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FPUD increases rates - Brady expands on viability of FPUD, RMWD consolidation

The Fallbrook Public Utility (FPUD) board of directors approved a fee increase for the next fiscal year, which will begin on July 1. According to general manager Brian Brady, the average customer will spend another $8.43 a month, which amounts to approximately 28 cents a day.

“That is an increase of approximately 8.1 percent in their monthly bill,” he said. “The majority of the increase is just for the cost of water.”

The cost of treated water that FPUD purchases from the San Diego Water Authority is increasing, said Brady, who said the cost will go from $1,148 per acre-foot to $1,259 per acre-foot.

“That is a 9.7 percent increase, and the real driver for the rate increase,” he said. “We just can’t do anything about it.”

Brady said that 2.5 to 3.5 percent of the increase will go to other costs, such as fuels, in addition to the employees’ memorandum of understanding (MOU), which is a part of a four-year agreement with employees.

As part of the agreement, FPUD will also cut the budgeted employee count from 71 to 70.

“The employee association made the agreement,” said Brady. “As part of the agreement, one of the benefits of the MOU is that employees will have picked up the complete employee contribution to their retirement. That means that by the end of the four-year period, eight percent of their salary will contribute to their retirement instead of the district paying for it.”

Brady stated that as a non-profit public sector operation, FPUD is not amassing profits other than what is required by the financial reserves for unexpected events.

“Right now, the policy set by the board is to maintain revenues from water sales at $19 million, with costs projected at $18.5 million. That leaves us with an overage of $500,000” said Brady. “The board has a policy that we maintain about $3.7 million in reserves for rate stabilization and catastrophic repairs. As of right now, we have $2.7 million, so any overage goes to the reserve requirements.”

Brady said the increase amount is reflective of why FPUD and Rainbow Municipal Water District (RMWD) have been deliberating in regards to a consolidation of the two water districts.

“We have done some forecasting, and the best estimate is that in a three year period, the cost of water will go up around 25 percent,” said Brady. “That’s half of our cost of doing business.”

Brady stated that FPUD is doing “everything it can” to reduce costs.

“We are not adding staff; we are reducing by one position, and we continue to look at our staffing level,” he said. “We have held costs for the last four years if it was a non-water related cost, and we can’t keep doing that. Our labor and everything else is pretty reasonable given the economic pressures we face. It is very frustrating being at the mercy of the imported water system in California.”

At a recent Fallbrook Revitalization Council meeting, Brady shared with community leaders that both FPUD and RMWD would achieve significant savings through sharing infrastructure and resources. An ad-hoc board was asked to figure out the viability of this option, and recently brought the information to the two districts’ boards.

“We began looking at how we could economize by working together. Rainbow’s gm [Dave Seymour] is talking about retiring in December, his operations manager is retiring, and his financial manager will be retiring within a year. Each district spends about $3.5 million in administration,” he said. “That includes the general manager’s office, the finance and accounting office, billing and customer service. If we were to combine, we would be able to improve the emergency response time, and have more people to respond.”

If the two districts were to consolidate, the combined operation would be over 122 square miles, which would rank the district as the third largest in the county.

“It would serve 53,000 people, and we would be significant at the Water Authority because we would have 6.6 percent of the vote,” said Brady.

The consolidated district would also have a larger employee force, though there would be a reduction from the employees that are currently serving the two districts.

“We would have the ability to reduce overhead costs and have a stronger organization with 102 employees,” said Brady.

Currently, FPUD has 68 employees and RMWD has 55.

“The nice thing about this is that unlike some consolidation, this would involve a programmed reduction in management first, then in supervision,” said Brady. “There would be fewer reductions in the people who are turning wrenches and doing the hard work in the field. We have talked to both employee groups, and we are pretty comfortable with the approach that we are going to take.”

Brady also stated that the consolidated district would allow for a better financial state as well.

“If the districts stay separate, the districts would not be investment grade if they had to go out for bonds,” he said. “When combined, they would probably reach an investment grade credit rating.”

Brady said if the districts choose to remain separate, they would face a 17 percent increase in three years, but if they were to consolidate, the rate increase would only be 12 percent.

“Rates are not going to drop because we can’t fight the increase by decreasing all of the other district costs,” he said. “We can make a good impact, though.”

Brady stated that a concern on both sides is the assumption of liability for the other district.

“We would take the preferred consolidation of the Rancho California District, which used to be the Santa Rosa and Rancho California Water Districts,” said Brady. “They consolidated in 1978, and they developed a divisional accounting system to keep everything separate.”

The model would keep both the liabilities and benefits of the districts separate as well. Examples that Brady used were the liability of covering the reservoirs, the refurbishment of FPUD’s waste treatment plant and emergency costs that come from catastrophic water spills.

“If something was to happen on Mission Road, and it were to cause millions of gallons of water to spill, it would be [FPUD’s] responsibility,” he said. “Rainbow customers would not have to pay for that.”

In addition, the boards would go to the Local Agency Formation Commission (LAFCO) and ask for a consolidation, and would choose from a number of ways to form a board, as long as the board had an odd number of directors.

“This is not a technical issue for a GM, but it is a political decision,” said Brady. “It depends on what the boards decide to do.”

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