Mayor vows water, sewer hikes won't be diverted

By Matthew T. Hall
STAFF WRITER - SAN DIEGO UNION TRIBUNE

November 22, 2006
Mayor Jerry Sanders sought to assure San Diegans yesterday that his long-anticipated proposal to boost water and sewer rates would avoid the perils of the last increase: stalled projects and diverted funds.

“I now believe the systems are being well-run, and ratepayer funds are being used wisely,” Sanders said. “I also believe that we must make absolutely certain this will always be the case.”

To ease community concerns, Sanders proposes to create a new review board to ensure that the water and sewer systems' ratepayer funds and bond proceeds “are being used as they are supposed to” going forward.

Board members would meet annually to analyze a yearly fiscal review of water and sewer spending and, every three years, a full-scale audit of the two beleaguered funds, which require more than $1 billion for mandated government work.

Sanders plans to appoint the review board before the new rates would take effect – May 1 for sewer, July 1 for water, assuming City Council approval. But he does not know how many board members would serve, or how long.

Consumer advocate Michael Shames is proposing that ratepayers empower a nonprofit organization to act as their own watchdog over the city utilities.

He is negotiating with the city to give customers the option of donating money to such a nonprofit in a series of inserts that would be included in their bills.

Sanders said his proposal was not meant as a deterrent to that effort, announced Monday. He called his proposal for a review board an important step toward “rebuilding complete trust in our water and wastewater systems.”

“The more eyes we bring to focus on the needs, requirements and financial management of these systems, the better,” he said.
San Diego has had an 11-member Public Utilities Advisory Commission since 1991 to offer recommendations on operations that affect ratepayers.

It reviews department operations, planned expenses and service delivery methods and can conduct “investigations, studies and hearings” to accomplish its goal, according to San Diego's municipal code.

Sanders did not say how his call for additional oversight would affect this other group of mayoral appointees. His spokesman, Fred Sainz, said that was undecided.

City Attorney Michael Aguirre said the mayor's oversight board should be worked into both the municipal code and a remediation plan the city must adopt as a requirement of a cease-and-desist order imposed on it by the Securities and Exchange Commission because of faulty bond disclosures in 2002 and 2003.

The cease-and-desist order focused on disclosures tied to the city's massive pension deficit, but it noted problems in the 1990s with sewer bonds.

Aguirre said the mayor's proposal would “lock in place . . . a requirement for proper oversight that has not existed up to this point.”

The last rate increases took effect in 2002 with the first of four annual 7.5 percent leaps for sewer, and five annual 6 percent jumps for water.

Sanders announced his plan for more oversight while proposing a new rate increase. Under the proposal, the water department's revenues would increase by 6.5 percent a year for four years, and the wastewater department's revenues would increase by 11.8 percent this year and then rise by 11.8 percent, 7.6 percent and 7.5 percent in the three following years.
Many single-family ratepayers would get a sewer rebate if the city settles a lawsuit filed by Shames over past rates, effectively giving them 8.75 percent increases for two years, followed by 7 percent increases the next two years.

The council considered the settlement in closed session yesterday but continued a discussion until next week, leading to the cancellation of a Monday court hearing on the matter.
San Diego spent $344,000 on cost-of-service studies that were used to set the scope of the water and sewer rate increases. Pasadena-based Raftelis Financial Consultants Inc. won the contract without a bid because one of its consultants did the city's last comparable studies in 2003 for another firm.

Sanders plans to ask the City Council to approve a $50 million private borrowing deal for water projects in January that would serve as a bridge loan until the city could borrow larger sums of money following the rate increases.

He expects the council to hold a hearing in late February on the increases.