LAFCO approves public vote for FPUD-Rainbow detachment

When the proposal for the Fallbrook Public Utility District and the Rainbow Municipal Water District to detach from the San Diego County Water Authority and annex to the Eastern Municipal Water District is heard by San Diego County's Local Agency Formation Commission, a public vote will follow any LAFCO board approval.

LAFCO's board voted 8-0 to call for a public vote, May 4, and the motion also included the creation of a technical advisory committee. LAFCO executive officer Keene Simonds will draft proposed tasks for the committee and a proposed membership composition, and LAFCO is scheduled to approve that criteria June 1.

"How the item went was in accordance with what we were expecting," said FPUD general manager Jack Bebee.

"It's sort of moving forward as we anticipated," Bebee said. "The process will continue to move. In particular there will be a working group put together by the executive office."

Although the County Water Authority did not receive its request to postpone any decisions until after the coronavirus gathering restrictions are lifted, the call for a technical advisory committee allows for the participation the CWA desired.

"We are pleased that the Water Authority's procedural application was approved, and we look forward to working together with San Diego LAFCO and all parties in addressing the issues raised by the detachment requests," said CWA general counsel Mark Hattam.

One decision the LAFCO board will make will be whether the public vote will be for just FPUD and Rainbow or for the entire CWA service area as has been requested by the CWA.

"It would be premature for staff to offer anything," Simonds said. "I'm guessing we will have other requests of conditions."

Under state legislation regulating LAFCO agencies, a LAFCO board has the option of requiring a public vote on a reorganization and a protest vote may also take place if petitions signed by at least 25% of an affected agency's ratepayers or registered voters are received by LAFCO (if the petition includes a majority of the electorate the reorganization is denied without a vote). The County Water Authority Act requires a majority vote of the electorate of an agency which detaches from the CWA.

If LAFCO approves the FPUD-Rainbow detachment the ratification would go directly to voters. "We would not be holding a protest period," Simonds said.

"We now know with certainty we would hold an election," Simonds said. "We're taking that out of the equation."

The LAFCO decision for a public vote means that the vote will be for registered voters rather than for landowners. "It puts all of the confirmation in the hands of the registered voters," Simonds said. "Only registered voters would have a say in confirming the detachments should LAFCO actually approve them."

FPUD has been part of the San Diego County Water Authority since the SDCWA was formed in 1944. The Rainbow Municipal Water District was founded in 1953 and became a CWA member. The Metropolitan Water District of Southern California began delivering water to San Diego County in 1947.

MWD's San Diego Aqueduct conveys water to a delivery point 6 miles south of the Riverside County line, which allowed MWD and the CWA to provide equal contributions for the connection between MWD's Colorado River Aqueduct and the San Vicente Reservoir in Lakeside.

The CWA northern boundary is the county line. All but one of FPUD's connections are from MWD pipelines rather than from CWA pipelines, and four of Rainbow's eight connections are to the MWD portion of the pipeline.

The CWA's supply rate is a melded rate which melds the cost of water delivered from MWD, water purchased from the Imperial Irrigation District under the Quantification Settlement Agreement, and water produced by the Claude "Bud" Lewis Carlsbad Desalination Plant in Carlsbad.

The CWA also has transportation, storage and customer service charges along with fees and charges for fixed expenditures which are incurred even when water use is reduced. This creates the possibility that FPUD and Rainbow can reduce their cost of purchasing water – and thus their rates – by detaching from the CWA and becoming part of another MWD member agency.

"Water costs have a significant effect in our community," said FPUD board member Charley Wolk.

Wolk has lived in Fallbrook since 1972. He rejoined the FPUD board after the 2018 election and had previously spent 14 years on FPUD's board. Wolk noted that in the 1970s the CWA wholesale water rate to member agencies was $75 per acre-foot. The rate now exceeds $1,600 per acre-foot. "The increase has made many agriculture operations unsustainable," Wolk said.

Many of the fixed costs are for CWA infrastructure. "Due to our unique location we don't use it," Bebee said.

"Our district has significant challenges moving forward," Bebee said. "We can't continue to build infrastructure for the rest of the county."

The Eastern Municipal Water District is a member of MWD and purchases imported water directly from MWD. The Western Municipal Water District is also a member of MWD and provides retail water sales of MWD supply to the Elsinore Valley Municipal Water District and to the Rancho California Water District.

If FPUD and Rainbow detach from the CWA and join Eastern, their status would be similar to that of the two water districts which obtain MWD water from Western. The Eastern Municipal Water District currently covers 555 square miles and includes Hemet, Menifee, Murrieta, Perris, Romoland, San Jacinto, Temecula and Winchester. Eastern has more than 140,000 water customers.

