EID rate lawsuit signals trouble on the horizon

By Dawn Hodson
Note: This is part one of a two-part article regarding a pending lawsuit against the El Dorado Irrigation District over water rates. Part one is an update on the lawsuit filed against the district as detailed previously in an article published March 2, “EID sued over water rates.” Part two describes the history of EID’s water delivery system and the role that farmers and ranchers have played in the development of water resources in the county.

A pending lawsuit against the El Dorado Irrigation District could portend big trouble for agriculture in this county if it is successful.

The class-action lawsuit (Throne v. El Dorado Irrigation District) was brought by El Dorado Hills resident Darwin Throne and filed in late 2017.

The case is now pending in Department 4 (South Lake Tahoe) of the El Dorado County Superior Court.

The lawsuit alleges the water district is in violation of Prop. 218 because it charges more than what it costs to provide water service and because the charges are more than the proportional cost of the service per parcel.

In particular, the lawsuit notes that single family residences and small farms are charged the same on a bimonthly basis for up to 4,500 cubic feet (cf) of water. Small farms pay .0194 cents less per cf than single family residences for water use above 4,500 cf. For agricultural irrigation when there is no residence on the property, the cost is a flat .00122 cents per cf.

The lawsuit alleges that the difference in charges is not cost-based but instead designed to help the agriculture industry; that it costs the district the same amount to deliver water to residential, small farm and agricultural customers; and that residential customers are illegally subsidizing small farm and agricultural users.

The lawsuit also accuses EID of using a cost-of-service study that is six years old as the foundation for its fees and charges.

Based on those claims, the lawsuit sought to force EID to equalize its agricultural and residential rates, declare its current rates to be unlawful and to award damages amounting to three years of allegedly excessive charges to its customers.

Those claims were rejected by EID.

Request for dismissal

In June, a temporary judge in Department 4 heard a request by EID to dismiss the case based on two main arguments.

The first was that for more than 100 years it has been agriculture that has driven the funding, acquisition and development of EID’s water supplies and facilities including Project 184, Sly Park Reservoir and Weber Reservoir.

Further, those ag (agricultural) users didn’t require treated water nor the same level of service that is required by residential customers since they used water straight out of the ditch.

Later, EID piped its ditch system and began treating its water to serve the growing number of residential customers. The treated water also went to its ag customers but only so EID wouldn’t have to maintain and operate a duel water system — one for ag customers and a different one for residential customers.

EID argued that those facts were taken into account in its last cost of service study when it gave ag customers a break on water usage above 4,500 cubic feet.

EID also maintained that it receives nearly $20 million per year of non-rate revenue from property taxes, hydropower sales, recreation and other sources. The district argued that when those non-rate revenues are taken into account, none of the rates that EID charges exceed the actual cost of providing water and in fact all its users are being subsidized by these other sources of revenue. For example, in 2012 the district’s budget was $37.4 million. Of this amount, water sales were $19.7 million and non-rate revenues were $17.7 million. So water sales only made up two-thirds of the cost of delivering the water.

The judge subsequently dismissed two of the three claims made in the lawsuit, ruling that the remaining claim could still provide relief if the lawsuit is successful. The judge also ruled that EID’s arguments were premature but would be considered at the trial.

Both Throne and EID were contacted previously about the lawsuit but declined to comment. Throne’s legal firm also did not respond to multiple phone inquiries.

However, EID did say it does cost-of-service studies every 10 years and will be doing another in 2019 with its implementation probably taking place in 2020.

The case is now set for trial in January.

EID rate lawsuit signals trouble on the horizon

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Another View: Will Apple Hill family farms survive?

By George Wheeldon

I’ve spent years studying and teaching geology and the history of the Mother Lode. Today, however, I’m switching to a different history, the history of agriculture in El Dorado County, and why our county agriculture may suffer a devastating setback, worse than the pear blight or prohibition.

In 1904 our county grew 2,100 acres of wine grapes. Prohibition, however, killed the wine industry. By 1966 only 11 acres of wine grapes were grown in our county. The early 1970s began a rebirth of county grape growing. Greg Boeger purchased Lombardo/Fossatti Winery in 1973. Our county has been adding grape acreage and wineries every year since, reaching nearly 100 wineries today.

County farmers began growing pears around 1900, with production growing to 52,000 tons in 1958. Then pear blight killed that industry, reducing county pear production to just 8,435 tons in 1965. The death of the pear industry started the next chapter in El Dorado County’s agricultural history, the birth of “Apple Hill.”

