Water News: A Final Look Back

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The RSF Post began publishing my articles in September 2015 and this is my 54th article.  Having resigned my SFID Board position in December, I wanted to review several significant SFID issues over the past six years.

Rate Equity

SFID Cost of Service Studies (COSS), required by Prop. 218, have been produced five times, four which led to rate increases: 2006; 2010; 2016; and 2020.  The 2006 & 2010 COSS resulted in water rate increases that applied the same percentage increase to each and every customer.  COSS are required by law to tell taxpayers how much additional money the utility needs to provide service, and how those costs will be allocated to customers.

Greg Gruzdowich and I served together on the SFID Board during the 2016 COSS.  We requested over and over of management and the Solana Beach majority to direct COSS consultants to evaluate more than one rate structure. It didn’t happen. Other California water districts with Boards that did not all agree on a single COSS approach went back to their COSS consultants and requested additional rate structures for their Boards to evaluate. Not SFID.

The 2016 COSS, developed during the period California Courts issued the San Juan Capistrano decision requiring more robust financial analysis when setting tiered rates, significantly changed how SFID structured rates. This 2016 rate structure, adopted by a 3-2 vote (Gruzdowich and King opposed), was asserted by Management and the three Solana Beach Directors to be fair and equitable. Created during a period of historic drought, the 2016 COSS rate structure did not cover operating costs nor did it increase reserves for infrastructure spend as the Prop. 218 notice promised, resulting in reserves being drained of five million dollars due to its over estimation of local rainfall availability.

The 2018 COSS, which proposed two tiers, was not adopted on a 2-3 vote (Dunford, King and Petree opposed).

The 2020 COSS, which added a fifth tier to the Single Family Residence (SFR) rate structure, was adopted on a 4-1 vote (King opposed). This COSS was based on more realistic local rainfall expectations, which was good.  The meter overlay feature in SFR tiers 3 & 4 spoke to the inequity I had pointed out, that SFID has a highly unusual SFR customer profile: more SFR meters 1” and above than there are 5/8” & 3/4” meters. (It is much more common for utilities to have 75-80% of its SFR having 3/4” or smaller meters.)  

SFID’s 2020 rate structure finally acknowledged over half their SFR customers were paying expensive bi-monthly fixed meter fees for purchasing larger meter capacity, therefore the imported water tier ranges should reflect those capacity demands. SFID believed this meter overlay feature was an olive branch, of sorts, to the RSFA to address the December 2018 lawsuit filed by RSFA against SFID over the 2016 COSS rate structure.

I was never impressed by the “olive branch” scenario. New fifth tier revenue primarily paid for the tiers 3 & 4 meter overlay feature. The fifth tier revenue, and 35% of all SFR water bills have fifth tier charges, comes from customers with larger properties, which are primarily in 92067. A RSFA “olive branch”, primarily paid for by the very customers it was said to benefit, doesn’t go very far with me. My water bill is slightly less with the meter overlay feature, but I know that the people who are paying for my savings are my neighbors with properties larger than mine. SFID made no evaluation whatsoever if my neighbors with larger properties are wasting water. The fifth tier rate structure simply says if you irrigate a larger property we’re going to take more money from you because the newly added fifth tier essentially paid for the meter overlay feature of tiers 3 & 4, and most tier 5 usage comes from meters 1” and larger, which are mostly in 92067.

Customer Convenience

SFID’s 2010 Board did not adopt COSS-recommended drought rates; therefore, when Gov. Brown’s 2015 order required SFID cut usage by 35%, you were subjected to allocations demanding you cut usage by 45% or face penalties. By contrast, the Olivenhain Water District Board had wisely adopted drought rates years in advance of Gov. Brown’s 2015 executive order. Olivenhain customers simply had their water bills adjusted to their previously approved 35% water reduction rates. When the regressive nature of SFID’s allocation formula became evident, due to numerous Solana Beach and Covenant customers providing public comment, allocations were not lifted until staff finally decided they were tired of dealing with customer complaints.

Covenant agricultural customers spoke month after month after month at Board meetings to request a fairer Agriculture rate. A customer-friendly organization would have arranged a single meeting to hear concerns and study how those concerns could be addressed. That is not how SFID does business.  As the lone SFID Board voice advocating six years for customer convenience, I’ve observed first hand the inertia of the SFID monopoly bureaucracy.  SFID was established in 1923 by citizen vote.  When will SFID become an organization that truly puts bill-paying citizens first?

