San Diego Business Journal

Commentary: Otay Water District’s Actions Could Soak Its Ratepayers

By Lani Lutar Monday, August 8, 2011

Businesses understand that the cost of the water needed to work and live in this arid region is, in part, beyond their control. The price of imported water supplies, critical infrastructure investments, population growth and drought conditions all contribute to water rates that continually rise.

As a result, business customers have played their part by changing their behaviors and making investments and sacrifices. Businesses have met or exceeded the conservation goals set for them. It’s only fair for them to expect that their respective water agencies would do the same and make necessary sacrifices to keep operational costs as low as possible.

Unshared Sacrifices

At the Otay Water District, customer water rates have increased by more than 40 percent over the past two years, and are scheduled to increase again in January by 7.7 percent. But rather than making a show of good faith through the district’s own financial sacrifices alongside those of ratepayers, the general manager of the Otay Water District recently led the charge to enhance retirement benefits for management with extraordinary lifetime health care and dental benefits for management and dependents. Board members voted 4-1 to approve these lavish gains.

Now, to the San Diego County Taxpayers Association’s utter amazement, a board vote to approve similar benefits for the rest of the district’s employees is expected Aug. 10.

This is another example of government gone wild. Like pensions, retiree health care costs contribute to any public agency’s long-term unfunded liability. These costs are difficult to control or forecast, but they usually only go in one direction: up. This self-serving gesture by Otay’s management will cost Otay’s ratepayers — most of whom can only dream of such a benefit. How could the Otay Water District possibly defend such an ill-considered increase in benefit costs at a time when ratepayers are getting hit hard with annual water rate increases?

To defend the actions, the district produced a sham report claiming savings from its benefit enhancement proposal. Unfortunately for ratepayers, an independent fiscal study showed that it is just the opposite. There will be jaw-dropping, City of Bell-type increases in the district’s financial liability for these benefits, including:

An immediate increase to the district’s unfunded retiree health care liability, from $49,000 to $1.72 million;

A $290,000 impact to budget in fiscal year 2012 to cover the district’s annual health care payment;

An immediate increase in the value of benefits for district employees from $151,000 to $3.25 million. This is approximately how much money would be needed to pay for the benefit throughout the lives of all district employees.

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