The group that rubber stamped a divorce from the agency plans to look at getting rid of the agency altogether.
By Mackenzie Elmer, Voice of San Diego
Dismantling San Diego’s biggest water broker could be what local boundary referees recommend later this year in the face of ever-rising water rates.
That’s just one of a menu of options that San Diego’s Local Agency Formation Commission, known as LAFCO, will analyze in what’s known as a municipal service review of the San Diego County Water Authority. Reviews like this can inspire further action by the commission, endowed with legislative powers to break up or consolidate cities and government services.
“The commission has to weigh in … on agency’s level of accountability to its constituents present and future,” said Keene Simonds, executive officer of San Diego’s LAFCO. “And, as a part of that, does LAFCO believe restructuring, whether in the form of governance or boundaries, is appropriate?”
Simonds has said LAFCO can initiate a breakup if it believes the business model of the agency is substantively flawed. Let’s say they did, LAFCO would have the authority to initiate the Water Authority’s dissolution internally.
How? Generally, LAFCO can initiate a dissolution under six circumstances by California state code, says Priscilla Mumpower, assistant executive officer at San Diego LAFCO. That includes things like evidence of unlawful or reckless spending, or chronic issues with no effort to fix them.
Point is — the Water Authority, for the first time in its history, is undergoing some serious scrutiny.
The Water Authority wasn’t on LAFCO’s radar until a request by two rural water districts to leave the agency’s service area got extremely contentious in 2023.
“I spent zero time ever contemplating the Water Authority. I largely assumed all was well,” Simonds said at the height of that battle. “Now we can’t ignore the fact that an outside expert has told us their system is broken.”
(That expert, at the time, was 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 fought the decision to the bitter end at LAFCO. That exposed the agency to the scrutinous, clicking pens of LAFCO analysts whose sole purpose is to identify government inefficiencies and waste. San Diego LAFCO hired Pat Bouteller, former chief aide to ex-Mayor Kevin Faulconer, to lead the review after its former analyst, Chris Cate, moved on to lead the San Diego Regional Chamber of Commerce.
LAFCO also hired former Rainbow Municipal Water District General Manager Tom Kennedy, who was one of the major opponents to the Water Authority during his agency’s divorce, to compare water rates across the Water Authority’s 22 water districts as part of the study.
Simonds said that since the contentious divorce battle ended, the Water Authority’s experienced a “sea change” under its new general manager, Dan Denham, board chair and San Diego Mayor Todd Gloria’s deputy chief of staff, Nick Serrano, and former board chair and Del Mar Water Authority representative, Mel Katz.
“It’s not perfect but they did a lot of changes for the better,” Simonds said. “But we still have a fundamental problem in (that the way they) collect revenues can and is being outpaced by their take or pay contracts.”
Simonds is referring to agreements San Diego made years ago to buy expensive Colorado River water off farmers in Imperial Valley. He also mentioned the most expensive water San Diego has – from a desalination plant in Carlsbad. All of this the Water Authority pursued years ago during times of extreme drought – but proved to be too much water for the region’s demand.
Plus, the city of San Diego is building a multibillion-dollar wastewater to drinking water project, which will lessen demand on the Water Authority’s overabundance of supply even more.
“At what point does water become unaffordable?” Simonds told Voice of San Diego.
Simonds gave the skinny on the three options that review will consider:
Option One
Dismantle the Water Authority as the main buyer and seller of water in the county and create three separate regional agencies that mirror places doing wastewater to drinking water projects. That could look like the city of San Diego and South Bay, one for East County that includes Otay and Padre Dam water districts, and another for the North Coast that represents the recycling project in Oceanside.
Each would become their own member of the governing board at the powerful – and controller of Colorado River water to — the Metropolitan Water District of Southern California. It’d be a huge shift in the power dynamics that traditionally run San Diego water.
Simonds said the complexity of this option lies in the fact that the Water Authority holds considerable debt ($2 billion) and contracts (like with Imperial Valley) which would be hard to divide up. But rural and urban areas could design policies that work better for them on water under this route. The city of San Diego can sway the Water Authority’s board with its large share of a weighted vote.
Simonds, who worked 11 years for Napa Valley’s LAFCO, put it this way: Right now, nobody gets to pick the bottle of wine that they want but everyone has to pay the tab. This way, each district gets to pick their bottle.
Option Two
Metropolitan, based in Los Angeles (which supplies and sells Colorado River water to San Diego), absorbs the Water Authority.
“Would there be a clear cost savings and or governance benefit?” Simonds said. “Our broad draft analysis to date suggests there could be some savings.”
But Simonds noted that means the people of San Diego would be further removed geographically from where decisions about their water are being made – a significant downside.
Option Three
The Water Authority absorbs some of the smaller water agencies and becomes a wholesale seller and retailer. Simonds gave the example of the Encinitas and Carlsbad area.
“Within basically 15 square miles you have four to five different water districts that all completely rely on the Water Authority for supplies,” Simonds said. “You would think there would be more uniformity in their rates – but there’s not.”
I ran the options by Denham, the Water Authority’s general manager, who hadn’t heard them all yet. He was very much not into breaking up the Water Authority, otherwise known as option one.
The idea mirrors one floated by Olivenhain Water District’s General Manager Kim Thorner months ago. The idea “kind of died,” she said, after San Diego settled its years-long lawsuit with Metropolitan over the cost of moving Colorado River water. (Thorner clarified later that the idea was hers, and did not reflect the position of her agency or her agency’s governing board).
But at that time, water districts like hers faced a proposed 22 percent rate increase from the Water Authority and contract obligations to buy more water the region didn’t need. Thorner said she printed out a map of the Water Authority region and started drawing new boundaries — the genesis of the idea for three Metropolitan agencies instead for one Water Authority.
After the settlement, suddenly, San Diego was able to sell its water to other Metropolitan agencies and maybe, if Metropolitan agreed, to other thirsty states.
But the idea isn’t really dead — it’s still part of LAFCO’s analysis.
Denham isn’t worried.
“It sounds like a big deal but it’s nothing more than a colorful map that’s been circulated,” Denham said about Thorner’s proposal. “I don’t think there’s any merit to that. Once you start to peel it back a little bit you’ll realize there are significant financial impacts to all ratepayers in doing that.”
He said dismantling the Water Authority presents extreme legal hurdles concerning its water contracts.
“I think people understand there’s still work to do at the Water Authority,” Denham said.
