Village News Reporter
The conditions of the decision by San Diego County’s Local Agency Formation Commission to approve the 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 included that FPUD and Rainbow indemnify LAFCO in the event of a lawsuit, which has been threatened by the SDCWA.
FPUD’s July 24 board meeting included a 5-0 vote to approve an indemnification agreement with LAFCO and to provide an initial $100,000 deposit in the event the CWA sues LAFCO.
“We have an agreement with LAFCO to help with the litigation and pay for the litigation should they move forward with litigation,” said FPUD General Manager Jack Bebee.
FPUD and Rainbow can reduce their cost of purchasing water - and thus their rates – by detaching from the CWA and becoming retail agencies within the Eastern Municipal Water District. FPUD and Rainbow filed LAFCO applications in 2020 after beginning discussions about the reorganization in 2019.
The CWA opposed the detachment and also disputes that the detachment is exempt from California Environmental Quality Act review due to insignificant impacts on the Bay-Delta.
LAFCO voted 5-3 July 10 to approve the detachment. The County Water Authority Act requires a majority vote of the electorate of an agency which detaches from the CWA, so LAFCO’s approval is contingent upon ratification by FPUD and Rainbow voters (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).
FPUD scheduled a special board meeting for July 14 in which a 5-0 vote approved a resolution calling for a detachment vote at the next general or special election.
FPUD’s $100,000 initial deposit will be matched by an identical amount from Rainbow. If no litigation occurs the deposits will be refunded. If LAFCO’s litigation expenses exceed $200,000 additional FPUD and Rainbow deposits will be required.
“We won’t know until an action occurs what they’ll do, who they’ll sue,” Bebee said of the CWA. “They tend to be more litigious than others.”
LAFCO’s June 2020 meeting approved a detachment advisory committee consisting of one representative from FPUD, one representative from Rainbow, one representative from the SDCWA, two board or staff members from other CWA member agencies, one representative from LAFCO's Special Districts Advisory Committee, one representative from LAFCO's Cities Advisory Committee, one at-large member from the County of San Diego with expertise, one at-large member from the San Diego Association of Governments with expertise, and one member from the Eastern Municipal Water District.
The committee was tasked with reviewing key assumptions, documenting the differences in proposals, identifying key stakeholders, topics and firms for LAFCO consultants, and legal topics. Multiple CWA submittals delayed a final report from the consultant as well as the LAFCO detachment hearing itself.
The County Water Authority Act does not require that agencies leaving the CWA pay an exit fee, but LAFCO staff recommended an exit fee to compensate the CWA for the loss of fixed revenues FPUD and Rainbow have been providing.
The July 10 LAFCO vote included a total exit fee of $24,305,000 over a five-year period, which would equate to $4,861,000 annually with Rainbow paying 65% and FPUD paying 35%. A CWA lawsuit carries the risk that the judge would apply the County Water Authority Act and void the exit fee.