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MWD Adopts Unnecessary Rate Increases for 2015 and 2016 While Over-Collecting $350 Million from Ratepayers
Agency continues overcharging region’s ratepayers while spending excess revenue on unbudgeted expenses
April 8, 2014
The Metropolitan Water District of Southern California on Tuesday raised rates for 2015 and 2016 despite having projected cash reserves of $840 million – an amount that is $352 million above its board-adopted maximum reserve limit. MWD's board also voted to spend the over-collected revenue on unbudgeted expenses.
Officials from the San Diego County Water Authority and several of its 24 member agencies attended Tuesday’s hearing in Los Angeles to defend the region’s ratepayers and urge no water rate increases be adopted. However, despite compelling information that rate increases are unneeded, the MWD board adopted 1.5 percent increases for each of the next two years.
The Water Authority’s delegates to MWD voted against the rate increases not only because they are unnecessary, but also because they are based on the same flawed methodology that a judge in San Francisco Superior Court recently ruled violates the California Constitution, the California Government Code and the common law.
“MWD had a chance to help ratepayers and water agencies by providing rate relief,” said Thomas V. Wornham, Chair of the Water Authority’s Board of Directors. “Instead, it’s continuing to charge more in an era when other public agencies are struggling to make do with less.
“MWD says these rate increases will avert bigger rate increases down the road – but there’s no assurance that they will do so,” Wornham said. “To avoid wild fluctuations in rates, MWD doesn’t need to raise rates now – it needs better long-term fiscal planning.”
In February, mayors of 14 cities in San Diego County called on their colleagues across Southern California to protest the unnecessary rate increases planned by MWD. In March, the Water Authority used MWD’s own financial documents to develop estimates for how much money MWD is over-collecting from each water agency that buys water from MWD. The total for Southern California at the end of June is projected to be $352 million above the maximum reserve limit set by MWD’s board. A real-time overcharge calculator, along with a breakdown by each MWD member agency, is at mwdfacts.com.
MWD has amassed hundreds of millions of dollars in recent months because it under-estimated water sales and over-estimated its expenditures. Instead of using the resulting over-collected revenue to provide rate relief next year, the MWD voted to spend it on unbudgeted expenses and continue its long history of increasing rates.
MWD’s 2015 and 2016 rates were adopted Tuesday along with the agency’s $1.64 billion budget for fiscal 2015 and its $1.69 billion budget for fiscal 2016. The Water Authority will account for higher costs from MWD when developing its rates for the Water Authority Board's consideration in June.
In addition to opposing MWD’s rate proposal for 2015 and 2016, the Water Authority has sued MWD for setting rates that illegally overcharge San Diego County ratepayers in 2011, 2012, 2013 and 2014. In February, a Superior Court judge in San Francisco tentatively ruled in favor of the Water Authority in two related cases, saying MWD violated cost of service requirements of California’s Constitution, statutes and common law. The parties are awaiting a final ruling in the first phase of the trial before the second phase of the trial begins later this year.
Phase 2 of the trial is expected to decide the disposition of tens of millions of dollars in disputed payments the Water Authority has made to MWD since 2011. Should the court award a refund to the Water Authority, the Water Authority will deduct its litigation expenses and return the remaining money to its 24 member agencies in proportion to their past payment of MWD’s illegal charges. For more information about the Water Authority’s lawsuits, go to www.sdcwa.org/mwdrate-challenge.