Legality of Sweetwater Authority's Tiered Water Rate Structure Questioned

By Michael R. "Mike" Seiler

This is the text of a letter sent to the California Attorney General asking for a review of the Sweetwater Authority's tiered water rate structure. The structure appears to have been implemented illegally and has caused water bills to be unfairly increased by hundreds of dollars for some homeowners.

I am writing on behalf of many water ratepayers within the Bonita Highlands and the Bonita- Sweetwater Valley communities of San Diego County who have been financially harmed by the egregious actions of our local water board, the Sweetwater Authority.

Specifically, we believe that the Authority violated the provisions of Proposition 218 in late 2010, all of 2011 and have done so again in 2012, by originally passing and subsequently upholding drastic changes to tiered water-rate tables without voter approval. The changes to the tiered water-rate table have resulted in groups of medium and high water use ratepayers subsidizing low and low-to-medium water use ratepayer groups. While Proposition 218 gives water authorities a process to raise water rates without voter approval, we understand that it prohibits actions by such authorities that result in overcharging one group of water ratepayers in order to subsidize the fees of another group of ratepayers.

Several of us have pointed out the unfairness of this action to the Sweetwater Authority Board of Directors (the only authority to have done so in San Diego County) and that such action is disallowed under Proposition 218, but the Authority continues to claim that what it did in September of 2010, and continues to do to this day, was within their rights, and is legally binding.

From my research, we appear to have no public utility-type commission to turn to for a fair hearing, so we are turning to you and your office for help.

The original 2010 notice of a proposed water rate increase, sent out per Proposition 218-mandated public notice, stated that water bills would only increase an average of about 6%. However, such was not the case for medium and higher water use ratepayers. The notice did not communicate that drastic changes were being concurrently made to the tiered water-rate tables, which the proposed rate increase applied to. Some homeowners water bills subsequently increased from $200 to $400 per two-month billing period.

The justification from the Sweetwater Authority Board of Directors for such a drastic and unfair billing practice has been that they want to force ratepayers to conserve more water, although admitting in general session that the Authority's ratepayers already met (and continue to meet} the state mandated "20x2020" water conservation goals as of 2009. We believe the real reasons were:

- to lower water bills for some constituents while maintaining free employee perks (e.g., $2.6M dollars worth of free health, vision, dental and health programs for 134-137 employees... over $19,000 per employee, per year; 100% health care coverage for most retired employees; free tuition reimbursements ($4000 for Bachelors Degree, $5000 for Masters Degree; $150 per year for gym membership; etc.);

- to continue to provide overly generous management salaries that far exceed state or federal civil service salary criteria;

- to continue to unwisely use cash revenues to fund most capital improvement projects (CIP). A knowledgeable source says the majority of California water agencies use tax exempt municipal debt financing (up to 80% of CIP) to pay for long term infrastructure projects. Such strategy allows gradual water rate increases to pay for long term debt financing, which is consistent with best management practices, particularly when interest rates are at historic lows;

- to deny the cost-effectiveness of outsourcing routine maintenance and billing functions to save money.

(Each of the above costs are detailed in Sweetwater Authority's Memorandum of Understandings for Middle Management Employees or Employees' Committee, or detailed in past and current budget documents.)

We believe that the water conservation motive is, itself, outside the scope of Proposition 218 since it has nothing to do with the direct cost of providing water to customers. The other free perks and benefits also do not relate to the direct cost of providing water to ratepayers, but are discretionary expenses that most businesses employing 134-137 employees cannot afford to pay out. Sustaining them, therefore, should also be outside the scope of Proposition 218.

The Authority's tiered water rate structure makes no allowances for residents with large lots, large families, mature green landscapes that have been in place for decades, swimming pools, and such. The board of directors expects all residents to use the same amount of water as a small family living in a condominium or trailer park, with little or no green lawn, fruit trees, no swimming pool, no large pets or horses (this is an equestrian area). To date, the Authority still posts no water conservation goals on customers' bills (they did so prior to 2011) because doing so would further point out the inappropriateness of financially penalizing families that are already meeting or exceeding state water conservation goals.

In summary, we believe these facts indicate that the changes made to the tiered water-rate tables in 2010 were outside the scope of Proposition 218, as they were not directly linked to the cost of providing water services to all customers. Therefore, the drastic changes made to the tiered water-rate tables should have been brought before ratepayer-voters in an election and should only have been effected if passed by a majority vote.

There is much more to be said about this situation, and I would again ask you to please advise us what recourse we water ratepayers have in working through your office or another state agency to get a fair hearing on this matter. As far as I can tell, there is no state oversight agency that local water districts or authorities, such as Sweetwater Authority, report directly to. It appears that they are only constrained by state law, and in this instance, even state law seems to be ineffective.

Thank you for your time and consideration.

Sincerely,

Michael R. Seiler

President, Bonita Highlands Homeowners' Association

Vice-President, Bonita-Sweetwater Valley Civic Association