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On Tuesday, the board of the Metropolitan Water District of Southern California is expected to approve more rate hikes and more illegal rates. The illegal rates alone will overcharge San Diego County water ratepayers more than $135 million over the next two years – not counting the additional and disproportionate costs imposed by MWD’s new scheme for water treatment charges. In addition, MWD will not reduce the property tax rate as prescribed by state law.
In a recent VOSD op-ed, MWD made claims about its proposed rates, charges and property tax revenue increases that are inconsistent with the facts. So let’s break down a few of MWD’s claims and the realities it seeks to avoid.
MWD: “Metropolitan is proposing overall rate increases of 4 percent for each of the next two years and projecting annual increases of 4.5 percent for the rest of the coming decade.”
Facts: The 4 percent “average” is irrelevant to San Diego County ratepayers. In our region, MWD’s proposed rates would increase the untreated water rate by 12 percent; the treated water cost by a whopping 77 percent in 2017 (or under another alternative, by 115 percent) and the water transportation rate by 6 percent.
MWD’s rate “projections” have been poor at best. By 2014, for example, MWD’s actual Tier 1 treated water rate was $890 – 45 percent more than the highest rate MWD had forecast in its own 2004 long-range finance plan. We continue to ask MWD to update its long-range finance plan.
MWD: “ … strong financial practices at Metropolitan are essential to maintaining the backbone of the region’s water infrastructure.”
Facts: MWD has repeatedly set rates far higher than necessary to pay its expenses, overcharging its ratepayers a total of $847 million since 2012. In fact, MWD’s chief financial officer has said it is MWD’s strategy to over-collect from ratepayers in seven out of 10 years. For San Diego-area ratepayers, these over-collections amount to an illegal $188 million of excess charges from 2011 to 2014 – money MWD collected without demonstrating any need, or any connection to the costs it incurred.
In addition, MWD has overspent its budgets by $1.2 billion since 2013. It approved unplanned borrowing of $500 million in November 2015, and now proposes to take out a $400 million line of credit from commercial banks to replenish its Water Rate Stabilization Fund. That fund – a critical tool intended to help mitigate water rate increases – was depleted by unbudgeted spending for such items as MWD’s turf removal rebate program, which Los Angeles City Controller Ron Galperin called a “gimmick.”
But that’s not all. In the past two years, MWD collected $226 million from ratepayers for capital investments and spent it on operating expenses instead. Since 2014, MWD has also approved increasing property tax collections throughout its service area by almost $100 million more than otherwise allowed under state law. MWD is currently proposing to increase property tax collections again – by more than $100 million over the next two years, claiming that the additional tax revenues are “essential to the fiscal integrity of the district.” On one hand, MWD claims it has sound financial practices, but on the other, says it cannot reduce property taxes as prescribed by the Legislature because of a fiscal integrity problem.
MWD: “Metropolitan has been developing its next two-year budget over many months – multiple workshops, hundreds of pages of detailed financial information, all public and all transparent.”
Facts: Far from being “all public and all transparent,” MWD stonewalled the San Diego County Water Authority’s requests for all of the information and data it used to develop its proposed rates and charges, including its cost-of-service analysis. MWD refused to release this information before its March 8 public hearing on proposed rates and charges for 2017 and 2018.
MWD is still refusing to release the most vital information needed to review its rates and charges – its rate model – claiming it is proprietary and a trade secret. That’s right: The largest public water agency in the country claims the tool it uses to allocate its costs and impose water rates and charges is a “secret.” The Water Authority has filed a formal demand for the rate model under the California Public Records Act.
MWD: “Metropolitan fully understands the need to keep costs down so that local projects such as San Diego’s Pure Water can advance.”
Facts: MWD’s proposed budget is going up, not down, and it has grown by 46 percent over the past decade even as MWD sales declined by 38 percent over that same period. MWD’s own long-term forecast shows its budget will grow by 38 percent over the next decade at the same time its sales are expected to decline by a like number.
MWD’s fiscal practices underscore the importance of San Diego County water agencies continuing to implement local water projects that are reliable, drought-proof and more cost-effective than ever. The San Diego County Water Authority’s position is simple: MWD must develop rates that are legal and properly allocated to the correct cost center, and its member agencies must have full access to the complete information behind MWD’s rates and how they are developed.
Mark Weston is chairman of the San Diego County Water Authority’s Board of Directors. He retired as general manager of the Helix Water District in La Mesa in 2012 and lives in Poway.