“It’s clear to me that there’s a lot of unresolved issues, a lot of disagreement,” Jacob said. “They just don’t want this merger flat out,” Jacob said. “The people that would be affected don’t want it.”
“I do believe in the merger, but I don’t believe in it right now,” Wood said. “The dispute on governance should not trump the savings to the ratepayers,” Abed said. “The savings will benefit the ratepayers.”
“I do not see that there would be a substantial cost savings, either,” Jacob said. Jacob noted that the claimed economic savings were in dispute. “I did not see that either the Rainbow Municipal Water District or Fallbrook ever adopted the draft consolidation study nor did they confirm the contents of that,” she said. “There’s a difference between the words accepted and adopted.”
Jacob has been on the LAFCO board since January 1993. “I have not seen a proposed consolidation merger that has been this controversial,” she said. During Jacob’s tenure LAFCO has approved three consolidation proposals favored by one affected agency’s board and opposed by the other governing body: the 1994 merger between FPUD and the Fallbrook Sanitary District, the 2004 elimination of the Tia Juana Valley County Water District whose area is now served by the City of San Diego water department, and the dissolution of the Lower Sweetwater Fire Protection District in Lincoln Acres which would have been replaced by a county service area had a 2002 election not nullified the dissolution. “It didn’t go because the people overturned the commission,” Jacob said. Because a fire protection district and a city fire department cannot legally merge, functional consolidation including automatic aid and dispatch service sharing is common with the fire service. “There’s other ways to do this,” Jacob said of FPUD and Rainbow achieving shared efficiencies. “If we just leave them alone I think there’s a better probability of that happening.”
FPUD and Rainbow began discussing consolidation in early 2012. The individual districts formed ad hoc committees, and that year the two district boards individually agreed to a consolidation study. The North County Joint Powers Authority was created in February 2013 as a transitional structure to test the possibility of consolidating the Fallbrook and Rainbow districts. The functional consolidation allowed for the experience of combining tasks among the two districts without a jurisdictional consolidation while also creating the possibility that the districts could experience cost savings due to such sharing without governance consolidation. The first North County JPA meeting took place in March 2013, and FPUD general manager Brian Brady was selected as the JPA’s executive officer. The seven-member JPA board consisted of three FPUD board members, three Rainbow board members, and an at-large member chosen by the rest of the board (following the dissolution of the JPA the at-large member, Charley Wolk, was elected to the FPUD board in November 2014).
Dave Seymour was Rainbow’s general manager from September 2007 until his retirement in April 2013. When Seymour retired Brady also became Rainbow’s general manager as well as the FPUD general manager and the JPA executive officer. The joint powers agreement included an employee leasing agreement which allowed FPUD and Rainbow to share employees. During the life of the JPA no board contested a report that the functional consolidation saved more than $1 million during its 11 months of existence with approximately 80 percent of those savings accruing to Rainbow and the other 20 percent benefitting FPUD.
“That was a combination of labor savings and operational efficiency savings,” said current FPUD board president Don McDougal.
“Sounds like the JPA was indeed working very well,” Jacob said.
Brady gave a presentation at the August 2013 JPA meeting which led to a decision, which was neither ratified by board approval nor overturned by any board, to move the engineering and systems operations functions to the Rainbow facility while transferring customer service items to the FPUD office. Rainbow’s customer service staff relocated to the FPUD building in November 2013, although issues involving the electronic equipment which communicates between district facilities prevented FPUD from moving its engineering or systems operations staff to Rainbow.
In November 2013 the FPUD and Rainbow boards voted to begin the process of applying to LAFCO for an actual jurisdictional consolidation. The subsequent talks led to agreement that the consolidated district would be called the North County Public Utility District and would be a public utility district, as is the case for FPUD, rather than a municipal water district which is Rainbow’s situation. The issue of governance led to the end of both consolidation talks and the JPA. FPUD and Rainbow both have five-member boards. FPUD elects its directors by seat with the entire district voting for each seat. Rainbow elects its directors by division with only voters in that division participating in the choice. FPUD initially proposed that all board members of the consolidated agency be elected at large, which was not acceptable to Rainbow.
In February 2014 FPUD’s representatives on the JPA board offered a compromise in which four directors would be elected by division and three would be elected at large. Such a format would provide board representation for residents of each of the four divisions while also ensuring that a majority of the board would be accountable to all of the district’s residents. Section 15972 of the California Public Utilities Code stipulates that if the entirety of a public utility district is in the same county the board shall have five directors elected at large. Municipal water district directors must be elected by division. The North County JPA looked at latent powers only and not governance when deciding to make the consolidated agency a public utility district rather than a municipal water district. The joint powers agreement allowed for a termination provision after one year.
