Also serving the communities of De Luz, Rainbow, Camp Pendleton, Pala and Pauma

5-3 LAFCO vote approves FPUD and Rainbow detachment from CWA

Joe Naiman

Village News Reporter

A 5-3 San Diego County Local Agency Formation Commission vote July 10 approved a reorganization in which the Fallbrook Public Utility District and the Rainbow Municipal Water District would detach from the San Diego County Water Authority and join the Eastern Municipal Water District.

County Supervisor Jim Desmond, Rincon del Diablo Municipal Water District board member David Drake, public member Andy Vanderlaan, Escondido mayor Dane White, and Alpine Fire Protection District board member Barry Willis voted to approve the reorganization.

County Supervisor Joel Anderson, Solana Beach City Council member Kristi Becker, and San Diego City Council member Stephen Whitburn voted against the detachment. The reorganization is contingent upon ratification by FPUD and Rainbow voters.

"We're just happy it turned out in our favor. It's really important in the community," said FPUD General Manager Jack Bebee.

The San Diego County Water Authority's supply rate is a melded rate which melds the cost of water delivered from the Metropolitan Water District of Southern California, 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 SDCWA 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. FPUD and Rainbow believe they can reduce their cost of purchasing water – and thus their rates – by detaching from the CWA and becoming part of another MWD member agency. The Eastern Municipal Water District is a member of MWD and purchases imported water directly from MWD.

"This is a clear problem which needs to be changed," Willis said.

FPUD and Rainbow filed LAFCO applications in 2020 after beginning discussions about the reorganization in 2019. Each county in California has a LAFCO which handles jurisdictional boundary changes including incorporations, annexations, consolidations, and detachments within that county. Eastern is in Riverside County but, in October 2019, San Diego County's LAFCO approved a memorandum of understanding with Riverside County LAFCO which delegated the potential reorganization entirely to San Diego LAFCO.

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. The May 2020 LAFCO meeting included a stipulation for a public vote, and the motion also created a technical advisory committee. Michael Hanemann was selected as the consultant for the committee. Hanemann began identifying water supply reliability, water rate impacts, and potential departure payments.

Hanemann concluded that the annual savings based on 2022 data – he was reluctant to address future years due to continued declines in CWA usage – would be $4.8 million for Rainbow and $2.9 million for FPUD. That would equate to savings of 35% for FPUD and 21% for Rainbow. The CWA would lose $12.6 million of annual revenue from the detachments, which would be a loss of about 2%.

Reduced water sales result in rates being raised to cover fixed costs. LAFCO staff recommended exit fee payments for five years and a total exit fee of $24,305,000, which would equate to $4,861,000 annually.

Rainbow would pay 65% while FPUD would pay 35%. The average monthly savings for FPUD and Rainbow households from detachment would be $23.50. The average cost per SDCWA household would be $2.20 per month, and the exit fee amount proposed by LAFCO staff would cover that cost for the next five years.

"It's a reasonable exit fee. It's not prohibitive," Desmond said.

The savings from detachment would be greater for FPUD and Rainbow agricultural users. "I feel for the farmers and what they're going through," Willis said. "We have a shot to make a big difference in our agriculture industry."

The LAFCO board held a June 5 hearing on the reorganization. LAFCO staff presented five options, including approving detachment (conditional upon approval by FPUD and Rainbow voters) with an exit fee. The recommendation did not provide a specific number for the exit fee amount. A 5-3 LAFCO vote that day approved a motion to continue the hearing. That allowed LAFCO staff to develop additional exit fee options, and the vote to continue the hearing June 5 after 3 p.m. also avoided a hasty decision.

Vanderlaan expressed preference for a delay rather than an immediate decision. Vista Irrigation District board member Jo MacKenzie, who voted to continue the hearing, was not available July 10, so Drake voted as the special districts alternate.

"We did not want to leave the Water Authority," said FPUD resident Paula Coxe. "All San Diegans want affordable water."

Coxe and her husband live on a parcel which is zoned for one dwelling unit per 20 acres. "The County of San Diego made a commitment that agriculture is important," she said. "We can keep it as farmland."

Coxe noted that the CWA rate increases exceed the inflation rate. "We are now desperate. The 56,000 residents of Fallbrook and Rainbow are not the villains," she said.

"This detachment has been an opportunity for the Water Authority to improve their reputation," said Stefani Baxter. "Rainbow and Fallbrook are well within their right to detach."

Baxter noted that the County of San Diego could also justify revenue increases if the cost of water makes agriculture unfeasible. "If agriculture in North County disappears we wouldn't be surprised if the county rezones land to meet housing demand," she said.

CWA board vice-chair Nick Serrano is one of the City of San Diego representatives on the CWA board. "It is the wrong solution," he said of detachment.

Serrano noted that the CWA has a new interim general manager (Sandra Kerl retired June 29). "I do believe we have the options and opportunities to address the issues that they brought forward," he said.

"The Water Authority has had plenty of opportunities," said Rainbow general counsel Bill Pellman. "They have failed."

During the June 5 hearing, the issue of MWD approval was discussed. FPUD legal counsel Paula de Sousa noted that a section of the Metropolitan Water District Act specifically addresses an exchange of territory between two MWD agencies. "There is no requirement for anything further," she said.

The CWA revenue which would be lost would be for the fixed charges FPUD and Rainbow pay which cover the CWA's fixed costs. "We've received very little to no benefit," said FPUD Board Member Dave Baxter. "Yet we continue to pay a tremendous amount of money for that infrastructure."

