The water beef used to be all about Los Angeles vs. San Diego. But a local water divorce roiled the internal world of the San Diego County Water Authority with lingering effects.
By Mackenzie Elmer, Voice of San Diego
Two of the San Diego County Water Authority’s smallest customers — avocado and citrus farming communities in North County tired of paying ever-rising water rates to urbanize San Diego — were prepared to leave quietly in search of cheaper water elsewhere.
These water divorce proceedings began back in 2020. But at the 11th hour, the Water Authority started pulling out all the stops to keep them in line, and all hell broke loose. The Water Authority leaned on powerful friends at the State Capitol and former enemies in Los Angeles, where the biggest water supplier in the world lives: the Metropolitan Water District of Southern California.
The Water Authority also turned to the courts, dropping a 360-page lawsuit against its defectors, Rainbow Municipal Water District and Fallbrook Public Utilities District, and a little-known organization that gave them permission to leave: the Local Agency Formation Commission or LAFCO.
But the Water Authority’s effort to quash its deserters had an unintended effect: It suddenly thrust the agency’s inner turmoil into the limelight.
“I spent zero time ever contemplating the Water Authority. I largely assumed all was well,” said Keene Simmonds, the executive officer of LAFCO. “Now we can’t ignore the fact that an outside expert has told us their system is broken.”
That outside expert is Michael Hanemann, an economist hired by LAFCO to weigh and measure the impact of the two departing customer water districts on the Water Authority. The Water Authority has bigger problems than the high price of its water, Hanemann wrote. Its financial and governance stability is at stake as it sells less water.
San Diego residents and businesses are buying about 40 percent less water than they did in 2010. They learned to conserve.
Rainbow and Fallbrook say their farming region is buying less, too, because farms are going out of business in part because of high-priced water. That’s just the tip of that iceberg. The city of San Diego, a bloc of water districts in eastern San Diego, and Oceanside are working on recycling wastewater into reusable water. That means they’ll need to buy less and less water imported by the Water Authority in the not so distant future.
The Water Authority is the middleman in getting water to San Diego, which doesn’t have many natural local water sources of its own. It buys wholesale water from the Metropolitan Water District of Southern California – a mix of Colorado River and California’s Sierra Nevada mountains – then sells it to 24 customer water districts.
Anyone familiar with Southern California water politics knows about the 30-year-old grudge between the San Diego County Water Authority and Met, its larger rival. The relationship was fraught because San Diego wanted control over its water sources but Met owned all the physical connections. Sparing no expense, San Diego wrested free from Met’s grip by building an expensive desalination plant and cutting deals for river water with Imperial Valley.
Now the Water Authority is staring down over $2 billion in debt to pay for all that. It’s what’s driving up water rates countywide and precisely why Rainbow and Fallbrook want out. Though they began the process of departing through LAFCO back in 2020, the beef didn’t really heat up until this past Spring.
The Water Authority proposed a 14 percent rate hike in March. Then a San Diego lawmaker, Assemblywoman Tasha Boerner, a Democrat from Encinitas, proposed a bill that could quash LAFCO’s ability to finalize the water district’s divorce. The city of San Diego, the Water Authority’s largest and therefore most powerful customer, pushed the bill through the legislature on behalf of the Water Authority.
Rainbow and Fallbrook saw this as a direct threat to their departure. LAFCO saw it as an attempt to strip them of their ability to change boundaries. The statewide LAFCO agency, CALAFCO, turned up in legislative hearings to decry the bill. Fallbrook’s general manager, Jack Bebee, flew to Sacramento to defend his utility’s divorce from the growing powers against it.
“Our agricultural community is struggling … and if this (bill) goes forward … you will likely have two failed water districts in front of you that are looking for help from the state,” Bebee told a state senate committee in July.
Nick Serrano, vice chair of the Water Authority board and San Diego Mayor Todd Gloria’s deputy chief of staff, also flew to Sacramento for that same hearing. He argued that if water districts like Rainbow and Fallbrook are allowed to leave, it pushes the growing cost of maintaining the county’s water system on the remaining 22 customer districts.
