Introduction

Originally posted February 2010

For the first time, the Encinitas Taxpayers Association (ETA) is asking San Dieguito Water District (SDWD) customers to protest the SDWD’s proposed water rate increases. The City Council plans on counting anyone who does not respond as voting yes on the increase (vote info).

Download a protest form or a protest flier.

The proposed rate increase for a typical water user will be 14% in March and automatically followed by another 13% increase next January. This results in an 85% increase since 2005. The SDWD has raised rates 4 times and 44% during the previous 4 years.

The SDWD has done well financially. The SDWD has been able to issue a 15% pay raise to SDWD staff over 2008-2012. The SDWD had $1.35 million sitting in its rate stabilization fund last summer, when the SDWD budget was adopted.

The ETA is also organizing an initiative to open up the SDWD board to non-councilmembers. The Encinitas City Council now governs the SDWD. The ETA recommends the SDWD’s governing board be opened up to independently elected officials who have no conflicts of interest. This is critical during negotiations between the SDWD and the City. The City and SDWD enter into many financial agreements and the current ratepayer safeguards are inadequate.

The SDWD claims the rate increases are necessary because of the increased costs of imported water and the need for upgrades and retrofitting to the district's infrastructure. The ETA recognizes most of those projects as appearing legitimate. However, the ratepayers could get a better deal.

The ETA is composed of members with diverse perspectives and their reasons for opposing the rate increase are varied. They include:

1. New rate increases should be opposed until the ratepayers have independent representation,
2. Raising rates in the midst of the economic downturn is bad timing,
3. Rate increases for seismic retrofitting should be written so they sunset once the projects are complete,
4. The residential customers of western Encinitas (i.e. SDWD) should no longer subsidize cheap water for the municipal government of Encinitas.

Under Prop 218, if 50%+1 of the SDWD customers disapprove in writing, rate increases will be temporarily blocked. Ratepayers who do not file objections are counted as yes votes for the rate increase.

Ways to Help
1) Sign and mail this protest form,
2) Display a yard sign,
3) Distribute protest postcards on your block,
4) Forward this email.

We will be able to cover the city if people like you share the protest postcards with our neighbors. Request a sign or set of postcards for your neighborhood from eta@encinitastaxpayers.org.

 

SDWD Independence

There are numerous issues at the San Dieguito Water District (SDWD) that could result in SDWD ratepayers paying more than they should.

What would make the rates and fees unfair?
1) SDWD ratepayers paying for city functions instead of water.
2) Only the western half of the city paying for city functions through their water bills (A different and wholly independent water district provides water to eastern Encinitas).

How could that happen?
There is no independent oversight of the SDWD. Currently, the City Council automatically serves as the SDWD Board of Directors. The SDWD and the City enter into multiple cost sharing agreements and the Council represents both the City and the District ratepayers at the same time.

Are there incentives to allocate costs unfairly?
The City cannot raise tax rates without asking the voters for permission, but increased costs can be transmitted to ratepayers during regular rate increases. Unfair allocations can be blurred by legitimate reasons for rate increases.

The City Council could benefit greatly by shifting cost burdens to the SDWD, because revenue can be raised without stirring the public.

What do we propose as a solution?
Regardless of any past abuses, the situation leaves the ratepayers inadequately protected. We propose adding directly elected members to the SDWD Board of Directors. This is a common governance structure of water districts in the region.

We expect ancillary benefits beyond reducing conflicts of interests during “negotiations” with the City. Independent District Directors are more likely to closely monitor and respond to regional water issues. Their role would be more focused than a Council Member’s.

Won’t high water rates spur water conservation?
The current rates are structured for conservation efforts, as are the drought rates. The structure could be strengthened as a policy decision.

The current proposed rate increases don’t just impact heavy water users. The current increase attempts to increase overall revenues. Low water users will see their cost of living rise.

Doesn't the SDWD have relatively low water rates?
Yes. In part, this is because the SDWD has a nearby local water source. The SDWD draws much of its water from Lake Hodges, which provides cheap water.

This does not mean that our base rates for water shouldn't be even lower.

