State bill would remove restrictions on WRD’s reserve spending but also add budget oversight

Sean Belk
Staff Writer

A bill that was recently passed by the California State Legislature will temporarily remove restrictions on how the Water Replenishment District of Southern California (WRD) can spend its reserve money.
But state lawmakers also agreed to maintain a cap on the water agency’s reserve fund and add an extra layer of oversight to WRD’s finances by establishing a budget advisory committee to be governed by representatives of seven water-rights holders.
SB 620, authored by Sen. Roderick Wright (D-Inglewood), is the result of a compromise between WRD and entities that pump water from underground aquifers, including the cities of Downey, Cerritos and Signal Hill. The State Senate officially passed the bill in a 62-0 vote on Sept. 12. Gov. Jerry Brown has until Oct. 16 to sign the bill into law.
The local cities, which have an ongoing lawsuit against WRD that claims the water agency did not follow state procedures in raising its assessment rates in past years, originally opposed the legislation. That’s because the original bill sought to eliminate a provision in a 2000 state law that caps WRD’s unencumbered reserve fund at $10 million after an audit found that WRD had “maintained high fiscal reserves and didn’t exercise strict fiscal controls.”
WRD officials claimed that the restriction prohibits the agency from seeking local water supplies and forces the agency to rely more on costly imported water, but the cities asserted that removing the cap would have given WRD no limit on how much it can stash away in reserves while the agency continues to increase assessments.
While the new version of the bill makes no changes to the state cap on reserves, it does temporarily remove some restrictions on how WRD can spend its reserve money.
According to a Senate floor analysis of the legislation, the bill eliminates, through fiscal year 2019-2020, the requirement in existing law that a minimum of 80 percent of WRD’s annual reserve fund be spent on water purchases. The State Legislature would be able to determine whether to extend the moratorium on state restrictions through a review of public records.
In a press release issued on Sept. 23, WRD Board President Robert Katherman said the new version of the bill would give WRD “the flexibility to more cost-effectively manage our financial resources for the benefit of our customers and the destiny of the groundwater resource they use.”
WRD General Manager Robb Whitaker said in the same statement that removing the language on the use of the unrestricted reserve fund “reflects the fact that our imported water purchases are declining and gives us the flexibility to meet unanticipated and unbudgeted contingencies that may arise as we move toward 100-percent local supply.”
According to WRD, the agency is moving forward with a program to achieve 100-percent water independence. Currently, the water agency mostly purchases imported water to replenish underground aquifers that supply 40 percent of the water used by residents in 43 cities in WRD’s service area.
Representatives from local cities also applauded the bill, particularly the provision that allows pumpers to weigh in on WRD’s budget and assessment process.
“This is an important step, because it adds additional accountability,” said John Oskoui, assistant city manager and director of public works for the City of Downey, in a joint statement released by the three cities on Monday, Sept. 16. “WRD replenishment assessments can amount to a third to half of the average consumer’s water bill. The cities and companies that provide the water to our residents and businesses need to be at the table fighting against unnecessary WRD spending and inflated assessments.”
In the same statement, Signal Hill City Manager Ken Farfsing said the advisory panel is “one more step to imposing fiscal discipline on the WRD.” He added, “This is an agency with unique power in a very critical area. Past abuses have demonstrated that reasonable checks are needed to head off unjustified spending and oppressive assessment burdens.”
Oskoui said in a phone interview that the local cities worked with the authors of the bill to come up with the compromise. Though it’s not perfect, it’s the best they could do, he said.
“We didn’t like it, and we still don’t like it, but we tried to make the best of what we could,” Oskoui said. “We managed to make some reasonable changes.”
According to the analysis of the bill, the advisory committee would consist of seven members elected among water-rights holders that pump water from underground aquifers and that are subject to WRD’s replenishment assessment. Each member of the committee would serve a two-year term.
Jim Glancy, chairman of the Southeast Water Coalition that represents 11 cities in the region, said in a phone interview that the coalition was against the original version of the bill but the new legislation resolves most of the concerns. “I feel that the bill is better than it once was,” he said. “It was changed many, many times.”
Patty Quilizapa, an attorney representing the local cities in the lawsuit against WRD, said the bill does not end the ongoing litigation in which the courts ruled that WRD did not follow a state law, known as Proposition 218, which mandates that government agencies give ratepayers a right to protest any increase in assessments. But she supported the legislation for setting up a panel to review and provide oversight to the WRD’s budget and replenishment assessment process.
“It’s a step in the right direction in that it brings the pumpers into the process because they’re the ones that are going to pay it,” Quilizapa said. “We’re hoping that maybe someday there will be legislation to fix all of this.”
Other provisions of SB 620 include allowing both WRD and pumpers to seek attorney fees as injunctive relief in litigation and increasing penalties from $150 to $1,000 that WRD can impose on pumpers that fail to provide reports on groundwater production. Both of these provisions apply to any litigation filed after July 1. The legislation would not apply to pumpers, many of which have withheld payments to WRD, involved in the ongoing litigation regarding Proposition 218.
Adeline Yoong, WRD’s senior government affairs representative, said in an emailed statement that the provision that allows the prevailing party of an injunction against an entity that does not pay the replenishment assessment to recover attorney fees and costs is critical to keeping water affordable for all ratepayers.
“To pump groundwater without paying for its replenishment is a very serious matter that puts an unfair burden on pumpers who do pay, and it jeopardizes the health of the groundwater basins,” she said. “Our region cannot afford anything to threaten the stability of our water resources. A steady and reliable supply of water will ensure that residents have affordable water and that businesses are economically competitive.”

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