strategies, LLC, a local lobbying outfit, is being paid $15,000 a month to work on behalf of the Metropolitan Water District (MWD) on a San Diego-based public relations campaign, records show. Except, MWD isn’t paying the invoices, a smaller agency in Riverside County with no direct connection to San Diego is funding the work – a point of contention for San Diego water authorities.

To view the related video on NBC 7/39, click herehttp://www.nbcsandiego.com/investigations/video/188675681.html

Judge fast-tracks water rate complaint

A Superior Court judge has expedited the San Diego County Water Authority’s challenge to the Metropolitan Water District by allowing two separate water rate lawsuits to be pursued simultaneously.

In the ruling on Friday, Superior Court Judge Richard A. Kramer said he would coordinate the agency’s two challenges to wholesale water rates set by the Los Angeles-based Metropolitan Water District.

Request for Negotiation under Paragraph 11.1 of the Amended and Restated Agreement between the Metropolitan Water District of Southern California and the San Diego County Water Authority

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.

San Diego County Water Authority to protest MWD’s rates at Monday hearing

Draft Report: The Cost of Water in San Diego: the SDCWA-IID Water City of San Diego Transfer and SDCWA Water Rates