Gender Equality

Joining the Board in December 2014, the Staff Appreciation Luncheon was a real eye-opener: only men received awards. I spoke with the ranking female Manager and stated either SFID has hired women who are not capable, or there is something seriously wrong with the award process.  Which is it?  She declined to comment. The G.M. later told me the female Manager had been making my point for a number of years.  An organization that held yearly Staff Appreciation Luncheons, but only recognized men, has entrenched gender equality issues.  

At that same luncheon, the first and only female utility worker retired. No women since 2015 have been hired in either the water treatment or distribution divisions, which comprise two-thirds of staff.  There have been 13 new hires in those divisions in the past six years. When groups of young children tour the water treatment plant girls see a workplace that models “women can’t do this work” while boys see “this work can’t be done alongside women”.  

General Manager Lau recently told the RSF Review there is a “robust recruitment process”.  Lau neglected to add that since he became G.M. in March 2019, three of his six new hires had to be replaced, a 50% turnover rate. Under Lau, female employees have dropped to 15% of staff. A study of the organization chart reveals there are significantly more opportunities for promotion and professional development within the water treatment and distribution divisions. 

My experience was six years of aggressive, condescending, dismissive treatment that began the day after my first Board meeting in 2014. The last time I attended a pre-Covid in-person meeting, I had to listen to the G.M. arrogantly tell me I didn’t understand the meter overlay feature of the new rates. Trust me, I understand COSS. Again, SFID has entrenched gender equality issues.

Looking to the Future

SFID is currently re-working its Strategic Plan and maybe the words “customer service” will be added to the Plan. Every time a new employee is added, their name and position are noted in the Board agenda and I’ll be keeping track.  If you think your water monopoly should be gender neutral, write an email, and make your voice heard, because there is a century of entrenched inequality to overcome.

Rates?  How overhead costs are distributed is the last frontier. 

The current COSS states that the only costs shared equally by all customers are meter reading and bill production. Essentially all remaining overhead costs (excluding actual water purchase costs) are apportioned by outdoor irrigation usage. Not one more staff member is required to produce sufficient water during high volume periods, yet smaller property owners never share the same percentage of personnel/pension overhead costs.  This water rate bias – which always favors small property owners – is due to “peaking costs”.  Peaking costs are determined by contrasting average winter usage, when customers turn off their outdoor irrigation, versus usage when they irrigate their landscapes. Highest peaking usually occurs in August. Generally, the bigger the property the higher the peak. By the very nature of the extreme contrast in property sizes between city-sized Solana Beach lots and 92067 estate properties, the rate model chosen to set rates always favors small property owners. It does not matter how much 92067 customers reduce their outdoor irrigation, the currently chosen rate model is specifically designed to throw tremendously higher overhead costs (again, excluding actual water purchase costs) onto the larger property customers. I participated in three COSS processes where the Solana Beach majority barely had to lift a finger. The rate model chosen by the Board majority and management is designed to financially favor the smaller property owner at the expense of the larger property owner.

I believe 40% of the SFR customers (typically smaller customers) pay less than 20% of the pension obligation. I’ve asked the “pension sharing” question of staff and the consultant at every COSS hearing and never got a direct answer.  Should the G.M.’s salary/benefits/pension be shared equally by all customers? Should the costs to maintain the historic Lillian Rice building be shared equally by all customers? I could go on and on.

Going forward, SFID Directors must demand clear data about overhead costs, especially personnel costs. Having studied all five COSS, that particular data is either nonexistent, or buried deeply in some aggregate entry.  My simple answer is that if all personnel/pension costs were shared equally amongst all customers, the COSS would make that fact clear as a bell.

Finally, I am very wary of a proposal to purchase the City of San Diego’s water rights to Hodges.  While some people say that is great, as local rainfall is our most low cost source, I’d be demanding answers to the following:

  • Will ALL Hodges costs be shared equally by every single customer?
  • Will the future political climate support/approve using local rainfall to irrigate outdoor landscape?
  • Is this an issue of having access to rainfall no matter the cost?
  • Is this an issue of believing that no matter what it costs to move forward on this proposal, the water would be cheaper than imported from the Water Authority? Man, I’d like to see those numbers.
  • Evaluate the motivations of people/forces supporting the proposal. (It’s like Eisenhower in his final address warning of the “military industrial complex”.) In a California political environment requiring we all consume less water, and the County Water Authority has spent plenty of your money to guarantee adequate supply, carefully and cynically evaluate what precisely is the point of taking on the incredible debt SFID customers will incur…then go back to the answer of the first bullet point.

I loved being your Div. 3 representative for the past six years, and was honored by your support. I especially valued working alongside my “water rate mate”, Greg Gruzdowich. As many of you know, Greg has a first class mind, and the two of us have been a pretty good team working to ferret out who’s paying what in the rates. The fight continues…