Water Authority Responds to San Diego Taxpayers Educational Foundation Report

January 16, 2012

The San Diego County Water Authority today responded to a report by the San Diego Taxpayers Educational Foundation that studied…

The San Diego County Water Authority today responded to a report by the San Diego Taxpayers Educational Foundation that studied labor costs at the agency between 1999 and 2009. 

“The Taxpayers Educational Foundation and the San Diego County Taxpayers Association serve important roles informing our community on issues impacting taxpayers and water ratepayers,” said Maureen Stapleton, general manager of the Water Authority.  “The Taxpayers’ study focuses primarily on how much labor costs at the agency rose between 1999 and 2009.  We believe it is equally important for ratepayers to be fully informed why the Water Authority’s workforce and labor costs grew during the decade.  The Taxpayers’ report does not provide an equal focus on that part of the story.

“Ratepayers need to know what value they receive for their dollars.”

The Water Authority’s workforce grew between 1999 and 2009 to support new historic water supply reliability programs and the peak planning and construction period for its $3.5 billion Capital Improvement Program, including:

  • Negotiating and implementing the 2003 Quantification Settlement Agreement and managing Colorado River water transfer and canal-lining agreements included in the QSA.  These long-term agreements will provide 170,000 acre-feet of new, highly reliable water for the region this year – enough to meet 27 percent of the region’s water needs.  These supplies will grow to provide 280,000 acre-feet annually by 2021 – enough to meet more than one-third of the region’s water needs. 

  • Emergency Storage Project:  This $1.5 billion project, when complete, will ensure that the region will have up to a six-month supply of locally stored water if an earthquake or other disaster cuts off imported supplies.  Construction of this network of more than a dozen major facilities, including dams, reservoirs, pipelines, pump stations, surge controls and more, began in 2000.  Most of the facilities – including the Olivenhain Dam, reservoir and pipeline, the Lake Hodges pumped storage facilities, the San Vicente Pipeline, and the San Vicente Surge Tank and Pump Station, are now complete.

  • San Vicente Dam Raise:  This project, the tallest dam raise project in the United States, will more than double the capacity of the city of San Diego’s San Vicente Reservoir.  It is part of the Emergency Storage Project and will store an additional 52,100 acre-feet of water for emergency use.  It will also add 100,000 acre-feet of carryover storage capacity – water stored during wet years to help meet demands during dry years.  Construction began in 2009 and is expected to be complete in 2013.  Since 1999, the Water Authority has added 114,375 acre-feet of regional water storage, and that figure will grow to 266,375 acre-feet when construction on the San Vicente Dam Raise Project is complete.

  • Twin Oaks Valley Water Treatment Plant:  The plant, the largest submerged membrane water treatment plant in the world, was built between 2006 and 2008.  It can produce 100 million gallons of high-quality treated water daily and reduces the region’s reliance on facilities outside of the region to meet treated water demands.

  • Pipeline Relining Program:  This program, started in 1996, cost-effectively extends the service life of 82 miles of vital large-diameter pipelines around the region by inserting steel linings.  The program is now one-third complete.  Between 1999 and 2009, the Water Authority lined more than 22 miles of pipelines as large as 96 inches in diameter, extending their useful life by 50 years or more.

  • Aqueduct System Expansion:  The Water Authority built 34 miles of new large-diameter pipeline, including the 11-mile long San Vicente Pipeline and Tunnel, an increase of 12 percent in the Water Authority’s aqueduct system.  The Water Authority also built 22 new pumping control facilities, an increase of 26 percent in such facilities.

  • Electrical Power Generation– Since 1999, the Water Authority built nearly 42 megawatts of hydropower electrical generation capacity, helping to meet the region’s energy needs and generating revenues to help moderate water rate increases.

“Until this past decade, San Diego County was over-reliant on a single supplier to meet up to 95 percent of this region’s water needs,” Stapleton said.  “Today, with the investments in the Imperial Irrigation Water Transfer, canal lining projects and other programs and projects, our region has a more diversified, and more reliable water supply.”

The following graphic depicts San Diego County’s water supply portfolio as it existed in 1999, compared to today.


Click on image above to enlarge.


Stapleton also called the period covered in the Taxpayers’ report “the biggest decade in the agency’s history for building new, large-scale water infrastructure to serve our region.”  The following graphic depicts the Water Authority’s infrastructure as it existed in 1999, compared to today.

  Click on image above to enlarge


“These investments support the region’s $186 billion economy and 3.1 million people, and will continue to serve our region for generations to come,” said Michael T. Hogan, chair of the Water Authority’s Board of Directors. “The region’s residents and businesses have received very strong returns for their investments in new long-term water supplies and infrastructure projects.”

