Watchdogs knock EID’s proposed rates, GM defends increases
In a Feb. 6 interview El Dorado Irrigation District General Manager Jim Abercrombie cautiously predicted that the proposed 2012 rate increases are spread out enough to avoid the vitriol of the 2010 rate increase package, when sheriff’s deputies rushed the stage with hands on holsters to maintain order at one meeting.
But ratepayer watchdogs Greg Prada of Cameron Park and Jon Jakowatz of El Dorado Hills are nonetheless barking, and have posted howls of protest on the website FixEID.org, to counter what Jakowatz calls “EID’s propaganda machine.”
Prada and Jakowatz are in the tiny minority of El Dorado County residents who attempt to understand the labyrinthine world of public utility district financing where, theoretically, the cost of maintaining an $800 million infrastructure is offset by rates, while the cost of capacity expansion is funded by current and future hookup fees.
The watchdogs contend that EID has contorted the equation through excessive spending and borrowing, forcing rates to cover an ever-growing debt service in addition to infrastructure maintenance.
They condemn the Prop. 218 notice as a carefully crafted public relations piece that disguises the full extent of the proposed rate increases that must also fund Mosquito Road overhead that, according to Prada, surpasses operating expenses. “We’ve got as many people on Mosquito Road as we have doing the work,” he said. “That’s why we need all these rate increases.”
Prada called EID’s Placerville headquarters a “Taj Mahal that sits half empty,” with “three PR people, 20 engineers, five HR people, two lawyers, 11 IT people, expensive consultants and 175 company vehicles.”
Abercrombie disputes Prada’s inclusion of all Mosquito Road employees as overhead, arguing that many function in direct field support roles, and that much of the on-site plant oversight was automated at Mosquito Road as part of the district’s two-stage downsizing.
Root of the problem
Abercrombie traces the root of the district’s financial problems to a “long-known and long-deferred” quarter-million dollars of maintenance identified back in 1999. He quotes a 13-year-old EID financial plan that predicted “major new debt” and subsequent “major rate increases or severe service curtailments.”
The 1999 plan underestimated the cost of restoring the recently acquired Project 184, the ramshackle system of dams, reservoirs and flumes that bring water to a hydro power generating plant in Pollock Pines.
Updating Project 184 has since cost more than $100 million, and remains the largest item on the five-year capital improvement plan.
“That board knew we had a bubble to fix … and no one bit the bullet,” said Abercrombie, who lamented that “a 5 percent water rate increase in 1999, 7 percent on the waste water side, a couple bucks a month, would have avoided all these double digit rate increases.
“Customers cannot tolerate rate shock,” he added. “Small but consistent rate increases … a couple bucks a month… should have happened over the years.”
With the combination of operations costs and debt service often exceeding rate revenue over successive years, EID boards resorted to borrowing, at times tapping FCC “hook up” revenues to cover costs, while pushing the cost of capital projects into future years to balance the budgets.
Abercrombie argues that district spending has resulted in a near-perfect record of regulatory compliance in an aging water delivery system.
The district’s two large waste water treatment plants now meet California’s strict tertiary treatment standards, ahead, it turns out, of neighboring jurisdictions to the west that presently dump partially treated waste water directly into the Sacramento River and now face a $2-plus billion treatment plant upgrade that experts predict will triple Sacramento’s sewer rates.
The rate comparison graphs included in the Prop. 218 notice compare EID rates favorably with neighboring districts. Prada calls the charts “misleading” because EID’s rates don’t reflect the $9.4 million property tax revenue EID will receive in 2012. He claims the tax revenue effectively increases EID’s water and sewer rates 30 percent and 25 percent, respectively, well beyond Sacramento and Folsom.
Abercrombie counters that many districts receive property tax, and other non-rate revenue, including large grants.
Prada and Jakowatz are hoping for a lively crowd at the March 26 hearing. In a recent e-mail blast Prada exhorted his fellow ratepayers to turn out and “tell EID to quit their accounting gimmicks and deceptive PR games and slash their millions of dollars of grandiose spending.”
The proposal will fail if a majority of parcel owners submit a written protest containing the parcel owner’s name and address or assessor’s parcel number. Protests must be submitted to EID at or before the March 26 hearing.