On March 5, 2014, Rainbow’s board voted 4-1 with Dennis Sanford in opposition to give FPUD a 30-day notice terminating the JPA. Rainbow board president George McManigle (who was defeated in his November 2014 re-election attempt) delivered the notice of termination to FPUD the following day. This dissolution also ended the employee leasing agreement, although Rainbow remained willing to approve a new agreement and subsequently approved a resolution authorizing Rainbow to provide practical assistance to FPUD in an emergency or opportunity situation regardless of whether a formal agreement exists. Rainbow moved its customer service staff back to the Rainbow office in April 2014.
A March 10, 2014, FPUD special meeting approved an application to LAFCO to consolidate FPUD and Rainbow, and Brady delivered that application the following day. Due to concerns whether the special meeting was properly noticed, FPUD’s regular April 2014 meeting included a vote to resubmit the application. The 3-1 vote with Archie McPhee (who was defeated by Wolk in the November election) opposed and Bert Hayden absent, approved an application calling for the dissolution of the Rainbow Municipal Water District, the annexation of the Rainbow territory into FPUD, the expansion of FPUD’s latent sewer service powers into the Rainbow territory, the expansion of FPUD’s sphere of influence into the Rainbow area, and a zero sphere of influence for Rainbow.
A municipal service review evaluates a jurisdiction’s services and anticipated needs. A sphere of influence study determines boundaries best served by a particular agency. Updates to both the municipal service review and the sphere of influence are prerequisites to any boundary change including an annexation or consolidation (LAFCO also periodically conducts municipal service review and sphere of influence updates for all cities and special districts), and in the event of a consolidation a dissolved district is given a zero sphere of influence. LAFCO may approve the municipal service review, sphere of influence update, and boundary change at the same meeting. FPUD’s special meeting agenda also addressed the JPA’s conflict of interest code which covers incompatible offices, and Brady resigned as Rainbow’s general manager. Later that month the Rainbow board selected Gene Buckley as the district’s new general manager. Buckley retired in June 2014 and Chuck Sneed served as interim general manager until Tom Kennedy was hired in August 2014.
The North County JPA held its final meeting on March 13, 2014, although the special meeting to address Rainbow’s withdrawal and the LAFCO application involved discussion rather than votes. Support from both agencies is not required for LAFCO to process a consolidation request, although input from the Rainbow board as well as from Rainbow residents has been part of the public hearing process.
A public comment period for FPUD’s application ended August 1, 2014, and the Rainbow Municipal Water District provided a formal resolution of objection which addressed several issues. During the public comment period, LAFCO also received 396 letters in opposition and 23 letters in support.
On December 19 LAFCO’s Special Districts Advisory Committee found that financial savings would occur if FPUD and Rainbow consolidated, although the committee made no recommendation on whether directors should be elected by the entire district or by territorial unit. “The committee found that there were cost savings and that the reorganization was financially feasible,” said Olivenhain Municipal Water District general manager Kimberly Thorner, the 2015 chair of the Special Districts Advisory Committee.
The hearing was initially set for July 6, but when Horn found out that a family matter would prevent him from attending on that day he requested a continuance. Three public speakers who were not sure whether they would be able to return for the September hearing were allowed to provide comments, and the remainder of the public comment was heard September 14. The September 14 comments also included statements from the general managers of FPUD and Rainbow. “There are no service level concerns that would justify LAFCO intervention,” Kennedy said. “This is a viable functioning district,” Kennedy said. “We have an excellent service record to our community.”
Brady cited the reduced administrative costs of a consolidated agency. “In the last 18 months once we split up the JPA together we have spent over one and a quarter million dollars on unnecessary administrative costs,” he said. The total number of employees for the two agencies decreased from 123 to 114 while the JPA was in existence. “That was all a very positive thing,” Brady said. (As of September 14 FPUD had 66 employees and Rainbow had a staff of 50.) Brady added that the two districts also had separate $250,000 expenditures on billing software. Kennedy noted that shared costs wouldn’t translate into lower rates for Rainbow’s customers. “There’s no direct benefit to the ratepayer here,” he said. “It’s not going to drop anyone’s rates,” Kennedy said. “Our rates are driven primarily by external factors.” Kennedy added that the stated $2.1 million of staff cost savings would not reduce the combined territorial area, infrastructure, or number of customers. “You really can’t make cuts like that without serious service disruption,” he said. “The job cuts would result in degradation to the ratepayers,” Kennedy said. “Another really important concern for us is the dilution of agricultural representation.”