Just how much it would cost was the center of bitter debate.
San Diego’s LAFCO had settled on a $63 million fee Rainbow and Fallbrook would pay to the Water Authority to satisfy some portion of the agency’s debts. But just before the final vote of the LAFCO commission, the Water Authority’s rate and debt manager suddenly declared Rainbow and Fallbrook’s departure actually left ratepayers on the hook for $200 million or more in unrequited costs.
The LAFCO commission, led by its Republican chair and County Supervisor Jim Desmond, waived off those claims and on July 10 by a 5-3 vote, told Rainbow and Fallbrook it was OK to see other water districts.
The Water Authority still tried to upset the avocado cart. Water Authority Chair Mel Katz asked the San Diego County Registrar of Voters to stall a special election of customers in Rainbow and Fallbrook – the last votes needed to certify the divorce. The Registrar said, um, no.
Political insiders at the state Legislature and locally in San Diego have told me they were shocked San Diego’s mayor spent so much political capital on blocking the water district divorce. The mayor drew on the Democratic strongholds of major labor unions to speak out against Rainbow and Fallbrook’s move at local LAFCO meetings and at the capitol.
Republican lawmakers saw the struggle as big city San Diego meddling with the ability of more rural communities to control their destiny. Statewide agricultural organizations like the California Avocado Commission threw support behind Rainbow and Fallbrook. Then, even some Democratic state lawmakers broke rank and supported the rural water districts’ cause.
Ultimately, the Legislature gutted Boerner’s bill of its ability to affect Rainbow and Fallbrook’s divorce. It seemed all the pressure suddenly eased, like somebody that was pressing into a bruise had finally taken their finger away. Gov. Gavin Newsom eventually endorsed the new state law, which makes it much harder for water districts of the future to leave the same way.
What was left were a lot of people with renewed bitterness at the Water Authority and the city of San Diego’s actions. Smaller, less-powerful water districts watching from the sidelines started calling for a shake-up of the power structure of Water Authority votes.
Still, on Thursday, the Water Authority board voted to drop their lawsuit against Rainbow, Fallbrook and LAFCO opting instead to work out a settlement agreement.
Before the board went into closed session, Bebee said a changing of the guard at the Water Authority amid this struggle has been for the better. Dan Denham, formerly the assistant general manager at the Water Authority, took over as general manager from Sandy Kerl who retired in June just before the controversial LAFCO vote.
“I think he has a really good vision for where this organization needs to go,” Bebee said. “The issues of Fallbrook and Rainbow became a hurdle to getting there. I think there’s bigger issues here, as you can see in the vote of Fallbrook and Rainbow.”
(About 95 percent of voters in those communities were in favor of departing the Water Authority on Nov. 7.)
Katz, the board chair, agrees there are bigger issues than Rainbow and Fallbrook afoot. But the two mean different things.
“We have so much bigger issues that we’re making deals on,” Katz told Voice of San Diego.
San Diego has more water now than its customers need, Katz agrees. Denham told Voice of San Diego that the Water Authority’s old line – that local demand for water will be ever-rising – was wrong. But now the Water Authority’s leaders are hoping to attract investors or new customers for some of that water across the drying West. It’s already leveraged some of its flexibility to do so and sold a chunk of its Colorado River water back to Imperial Valley to help stock the Colorado River’s largest reservoir.
Bebee and Kennedy have been saying that the Water Authority over-committed on supplies for years. The city of San Diego quietly agrees – and has been pushing the Water Authority to study whether it should sell-off some of its contracted and more expensive water supplies to save money.
“While their late to come to the realization I appreciate the water authority leadership is finally recognizing the situation they’re instead of saying this isn’t happening,” said former general manager Tom Kennedy, who retired Oct. 4 from Rainbow Municipal Water District.
This story was first published by Voice of San Diego. Sign up for VOSD’s newsletters here.