What are the drawbacks?
The most commonly cited reason against adding elected directors to the SDWD is cost. If the number of directors is kept at five, the direct impact will be limited to the nominal cost of the elections.

Some staff are shared between the City and SDWD. If an independent Board deems the current staffing structure as the best way to run the district, no changes to staffing would have to be made. If they determine that the SDWD is not getting a good deal, we would expect the cost of operations to decrease. An independent board, representing only the interest of water customers, could decide that the current structure is optimal and staffing would not change.

Have the SDWD ratepayers been disadvantaged by the current governance structure?
The rate increase is scheduled for a council vote on February 24th 2009. Prop 218 allows ratepayers to object and stop the rate increase. Rate increases can be stopped if 50% of the ratepayers protest in writing. Time for mobilization is very limited.

On January 26, the ETA decided to object to the rate increase. The ETA is continuing to collect source documentation on several SDWD decisions, which we have identified through interviews with ETA members and our notes on the city's history. Below is a list of issues that we are investigating and have asked the President of the SDWD to address and clarify (Mayor Dalager still has not responded to the ETA).

What we know for sure about each case is there was no one representing just the ratepayers' interest in each decision.

1. Demolition of SDWD Headquarters
Existing works yard and offices were sold to the City so the City could use the land. The works yard and offices were paid for at the time. The Council eventually moved the SDWD operations to the City’s brand new public works yard. The City charged the SDWD $3.4 million to move in. That was $2.3 million more than the City gave the SDWD for the SDWD's headquarters.

The SDWD no longer owns its headquarters.

Status: Confirmed

The arrangement might have been more advantageous to the ratepayer if we had an independent water board. We certainly would have had better negotiations between SDWD and the City of Encinitas.

Important Updates and Responses

 

2. SDWD Involved in City Park Bonds
The Council has transferred assets of the City and SDWD into the Encinitas Public Finance Authority (Technical clarification: the assests are the City's but the City makes lease payments for them. See this tutorial on lease-revenue bonds.). The Encinitas Public Finance Authority has now issued lease-revenue bonds for the acquisition of parkland. The park bonds repayments will exceed $40 million.

This maneuver was not widely know or understood, however had we had an independent water board they would have been inclined to ask the question, in what way is the water district involved in park bonds? More importantly, how does using lease-revenue bonds instead of general obligation bonds help the residents of Encinitas?

It had been unclear how much the SDWD will eventually contribute to the park bonds repayment. Some ETA members have claimed that the SDWD could be responsible if the City ever defaults. On Jan. 25, the President of the SDWD promised to send the ETA documentation that shows the SDWD is not involved in bonding for City projects.

Status: City Documentation Received (27 Day Delay)

Important Updates

 

3. Reports of SDWD Work Crews and Equipment used for City Work
There are credible reports coming to the ETA that SDWD staff and equipment have been used to conduct city work inside and outside the geographic boundary of the SDWD.

Status: confirmed

There are no independent elected officials overseeing the SDWD to ensure that ratepayers are not paying for city services.

Important City explanation

 

4. Cost Allocations
The City charges the SDWD under various cost sharing arrangements. Those arrangements are never approved by a body representing only the side of the ratepayers.

Status: Confirmed

Independently elected Directors of the SDWD should determine if these cost sharing arrangements are fair to the ratepayer.

Important updates

 

5. Real Estate Usage
SDWD lets the City use property it owns free of charge (and with no prior compensation).

Status: Confirmed

Independently elected Directors of the SDWD would determine if this is a fair arrangement.

 

6. Finance Staff Shifted to SDWD
Buried in the 2009-2010 Operating Budget was a shift of three city finance staff to the SDWD. During the City Council’s budget approval meeting, the ETA asked the City Council to deliberate over these shifts prior to adopting the budget. The Council did not publicly explore the justification for the move.

An independent water board would be more prone to ensure that personnel shifts were being made to benefit the ratepayers and was not a budgetary device to shift the cost of running the City of Encinitas to SDWD ratepayers.

Status: Justification Under Review

Important Updates and Responses

 

We hope to improve our city with your help and input. Please, contact the ETA if you have comments, feedback, or questions. We will keep ETA members updated as we learn more details about these issues.