The Santa Fe Irrigation District’s (SFID) 2025 and 2023 Cost of Service Studies (COSS) raise concerns whether the Solana Beach Directors’ unbounded determination to keep rates low for their Solana Beach neighbors has resulted in imprudent – some might say reckless – financial management.
SFID management does not shine a bright light on how they are able to propose only a 2% rate increase, which was achieved by gutting – yet again – their Capital Improvement Project (CIP) program that replaces aging pipelines, valves, etc., before they break and cause service interruptions to customers, major damage to homes, and unexpected damage repairs to roadways. Shrinking CIP spend can also affect the Badger water treatment plant. Their report stated that “The revised CIP reduced capital spending through FY2025 from $21.2 million down to $8.3 million.” When will SFID publish a Prop 218 notice (California Constitution required notice to ratepayers to explain exactly why a public utility is requesting increased rates) to fund our failing infrastructure? What are the Solana Beach Directors thinking?
Dwindling Cash on Hand
The RSF Review notes that the Santa Fe Irrigation Board has set aside $10.4 million for Lake Hodges. Do ratepayers understand this amount is only for planning and initial design costs SFID is contractually required to fund by pay-go? Seth Gates, management’s CFO, references $90 million as SFID’s share of building the new dam face. And let us not forget SFID’s Facilities Management plan to spend upwards of $30 million to rebuild/relocate their administrative/distribution yard.
… the Directors complained then, and continue to complain, that Solana Beach homeowners can not possibly endure a 40% rate increase to pay for the imported water. And yet the new four-tier rate structure rolled out in 2016 resulted in many residents in the 92067 zip code having to endure those same 40% increases and more.
One measure of financial health is the number of days of cash on hand. For a point of comparison, in 2012, the SFID had 572 days of cash on hand; and 2018 they had 362 days. By 2021, the number of days of cash on hand for operating expenditures decreased to 90 days. At the time, the SFID Board explained the 90 days was “based on guidance from the Government Finance Officers Association, various rating agencies, and is reflective of the potential for natural disasters that the District faces (i.e. earthquake and wildfires).” This year, the cash on hand is a mere 60 days. Plus staff is rather nimble at delaying capital improvement projects so they fall into the next fiscal year, thus improving the look of balance sheets. Ditto for a habit of pushing new hires and expensive vehicle purchases each July – the start of the fiscal year.
Spending’s Cumulative Effect
Do homeowners understand the cumulative effect and financial implications of SFID’s spending? They increased their number of employees, the general manager negotiated a benefit of deferred compensation matching which saw an increase from 3% to 5% (a California law requires that matching deferred compensation benefits be available to all employees), not to mention a 6.8% salary increase. $90 million for Hodges Dam refacing … $30 million for new facilities … County Water Authority’s steady increases … and SFID selling less water due to customer conservation. How will this all end? And yet Solana Beach Directors are laser-focused on tamping down the “local water tiers” rates when much bigger expenses are barreling toward them.
We know that when Sacramento placed height restrictions on Lake Hodges Dam, it had severe impacts on SFID rates because the first two tiers were primarily local water. SFID pulled 1,552.9 Acre Feet (AF) of local water from Hodges in FY24, and 1,308.7 AF of local water in FY23. I imagine the SFID is crossing their fingers that Sacramento will loosen the height restrictions on Hodges. Maybe they’re also hoping to recover money from their lawsuit against the City of San Diego for importing water to replace local water. Is “hope” a prudent financial strategy for a public utility?
Imprudent and Unfair Strategies
For six years, I served on the SFID Board alongside the Solana Beach Directors. It has not gone unnoticed that after Sacramento made local water a near impossibility, the Directors complained then, and continue to complain, that Solana Beach homeowners can not possibly endure a 40% rate increase to pay for the imported water. And yet the new four-tier rate structure rolled out in 2016 resulted in many residents in the 92067 zip code having to endure those same 40% increases and more.
I’ve sent in my Prop 218 Protest Form. What’s your thinking? *
Marlene E. King served as SFID Director, Div.3, from 2014-2020.
* If readers would like to complete a Prop 218 protest form, click on the hyperlink. Forms must be received by SFID no later than 8:30 am Wednesday, February 12, 2025, which is the date and start time of the Public Hearing. Forms can be mailed in or turned in to offices in person. NO Emailed Forms, NOR faxed forms. Must have a wet signature.