Each county in California has a LAFCO which handles jurisdictional boundary changes including incorporations, annexations, consolations and detachments within that county. Because the Eastern Municipal Water District is all currently within Riverside County, a reorganization would have required approval from both San Diego County's LAFCO and Riverside County's LAFCO, although both LAFCO boards approved a Memorandum of Understanding delegating the entire process to San Diego LAFCO. FPUD and Rainbow will be responsible for all LAFCO fees.

The CWA and the other 22 CWA agencies could incur adverse financial impacts if FPUD and Rainbow left (a preliminary CWA analysis estimated an annual impact of $13 million in 2018 dollars), so the CWA requested that the process be conducted entirely within San Diego LAFCO.

During the Oct. 7 San Diego LAFCO hearing, the CWA requested that any reorganization have rate neutrality and that day's 8-0 LAFCO board vote which approved the MOU also gave direction to LAFCO staff to review the economic impacts not only for FPUD and Rainbow but also to the CWA and the other member agencies.

The LAFCO board and staff members prefer that FPUD and Rainbow work out financial terms to compensate the CWA and the 22 remaining agencies, although LAFCO would consider financial terms if no agreement is reached.

"It could potentially affect every ratepayer in this entire region," said county supervisor Dianne Jacob, who is the chair of the LAFCO board. "It's not just about the ratepayers in Fallbrook and Rainbow."

LAFCO staff analyzes any proposed reorganization both for service impacts and for financial impacts. The analysis will conclude with the preparation of a report and a staff recommendation. The LAFCO board will hold a public hearing and may or may not adopt the staff recommendation.

"I think we have a wide range of stakeholders," Jacob said.

"There are going to be some really tough decisions," Jacob said. "This potentially could be a very expensive process for these two water districts."

Because the other 22 CWA agencies are also affected, the CWA has requested a vote for the entire CWA service area. "The Water Authority is coming forward with a unique request," Simonds said.

The County Water Authority Act has a provision for members leaving the CWA, and that provision states that the vote shall be by the electorate of that agency.

"The County Water Authority Act specifically says who votes in the election," said Rainbow general manager Tom Kennedy. "We should follow that act."

Bebee noted that the provision of a vote by only the district desiring to leave was part of the County Water Authority Act when FPUD joined the CWA in 1944. "Those rules are still in effect today," he said.

"These provisions are in the County Water Authority Act, and I believe they should be followed," Wolk said. "The County Water Authority Act clearly states that Fallbrook ratepayers are the ones who can decide whether we should leave or not."

A vote of the entire CWA area would increase the expense for FPUD and Rainbow. "The applicants are responsible for all costs borne in this election," Simonds said.

A delay in any LAFCO preliminary decisions could delay the final vote past the 2022 elections in which case FPUD and Rainbow would continue to pay CWA wholesale prices rather than Eastern rates. "The overall process is a very lengthy process," Bebee said. "We don't support staying the proceedings."

"I don't see any reason to delay their application," said Jim Desmond, who is the other county supervisor on the LAFCO board.

The decision allows the process to proceed to the next phase. "That work will now continue," Simonds said.

A complete analysis and potential concurrence are acceptable uses of time for FPUD. "We would be open to more meaningful dialogue with the Water Authority," Bebee said.

The CWA is also willing to defer major decisions until analysis and negotiations have been conducted. "We concur with staff's position," Hattam said. "We would suggest that it be brought up and talked about at that time."

The motion approved May 4 added the technical advisory committee to the staff recommendation and also directed LAFCO staff to develop a cost estimate for FPUD and Rainbow. "It's only fair that we have some idea of what these costs are going to be," Jacob said.

"This is a complex proposal with a lot of moving parts," Simonds said.

"I don't think it's going to be a simple process. I think it's going to be complicated. We may have to hire some consultants," Jacob said.

"I think we're going to need some technical expertise," said LAFCO public member Andy Vanderlaan, who lives in the Rainbow Municipal Water District.

If FPUD, Rainbow and the CWA reach an agreement on how much the departing agencies will pay the CWA to leave, that decision will be ratified but not decided by LAFCO. "Hopefully this will get resolved before," Jacob said.

The technical advisory committee may allow for some negotiations as well as analysis.

"I will offer up to the commission what I think will work best," Simonds said. "Part of the challenge will be to create a composition."

Simonds estimates that the review process will take approximately one year, in which case the voter confirmation election could take place at the June 2022 election if not at an earlier special election.