Rate increases, debt levels and the long-term financial health of the El Dorado Irrigation District dominated a panel discussion last Wednesday.
Sponsored by the Tea Party Patriots of El Dorado Hills, the panel features EID Board of Directors candidates Greg Prada, Dr. Dale Coco and Jake Flesher. Candidate Richard Englefield was absent due to another commitment.
Facing off in Division 4 are Coco and Flesher. In Division 2, it’s Englefield and Prada.
Flesher, managing partner of a law firm in Folsom, said the election is about EID’s rates, debt and spending. If elected, he said he would focus on rates by looking at them through the lens of the ratepayers.
Twenty-five percent of EID’s budget is currently devoted to servicing its debt, he said — an amount similar to that paid by the city of Detroit before it declared bankruptcy. EID has more than $400 million in debt and has $30 million in unfunded liabilities, but they think they are in pretty good shape, according to Flesher. “Well I disagree,” he concluded, explaining that rates have gone up 102 percent in last five years, plus 11 percent this year and another 11 percent next year. Flesher also wondered how long EID could stay in business when in 2012, for example, it overshot its budget by $4 million and only cut $940,000 in expenses.
Flesher went on to say that 73 percent of EID’s rate (revenue) comes from Shingle Springs, Cameron Park and El Dorado Hills and he wanted to end that. He also advocated for a moratorium on new debt, saying that portion of the budget devoted to debt service will increase once interest rates go up again.
Largely agreeing with Flesher was Prada, a retired chief executive. Claiming EID was financially broken, Prada declared, “EID is financial irresponsibility on steroids” with runaway rate hikes of 102 percent from 2010 to 2015, including 11 percent next year. The district also has mushrooming debt levels approaching a half billion dollars including unfunded pensions and health benefits and $60 million of debt, according to Prada. With ongoing deficit spending of $15 million a year, if it was business, it would be out of business, he claimed.
The district has some ticking financial time bombs including unfunded pensions, covering health cost for retirees, deferred debt repayment and looming interest rates which he predicted would result in a 20 percent rate hike in the future regardless of any cuts, Prada added.
He asserted that EID sells less than half of its water and it already has plenty of water for all the development projects approved plus others proposed. The capacity added is done for developers, he said. As far as trimming costs, Prada explained that overhead at EID had increased from $7.5 million to more than $18 million over the last dozen years and one-third of rates pay overhead. That’s too much staffing on Mosquito Road, he said.
Accusing the present board of rubber stamping everything, Prada said factors driving the rise in water rates next year are the $60 million in additional debt, a 7 percent wage hike next year for most employees and 6 percent this year, plus additional benefit costs. ”
We need to stop increasing debt, slash overhead and stop the accounting gimmickry,” he said. “I’ve previously been a CEO, CFO and COO and am used to turning around companies that are in the red. EID needs that kind of attention and that’s why I’m running.
Dr. Coco, a retired physician, said it was time EID focused on “real solutions to the $370 million debt and stop runaway rate increases” — a long-term strategy that secures the district’s water at reasonable rates and leaders with solid management experience to make that happen. EID’s management has managed the board for years and it is time for the board to take control, he claimed.
Touting his management experience, Coco said he previously was the chief of staff at Barton Memorial Hospital and served on several oversight committees at Marshall Medical Center.
“I was a project manager who saved hundreds of millions of dollars and increased efficiency. I can do the same as an EID director,” he promised.
“There are sewer rate increases every year. Our water rates have nearly doubled. We just had a 11 percent water rate increase and we will have another one next year. When does it stop?” he asked. “We need to get the rates under control. At best, EID has a $370 million dollar debt with one-third of every dollar paid going to service that debt. We also need to get our debt under control.”
If operating costs were brought under control it would stop escalating rate increases, he continued, adding that projects were sometimes approved and built without the benefit of a cost/benefit analysis. EID has spent money on things that might happen instead of what will happen, he claimed. He also advocated for increased efficiency in all departments saying, “I have a methodology that can solve those problems.”
With the moderator’s questions completed, the audience chimed in. On the topic of protecting agricultural water rates, Prada noted that such users only pay one-seventeenth what others pay and there is a mismatch in rates. Coco and Flesher sidestepped the question by advocating lower rates for everyone.
Audience members also asked about salary increases. Prada said most staff got a 6 percent increase this year and will get a 7 percent increase next. Coco said there should be no salary increases for anyone as long as rates are increasing. He added that board members currently receive a monthly stipend of $1,250 for serving plus health insurance. Flesher — who said he was offended at hearing this information — promised not to accept a stipend if elected.
Asked about priorities, Flesher said EID needs to prioritize what will affect water and sewer rates. Prada responded by saying there are too many priorities and they should be limited by what the district has to spend. Coco advocated doing more than just cutting when setting priorities.