Baxter noted that FPUD and Rainbow account for 1.5% of the CWA's total revenues and that the margin of error in the CWA budget is 6%.

Lakeside egg farmer Frank Hilliker is on the Lakeside Water District board and is Lakeside's representative to the CWA board. Hilliker brought up that the rest of the CWA area, including farmers, would have to make up the revenue lost by the FPUD and Rainbow detachment. "That in agriculture is what you call subsidies," he said.

No other farmers opposed the detachment in person at the LAFCO hearing. FPUD Board Member Charley Wolk owns Bejoca Grove and Landscape Management, which serves farms in both districts as well as in other North County and Southern Riverside County districts. "Where we're located, we don't use any County Water Authority facilities," Wolk said.

Wolk noted that other CWA agencies would also pay a greater share of fixed costs when certain CWA members complete their projects to enhance local supply. "Other districts are investing millions of dollars to find an alternative to purchasing water from the San Diego County Water Authority," he said.

Rick Carey has already removed approximately 1,200 trees due to the high cost of water. "That was before the current round of rate hikes," he said. "We need cheap water to survive."

(On June 22, the CWA increased rates by an average of 9.5% percent. Due to fixed charges, the increase for some agencies will exceed that amount.)

"Fallbrook and Rainbow have already contributed billions of dollars to the Water Authority," said Fallbrook Community Planning Group Chair Eileen Delaney.

"We have tried in good faith to impact the Water Authority decision-making process for decades but to no avail," said Jennifer Jeffries, who has been a Fallbrook ratepayer since 1988.

"It's unlikely that the whole San Diego County Water Authority is going to fall apart because 2 ½% of their constituents want to leave," said Jon Frandell.

MWD's San Diego Aqueduct conveys water to a delivery point six 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. 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.

"FPUD and Rainbow have a reliable source of water and the infrastructure to deliver it," said Jerri Patchett.

"It's time to decide. For 3 1/2 years, Rainbow and FPUD have been in discussions with the San Diego County Water Authority," Patchett said. "We've been in it for 3 1/2 years with no resolution."

Helix Water District board president Kathleen Coates Hedberg is a Fallbrook High School graduate whose father was once the Rainbow Municipal Water District general manager. "Maybe we need to tell the San Diego County Water Authority to work with all these agencies, not just those two but all of us," she said.

Hedberg opposes the detachment. "It's like we build an apartment with 24 rooms and two are always empty," she said.

Hedberg also noted the precedent of allowing agencies to leave the CWA. "Next week you'll have Lakeside wanting to leave because they can drill more wells," she said.

(The San Diego River flows through the Lakeside Water District.)

"The 98% would like the 1 1/2 percent to pay," said Fallbrook Chamber of Commerce CEO Lila Hargrove.

"I am feeling like we are in an abusive marriage with the San Diego County Water Authority," Hargrove said. "It is legally our right to leave this toxic marriage."

"The San Diego County Water Authority has had decades to address this problem," said second-generation farmer Duane Urquhart.

"That is some of the most prime farmland in all of California," Urquhart said. "We're not able to sustain and support agriculture in that area."

Suzanne Walton had approximately 400 trees on her property before removing them due to high water costs. "We don't have time. This should have already happened three years ago," she said.

Walton noted that the other 22 agencies would have an increased share of fixed costs if farm closures reduce water sales in FPUD and Rainbow. "We're all going out of business, and you are going to bear the brunt of more costs anyway because we're not buying that water anymore," she said.

Leticia Maldonado-Stamos noted that farmers aren't the only FPUD and Rainbow ratepayers affected by high water costs. "The most impacted are working families," she said. "We are within our right to seek a free and clear detachment."

"We would like to see the Water Authority stay whole," Desmond said. "We have to work with the law and the Administrative Code."

Desmond noted that the CWA's Administrative Code has no provisions for shifting burdens. "That should have been in the Administrative Code," he said.

"To me, I feel the Water Authority is shifting their lack of Administrative Code to LAFCO to fill it in," Desmond said. "At LAFCO it is not our job to do that."

Desmond noted that the CWA, FPUD, and Rainbow could reach a solution before the public vote is held. "This is not the end. There's still time," he said.

Willis noted that the water agencies impacted by the elimination of the FPUD and Rainbow fixed fee payments would have five years of exit fee payments to adjust to the lower revenues. "Most businesses could do that in one year," he said.

"The water districts, they really need to get tough on their budgets," Willis said. "I believe they can cut their expenses by three or four percent to make up for this loss in revenue."

Willis would also like to see the CWA reduce its expenses. "I would like to hear something that they would try to cut costs," he said.

White noted that the CWA was responsible for financial impacts. "Neither LAFCO nor Fallbrook nor Rainbow has the ability to raise rates for the rest of the county," he said.

"I think this is a relatively loud alarm," Drake said.

"This will benefit Fallbrook and Rainbow, and it will hurt everyone else in San Diego County," Whitburn said.

(The San Diego County Water Authority does not cover all of San Diego County. Some parts of the county are east of the CWA boundaries, and California American Water serves Imperial Beach, Coronado, and part of Chula Vista. The CWA's 24 member agencies provide water to approximately 3.3 million county residents.)

LAFCO has a 30-day reconsideration period. Although a public vote will be automatic for FPUD and Rainbow, a protest period will allow Eastern ratepayers the option of a public vote. The FPUD and Rainbow boards will then call for elections. The elections will be separate, and if detachment is approved in only one district that district will detach while the other district will remain part of the CWA.


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