A safe and reliable water supply is critical for the continued prosperity of San Diego County’s $186 billion economy and quality of life for its 3.1 million residents. A May 31 Grand Jury report, “San Diego County Water Rates: High Today, Higher Tomorrow” determined that the region’s water rates are likely to continue to rise. Some of these factors are beyond the control of local agencies, such as weather, population growth, the pricing of imported water supplies, and implementation of technology to stretch the short supply.

   Customers have played their part by changing their behaviors and making investments and sacrifices. They have met or exceeded the conservation goals set for them. It’s only fair for them to expect their respective water agencies to do their part and make necessary sacrifices to keep operational costs as low as possible.

   Even so, ratepayers in San Diego County have seen water bills increase at a double digit pace over the past four years. Yet conservation efforts continue, simply because it is the right and responsible thing to do.

   At the Otay Water District, customer water rates have increased by more than 40% over the past two years, and are scheduled to increase again in January 2012 by 7.7%.  But rather than making a show of good faith through their own financial sacrifices alongside ratepayers, the general manager of the Otay Water District recently led the charge to enhance retirement benefits for management with extraordinary lifetime healthcare and dental benefits for the managers and their dependants. Board members voted 4-1 to approve these lavish new benefits.

   The San Diego County Taxpayers Association was the only organization to speak out publicly at the board meeting against this vote. Now, to SDCTA’s utter amazement, a similar deal is being considered for represented employees with another board vote to approve similar benefits expected on August 10.

   How could the Otay Water District possibly defend such an ill-considered business practice, increasing benefit costs at time when ratepayers are getting hit hard with annual water rate increases?

   The District claimed its proposal would save money. SDCTA examined their financial analysis and discussed it with the independent actuary; we discovered several glaring discrepancies in the findings. First, the actuary did not produce or calculate the purported “savings” estimates that were found in the District report. The actuary was provided the figures by the District to calculate the cost impact and does not know how they were derived.

   Even so, the most conservative analysis shows jaw-dropping, City of Bell type increases in the District’s liability to pay for these luxurious new retiree healthcare and dental benefits:

– Immediate 3,416% increase to the district’s unfunded retiree healthcare liability ($49,000 to $1.72 million)

– $290,000 impact to budget in fiscal year 2012 to cover the district’s annual healthcare payment; a 2,417% increase from $12,000 to $302,000

– Immediate 2,058% increase in the value of benefits for district employees, from $151,000 to $3.258 million; this amount will be paid throughout the retirement of all district employees

   Consider the fact that since 2001, pension and retiree healthcare costs for District employees have increased by more than 193% and 638%, respectively.  Last year, employee retirement related costs alone accounted for 23% of the District’s administrative budget, without a drop of water ever traveling through the system and coming out of a customer’s faucet.

   The District already provides more generous retirement benefits than many water agencies across the region. Taking the average base salary of $176,000 for district executives and assuming 20 years of service, an executive would receive $96,800 for life upon retirement, plus annual cost of living increases.

   Current executives enjoy generous benefits too. According to a recent media investigation, the District’s general manager Mark Watton makes more than $300,000 and is eligible to receive 71 days off, amounting to three months off work during any given calendar year.

   The Otay Water District has a significant governance problem and these cost increases cannot be sustained forever on the backs of ratepayers.

   District leaders claim the employees will be paying for the increased cost of their enhanced healthcare benefit. There is absolutely no evidence of such an agreement. Further, while managers will be required to pay the full employee share of pension costs – the full eight percent, up from one percent – these savings are lost because employees will receive a salary increase of seven percent during that same period.

   Perhaps board members believe they can act without any consequences because their ratepayers rarely speak up. It is time to ensure this excuse can’t be made again. SDCTA calls on the ratepayers and concerned public to call upon Otay Water District board members to rescind its recent vote to enhance lifetime medical and dental benefits with no cap on costs for managers, and to abandon the plan to approve a similar deal for represented employees. The deal is self-serving and completely irresponsible. The District’s spin on the purported savings is more than disingenuous. It is blatantly dishonest.