Solana Beach: Residents ask Santa Fe Irrigation District for more cost cuts

By Joe Tash/Contributor

Santa Fe Irrigation District residents are demanding more cost-cutting by the district’s board of directors in the wake of the panel’s decision last month to raise water rates by 12 percent on Jan. 1, and by up to 12 percent in 2012 and 2013.

At a board meeting on Thursday, Dec. 16, speakers asked directors to reconsider their vote to raise rates over the next three years. They also urged the board to cut expenses such as employee retirement benefits and compensation for board members, and to consider consolidation with neighboring water districts to save on administrative overhead.

“I see this really as a moment of truth,” Rancho Santa Fe resident Greg Gruzdowich told the board. “You can either grasp the magnitude of what’s happening and change your ways, or continue to hide under these rocks.”

Thursday’s board agenda included a letter from Gruzdowich calling on the district to take three specific actions: eliminate all compensation and benefits for board members, convert the current employee pension program to a 401(k)-type retirement plan, and form a task force to work toward consolidation with neighboring water districts by the end of next year.

Board members responded that Gruzdowich’s suggestions deserve consideration, but they did not act on any of his proposals.

The board Thursday did approve a new two-year labor agreement with its 48 employees and managers that includes no pay increase, but raises employee contributions toward their retirement benefits over the next two years from the current 1.5 percent of their salary to 3 percent. The district saves about $40,000 for each additional 1 percent retirement contribution by employees, said administrative manager Jeanne Deaver.

The district provides water to some 22,500 residents of Rancho Santa Fe, Solana Beach and Fairbanks Ranch, and is governed by an elected five-member board of directors. Under the rate plan approved on a 3-2 vote last month, the bimonthly bill for the average residential customer will rise from the current $216 to a maximum of $303 in 2013.

Brad Burnett told the board Thursday that he has been examining the district’s finances, and found that the district is paying some $700,000 per year for employee retirement benefits, which he said is more than the district can afford.

“You need to find a better system,” he said.

Board president Michael Hogan said, “As much as I’d like to make the change right now, we can’t do it.”

In an interview after the meeting, Hogan said the district has contractual obligations both to current retirees and current employees, which cannot legally be broken or changed. The district — which belongs to the California Public Employees’ Retirement System, or CalPERS — also cannot opt to keep new employees out of the CalPERS system.

Its only option, he said, would be to create a new “tier” of lower benefits for new hires under the CalPERS system. For example, current district employees can retire at age 55 and receive an annual pension of 2.7 percent of their final year’s wages for each year of service. A new tier could increase the retirement age to 60 and decrease the benefit to 2 percent for each year of service.

Currently, Hogan said, the district pays about 29 percent of its employee payroll on retirement benefits, a percentage that will drop to about 27 percent under the new labor agreement with employees.

Only the state Legislature can change the rules of the retirement system, Hogan said.

“Barring any legislative action that would change the rules of the game, I think I would be supportive of moving forward with a multi-tiered system,” Hogan said.

On the issue of board compensation, the reaction of directors was mixed.

Directors receive per diem payments of $200 for each meeting they attend, and also are eligible to receive health and dental benefits and reimbursement for travel and other expenses. For the fiscal year that ended June 30, expenses and per diem payments for district directors totaled $55,625. This year, the district has budgeted $46,883 for director health benefits, and $4,370 for dental benefits.

Santa Fe Irrigation District directors have received per diem payments since 1924, as have members of boards governing many public agencies, said director John Ingalls.

“I receive per diem compensation and I don’t apologize for it,” said Ingalls. “I work hard when I prepare for these board meetings.”

Hogan said in the interview that the district’s board compensation is relatively modest compared to other districts, and although he believes such expenses can be trimmed, he would not support elimination of the payments.

“Some people can criticize the fact that we receive per diems and some benefits for serving as elected officials. Most … elected officials receive some renumeration for their services,” he said. “That’s not unreasonable, you do put in a lot of work. But we need to control those costs.”

Board members were also open to the idea of consolidating some or all of their operations with other water districts. Hogan said the issue requires study, and that any merger would involve agreements between the agencies on such areas as water rates, employee pay and benefits and disposition of assets, such as the Santa Fe Irrigation District’s valuable rights to water from Lake Hodges.

Andy Menshek, who was elected to the board on Nov. 2, said consolidation offers much more opportunity for savings than trimming board per diem payments and expenses. But any consolidation of services would have to be thought through carefully.

“It is a difficult, difficult dance, but it’s not insurmountable, it can be done,” Menshek said. “At the end of my four years, if we can facilitate a consolidation, I’ll step down.”



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