Guest Commentary: Voters can change water board majority
I attended the meeting of the Ramona Municipal Water District (RMWD) Board of Directors (BOD) on June 14th at which the Sewer Service charges hearings for Santa Maria and San Vicente Sewer service areas were conducted, and rate increases adopted for both areas. Thomas Ace, board president, approached me after the hearings and stated that he paid close attention to my commentaries in the Sentinel and objections, and took them all very seriously. Only Jim Hickle’s discussion, questions, and vote against the increases showed any comprehension of the objections (all of an accounting, financial, or legal nature). When I pointed this out, Mr. Ace responded that the BOD “must rely upon staff and consultant” expertise to make up for a lack of BOD financial planning expertise and experience.
How can a BOD provide the required direction to staff and consultants when they do not understand the issues? The lack of enterprise financial planning qualifications of directors is the critical shortcoming that prevents this BOD from satisfactorily fulfilling its duties to ratepayers and property owners.
The hearing and Mr. Ace’s comments raised another oft-repeated question. How can the BOD rely upon staff and consultants who have repeatedly proved unreliable? Using the meeting as an example, the chief financial officer (CFO) emotionally urged the BOD to discount protest letters from two ratepayers that were identical, sent by the plaintiffs in the current class action against RMWD regarding sewer service charges, itemized alleged RMWD violations of the California Constitution (added by Proposition 218), and were clearly written by their attorney. Don’t prudence and the court’s opinion (under appeal) in the class action standing opinion require extra attention to such specific objections?
The inappropriate cash flow analysis does not address the question of “how much should be in each reserve” — it inherently can not. So the question is always raised at hearings and the BOD must make an arbitrary decision that seems to always be “more.” A proper reserve analysis starts with lists (already regularly prepared) of capital assets or improvement projects and the year acquired, then for each item adds remaining useful life and either current value or estimated cost, then calculates the current required reserve and required annual contribution expense to maintain the current “target” reserve levels.
Reserve “targets” are set consistently and fairly over the years, not according to arbitrary BOD feelings regarding how much to “pay now, or pay later.” This methodology is a simple and understandable spreadsheet prepared in-house that provides consistent answers year after year. Consultants do not like this methodology because their cash flow programs are no longer needed to hide the relevant facts among the irrelevant details — ever.
The BOD, staff, and consultant discussions focused on “what is the appropriate level of working capital (inappropriately referred to as “reserves”).” Because most sewer revenue comes from the sewer fee charge on annual property tax bills, it spikes in December and February. Spending is spread more evenly throughout the year, so working capital inherently spikes twice each year and then declines. There is inherently no single appropriate level of working capital, so the entire discussion was an off-point distraction. Protests raised the only relevant point — do charges comply with California Constitutional (Proposition 218) requirements regarding who pays, how much, and when — but were ignored by the BOD, staff, and consultants.
I raised 10 objections in my sewer protest letter. Five of these objections were also raised by one or more other protesters (including two Estates HOA directors). Only Jim Hickle addressed any of those objections. Staff manipulated the BOD into adopting the ill-considered sewer charge increases by submitting their proposal at the last opportunity and before agreeing upon budgeted expenses to be apportioned (as constitutionally required as a result of Prop. 218). The County Assessor deadline to accept changes to be applied to the 2016-2017 property taxes will pass before the next BOD meeting. Only Jim Hickle refused to be manipulated, raised relevant questions, and voted against the increases.
The BOD, staff, and consultants cannot fix a financial planning process that they do not recognize, or will not admit, is broken. I would be remiss if I did not add at this point that the engineering and operations presentations at the meeting were concise, informative, and conveyed a sense that these parts of RMWD are well-focused and hard-working.
Three RMWD BOD seats will be on the ballot this November. Albert Einstein is credited with defining “insanity” as “doing the same thing and expecting a different result.” Unless Ramona voters elect a BOD majority that understands enterprise financial planning so as to be qualified to direct staff and consultants, shouldn’t we expect the same old arbitrary and irrational decisions from the broken enterprise financial planning processes currently used?
Gary Hurst is a Ramona resident.