Kennedy noted that Rainbow ranks second among San Diego County water agencies in agricultural sales. “Water is very important to agriculture,” he said. “They really enjoy having a board that’s focused on their needs.” Kennedy told LAFCO that Rainbow’s agricultural sales exceed FPUD’s total sales. “We’re an agricultural agency. They’re a water agency that sells to agriculture,” he said. The board of the consolidated agency would have determined rates, although Brady noted that FPUD rates are lower than Rainbow’s. “Rainbow agricultural rates will go down. That’s just mathematics,” he said. Although rate surveys for San Diego County’s water agencies have listed Rainbow as among the highest for what the survey defines as the average water user, Kennedy countered that the average Rainbow customer uses 100 units (customers are billed in units of 100 cubic feet, or 748 gallons) and that while FPUD’s rates are lower for usage of 50 units or fewer Rainbow has lower rates for 100 units or more. “It comes at a loss of local control and agricultural representation on the board,” Kennedy said of the proposed consolidation. Kennedy cited a December 2014 presentation to the LAFCO board by Valley Center Municipal Water District general manager Gary Arant that jurisdictional or functional consolidation must include mutual support. “The climate isn’t right,” Kennedy said. “We need everybody on the same page.”
Arant’s presentation noted that distance or system integration issues could offset economies of scale. “The benefits can be very small or even illusory,” Kennedy said. Arant warned that functional or jurisdictional consolidation must result in better service or economic savings to be successful. “It’s bad public policy to just push it through for the sake of pushing through a merger,” Kennedy said. “We believe that the outcome is more likely to be the opposite.”
The citizens who spoke against the merger included Oak Crest Estates resident Jim Mauritz. “Nobody’s talking about what’s going to happen to our senior park,” he said. The mobile home park for residents 55 and older has its own sewer plant, and the permit is grandfathered from current standards but references the Rainbow Municipal Water District. Mauritz told LAFCO that if the permit needed to be changed the park would no longer be grandfathered and the estimated cost for the 105 homeowners to upgrade the system would be $250,000. “All of our residents there are seniors,” he said. “They can’t afford this kind of rate increases.”
“Local control needs to be honored,” said Rainbow resident Jerri Arganda. “We have no desire to be a part of Fallbrook’s desire to expand.”
Bonsall resident Joe Beyer lives in the Rainbow district but favors the proposal. “It seems to make sense,” he said. Beyer noted that consolidation would need to protect Rainbow’s employees from staff cuts. “We want to make sure that they can stay around as long as possible,” he said.
FPUD board member Milt Davies was on the Fallbrook Sanitary District board before the merger with FPUD. Davies told LAFCO that the sanitary district was without a general manager in 1992 when FPUD general manager Gordon Tinker proposed a merger. The consolidation proposal had both board and resident opposition, but Davies noted that no issues have occurred since the merger. “It was the best thing that the sanitary district ever did,” he said.
Tinker was also FPUD’s general manager in 1990 when the DeLuz Heights Municipal Water District was merged into FPUD and thus was involved in two of FPUD’s three mergers. “We never got a complaint afterwards,” he said. (FPUD, which was formed in 1922, merged with the Fallbrook Irrigation District in 1937.) “The savings are real. They’re going to be real here,” Tinker said.
“The proposed merger of Rainbow and FPUD will provide for smaller and much more efficient local government,” said FPUD resident and avocado grower Donna Gebhart. “I just believe that smaller government will trickle down to the consumer.” (Gebhart had given Horn $300 during his 2014 re-election campaign; prior to Gebhart’s comments Horn returned $51 of that so the $250 threshold which would have prevented Gebhart from speaking or Horn from voting was avoided.)
“We are concerned about a loss of customer service,” said Rainbow resident Tom Casey. “I think Rainbow does a very good job and we should just keep our local control,” Casey said. “I think this is a classic case of solving a problem that does not exist.”
Oshea Orchid represented the Rainbow employees’ association. “It’s clear Rainbow can provide more efficient and higher-quality service to ratepayers,” she said. “Providing quality service to customers is the most important goal.”
Jacob served on the Jamul-Dulzura Union School District board prior to her election to the Board of Supervisors. She noted that the Jamul-Dulzura students outperformed their large-district counterparts. “The outcomes we achieved were far better at less cost,” she said. “Bigger is not necessarily better.” Jacob has spearheaded the reorganization of fire protection services which has already included territory served by volunteer fire departments but not by a legal fire protection agency and five county service areas whose governing body was the Board of Supervisors.
The current LAFCO phase will consolidate the Pine Valley and San Diego Rural fire protection districts into the San Diego County Regional Fire Authority, and that has no known opposition. “Usually you find there’s a problem that needs solving and we did find problems that needed to be solved in terms of fire and emergency services,” she said. Jacob noted that none of the fire service consolidations were forced upon any district. “They all agreed they want to be part of CSA 135,” Jacob said. “It’s taking its natural progression in consolidation.”
“Maybe another time in the future a formal merger may be appropriate,” Sprague said.
This article was originally published by the Village News.