Water Authority compensation costs grew at a rate comparable to entities in the private sector.  Figures from U.S. Bureau of Labor Statistics show per-hour compensation costs at private utilities nationally grew 30 percent between 2004 and 2010, a period for which such data was available and that overlapped the years reviewed in the Taxpayers’ report.  Water Authority per-hour compensation costs grew 33 percent over the same period.






2010 dollars



Total Per-Hour Compensation


Private Industry

Total Per-Hour Compensation San Diego County

Water Authority



Actual Dollars

% Increase

2010 Dollars

% Increase

Actual Dollars

% Increase

2010 Dollars

% Increase



















































Stapleton noted that since 2009, the Water Authority has reduced its workforce in accordance with plans made more than a decade ago.  For example, the Water Authority used limited duration employees to help meet the peak staffing needs associated with its Capital Improvement Program.  As capital spending is dropping, the Water Authority is eliminating limited duration positions as planned.   

“The Water Authority is undergoing the largest workforce reduction in our agency’s history and taking other measures to manage labor costs,” Stapleton said.

Measures the Water Authority has taken since 2009 include:

  • Executing a workforce management plan that will reduce staff positions 16 percent between 2008 and 2014.  As part of this plan, the Water Authority is eliminating 31.33 full-time positions during the current two-year budget cycle.  Many of these positions are “limited duration” positions that were designed to end as specific construction projects and other limited duration staffing needs ended.

  • Requiring employees to pay an increased share of their retirement benefits (4.5 percent of employee contribution, up from 0 percent in 1999). 

  • Deferring 14 construction projects worth $150 million to July 2014 or later.

  • Making $6 million in mid-year operational budget cuts in fiscal years 2010 and 2011.

  • Adopting a budget for fiscal years 2012 and 2013 that features $235 million lower spending on capital projects and a 7 percent decrease in the cost of operating departments.

  • Aggressively refinancing its debt portfolio to reduce the costs of financing capital projects.  Bond refunding sales this year are expected to save $18.7 million in financing costs on a present-value basis over the life of the bonds.

  • The recent increase in unfunded liabilities at the Water Authority is largely related to poor economic conditions and market performance in recent years.  This phenomenon is common among public agencies and private entities with pension plans.

Labor costs represent only about 6 percent of the Water Authority’s budget, and are not significant drivers of recent rate increases, Stapleton noted.

One of the biggest drivers of recent and projected water rate increases is increased water supply and transportation costs imposed by the Metropolitan Water District of Southern California, the San Diego region’s largest supplier.  The cost to purchase treated water from MWD increased 94.6 percent from 2003 to 2012.  In addition, the rates MWD charges the Water Authority to transport its independent Colorado River supplies through MWD’s conveyance and distribution system have increased 56.5 percent over the same period.

The Water Authority alleges that MWD improperly overcharges the Water Authority for the transportation of its independent Colorado River supplies and uses that money to subsidize the cost of MWD water to its other 25 member agencies. This violates California’s Constitution, other state law, and standard water utility practice.  In June 2010, the San Diego County Water Authority Board of Directors unanimously approved filing suit against MWD over its rate structure.

MWD’s rate structure causes significant financial harm to the San Diego region. San Diego County will be overcharged by about $40 million in 2012; those overcharges will grow to as much as $220 million annually by 2021, and total as much as $2.1 billion over the next 45 years.  The case is being heard in San Francisco Superior Court.  More information on the rate challenge is available at www.sdcwa.org/mwdrate-challenge.

“The Water Authority is dedicated to ensuring our region has a safe and reliable water supply,” Hogan said.  “We understand ratepayers want to make sure their dollars are being spent wisely and prudently to achieve that mission.”

The Water Authority holds long-term senior lien credit ratings of AA+, AA+ and Aa2 from Standard and Poor’s, Fitch and Moody’s, respectively. The Water Authority also holds subordinate lien credit ratings from those agencies of AA, AA and Aa3, respectively.  (Subordinate lien credit ratings are typically at least one level below senior lien credit ratings.)  The Water Authority’s current credit ratings are considered high quality by all standards and are held by only a few select water agencies in California.  High credit ratings benefit ratepayers by helping to lower the cost of borrowing.

The Water Authority is recognized nationally for its sound financial management practices.  It has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada for 11 consecutive years.   It also received the 2010 Excellence in Budgeting Award from the California Society of Municipal Finance Officers.

More financial information about the Water Authority is available at www.sdcwa.org/financials-investor-relations.

  • The San Diego County Water Authority sustains a $268 billion regional economy and the quality of life for 3.3 million residents through a multi-decade water supply diversification plan, major infrastructure investments and forward-thinking policies that promote fiscal and environmental responsibility. A public agency created in 1944, the Water Authority delivers wholesale water supplies to 23 retail water providers, including cities, special districts and a military base.

    Media Contact Information

    Grace Sevilla

    Phone: (619) 855-5135

    Email: GSevilla@sdcwa.org