Proposition 218 and EID Rate Violations
(a partial list) (read
ENTERPRISE FUND VIOLATIONS:
DIFFERENT DEBT COVERAGE RATIOS: Use of Sewer Fund’s more favorable debt coverage ratios to subsidize Water… a subsidy of some $2 million in 2011, alone… almost equal to EID’s 15%/$101 Sewer rate increase on January 1, 2011.
FAILURE TO “TRUE-UP”: Failure to “true-up” $ millions of annual Actual vs. Budget variances between the two major Enterprise Funds… for example, 2010 Water revenues fell $5.3M short of plan while 2010 Sewer revenues fell $1.8M short of plan. Yet, half the additional $3.5M Water shortfall was NOT “trued-up” and $1.7 million effectively was absorbed by Sewer ratepayers.
COMMINGLING OF FUNDS: Ongoing commingling of Enterprise Funds… resulting in $10M of rate overcharges to Sewer customers over the past five years.
RECYCLED WATER SUBSIDIZED BY SEWER CUSTOMERS: Inclusion of various Overhead and Debt Service costs for Recycled Water in the Sewer Enterprise Fund, and in Sewer rates… 20,600 Sewer customers are subsidizing 4,100 Recycled customers; if any subsidy is to occur, it should be from 38,100 Water customers.
LACK OF DETAILED COST STUDY: General use of blanket, invalid 60% Water/40% Sewer cost allocation methodology for $40M of $59M total EID costs (i.e. 68%), instead of performing a thoughtful, detailed, legally-required cost study. ( read Jan 24 COSS Update)
Reasonable cost specificity not provided as legally required. See HJTA v Roseville
Debt service cost allocations further do not reconcile to audited Financial reports for debt (there are $22M of Debt Service costs)
Overhead cost allocations further do not conform to ACWA standard methodology (there are $18M of Overhead costs)
SEWER RATES INCREASED WHILE COSTS DECREASED: Inconsistency of the 2010-2011 $202 Sewer rate increase (the 2011 Sewer Operations budget DECREASED 3.6%) vs. the $84 Water rate increase (the 2011 Water Operations budget SURGED 34%).
ADDITIONAL PROPOSITION 218 VIOLATIONS:
65% DOMESTIC IRRIGATION DISCOUNTS
ADDITIONAL 35% SMALL FARM DISCOUNTS IMPLEMENTED IN 2009
DIFFERENT COSTING RULES FOR AGRICULTURE:
“DIRECT COST ASSIGNMENT”/EXCLUDED COSTS
DIFFERENT CONSERVATION ASSUMPTIONS AND BASE YEARS
“FUTURE CUSTOMER” Capacity Interest Costs included in Current Rates
PROPERTY TAX ALLOCATIONS PROPOSED 100% TO WATER
Proposition 218 override by EID Board for “POLITICAL CONSIDERATIONS”
If the number of EID Water and Sewer customers were relatively equal, these accounting deficiencies would NOT have a material impact on aggregate rates. But, due to:
the near 2-1 ratio of Water customers to Sewer customers,
use of Sewer Fund’s more favorable debt coverage ratios to subsidize Water
failure to “true-up” $ millions of actual to plan variances
ongoing commingling of Enterprise funds, and lack of separate accounting
inclusion of Recycled water costs in the Sewer Enterprise Fund,
faulty cost assignments and allocations for $40M (68%) of EID’s costs, and
failure to perform a bona fide Cost of Services Study that complies with California legal rulings regarding reasonable cost specificity, and fails to satisfy the Board’s commitment to EID ratepayers in Board Resolution No. 2010-003
20,600 EID Sewer customers are heavily subsidizing
17,500 Water-only customers and 4,100 Recycled customers. These
subsidies exceed $150 per each of EID's 20,600 Sewer customers annually.
(i.e. approximately 20% of EID’s extraordinarily high average annual
Sewer rate of $777).
The above issues have been raised multiple times with the EID Board, as recently as the May 23, 2011 EID Board meeting. But, the Board continues to reject the legitimacy of these conflicts with Proposition 218. EID continues to be an IRRIGATION district first and foremost, even though 48% of its revenues come from Sewer customers and 48% come from non-irrigation Water customers. Irrigation and Recycled Water each provide only 2% of EID's rate revenues.