Rancho Santa Fe water district to reach out to potential merger partners

By Joe Tash

Santa Fe Irrigation District directors are open to the idea of merging with an adjacent water district to save money, but the question is whether their neighbors share that interest.

Directors discussed consolidation at a workshop meeting on Thursday, Sept. 12. Following their discussion, they formed an ad hoc committee of two board members, charged with contacting two neighboring water agencies to determine their interest in further exploration of consolidation.

“Without an interested party to talk to us and pursue those [issues] the discussion won’t go any further,” said SFID board president Michael Hogan after Thursday’s meeting.

Hogan and director John Ingalls will seek meetings with their counterparts at the San Dieguito Water District and the Olivenhain Municipal Water District, and then report back to the full board within 60 days.

Santa Fe provides water to residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch. Interest in consolidation has increased in recent years as residential water bills have climbed sharply, due to increased costs of imported water and other factors.

The Santa Fe board, working with an outside facilitator, listed both pros and cons of consolidation. On the plus side were cost efficiencies, healthier finances, better rates for customers and new services that could be offered.

Under “challenges,” the board listed risk of a failed merger, savings that don’t materialize as planned, and loss of local control over resources such as pipelines, local water sources and treatment plants.

The district already shares ownership of some assets, such as the R.E. Badger treatment plant, with the San Dieguito District, and it also has cooperative agreements in such areas as public works project planning and emergency response coordination with other agencies.

However, board members such as Greg Gruzdowich, who was elected last year, contend that additional savings could be realized by eliminating duplication of support services such as administration and information technology.

Locally, water districts in Fallbrook and Rainbow have launched a partial merger that is on track to save up to $700,000 this year, and more in the future, due mostly to cuts in administrative staff, according the combined districts’ top administrator.

“This is a great thing. I’m one of the biggest advocates of exploring consolidation,” said Santa Fe director Andy Menshek at Thursday’s meeting.

Menshek said one obstacle to consolidation of water districts is a reluctance by board members, who don’t want to lose their positions as a result of a merger.

“If we consolidate, I’ll be the first one to step down,” said Menshek.

Gruzdowich echoed Menshek’s comments. “Nobody wants to give up their board position,” he said, adding that he would be right alongside Menshek in stepping down from his seat if a merger is completed.

Hogan took issue with that contention, noting that he and other board members are not concerned with preserving their seats, but doing what is in the best interest of ratepayers.

“I don’t sense this board has this issue,” of members seeking to retain their seats, Hogan said.

Another hurdle is an aversion by boards and managers to lay off employees, Gruzdowich said.

“People in general don’t like to address those issues,” he said. “It’s human nature, if we can keep raising rates and keep our infrastructure together, that’s what we keep doing.”

Over the past six years, Santa Fe has raised its water rates 74 percent, which Gruzdowich said has effectively doubled customers’ bills due to the compounding of annual rate hikes.

District officials point out, however, that Santa Fe’s rates are in the bottom one-fourth of San Diego County water agencies. Earlier this year, the district adopted a new budget that contains no rate increase for 2014, the first time in a decade that rates won’t be going up at the first of the year.

Ingalls said another factor to consider is that top rates in the Olivenhain district are substantially higher than Santa Fe’s, and that as a consequence, residents of unincorporated Rancho Santa Fe would likely be “violently opposed” to a merger with Olivenhain.

Consolidation supporters such as Gruzdowich have said such issues could be addressed with a tiered rate structure for a merged district.

Rancho Santa Fe resident Rankine Van Anda, who attended the meeting, told the board, “I believe there’s opportunity here,” and pointed out the district already has experience in consolidating operations with its neighbors, such as its partnership with San Dieguito.

Board member Alan Smerican, however, cautioned that a merger is no guarantee of better service or rates.

“Bigger is not always better,” he said. “I think our small agency here has demonstrated it is extremely efficient.”