In 1964 Gene Bolster, Dick Bethell, Ed Delfino and Bob Tuck formed an apple growers association, naming it “Apple Hill” and marketed it aggressively. Today visitors come to Apple Hill from all over northern California to sample apples and all things made from apples and to have a fun family outing. Christmas trees and other farm operations add to the mix. Today Apple Hill farmers are a major economic force, generating $255 million in 2015 from all sources.

A new development now threatens to virtually wipe out Apple Hill farmers. This time, though, it’s not blight or prohibition. It’s a lawsuit. If successful the lawsuit will make irrigation water so expensive that only a very few well established farmers might survive. Local farmers will pay thousands more for their water, some paying more than $100,000 extra each year, while the average residential ratepayer will save only $36 annually. Over time that $36 savings will diminish as farmers go out of business and sell their land. Eventually developers will swoop in to buy the empty land for pennies on the dollar, replacing our beautiful vineyards, orchards and Christmas tree farms with housing developments. It’s hard to fathom why anyone would willingly destroy a profitable industry, a way of life and scenic open spaces which our farms and ranches provide — all to save residential ratepayers as little as $6 on their EID bill.

In a misguided effort Darwin Throne, of El Dorado Hills, is suing to force El Dorado Irrigation District to charge the same rates to all classes of water customer, residential, schools, parks, farmers and ranchers. EID Director, Greg Prada, has been arguing to increase farm water rates since before he joined the EID board. He even pestered Howard Jarvis Taxpayers to sue EID until they ordered him to stop asking.

On Aug. 28, 2017 Prada put on a presentation at an EID board meeting, which included some very doubtful legal reasoning, claiming that EID’s rates violate Prop. 218. A few weeks later Darwin Throne, a Prada supporter, filed a claim and then a lawsuit against EID for violating Prop. 218. Amazingly, the lawsuit used the very same legal arguments Greg Prada had just presented. Coincidence?

To date EID has spent 40,000 ratepayer dollars fighting the lawsuit and expects to spend another $200,000 to $300,000, with Prada refusing to vote to authorize even the $40,000. EID feels confident about its chances of winning in court, although it’s not guaranteed. Losing the lawsuit could cost EID ratepayers millions, paying EID’s legal costs as well as Throne’s. How ironic, that a board member who masquerades as a ratepayer’s advocate is costing EID’s ratepayers so much.

Throne’s lawsuit, supported by Director Prada, presents a clear and present danger to the county’s agricultural industry and way of life. Failure to fight the lawsuit would have the same effect as losing. EID directors hold the fate of Apple Hill in their hands, deciding whether or not to fight the lawsuit. It’s critical to elect EID board candidates who guarantee that they will fight the lawsuit to preserve local farms and ranches. Director Prada has made it clear that he will not fight the lawsuit and supports ruinous water rates for our local farmers.

If you live in EID Division 2, please vote for Pat Dwyer, Greg Prada’s opponent. Pat is extremely well qualified and promises to fight the lawsuit to save Apple Hill. If you live in EID Division 4, please re-elect Director Dale Coco. Director Coco has done a great job as an EID director and guarantees that he will continue his fight to save agriculture in El Dorado County.

EID’s chances of winning the lawsuit are pretty good, but winning requires at least three EID board members to fight it. Dwyer and Coco are two who will fight to save Apple Hill.

George Wheeldon is an emeritus professor of Geology and 12 year member of the El Dorado Irrigation District Board of Directors

Another View: Will Apple Hill family farms survive?

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Retired EID General Counsel Opines about EID Lawsuit Costs

[Tom Cumpston, Retired EID General Counsel]

El Dorado Irrigation District Director Greg Prada claims that EID’s agricultural water rates violate the law. Last year, he presented his arguments publicly at an EID Board meeting. Within weeks after that, his supporter Darwin Throne initiated what’s now become a lawsuit against EID on the very same legal theories. Coincidence?

I’m an EID ratepayer, and I wanted to find out. I requested public records from Prada’s private email account to see if Prada orchestrated Throne’s lawsuit. Prada stonewalled my first requests. Eventually, he swore in writing that he’d deleted all such emails.

A Grand Jury condemned Prada’s behavior and recommended that the EID Board censure him – which it did. But that can’t bring back Prada’s missing emails.

EID has spent $50,000 of ratepayer (our) money defending the lawsuit so far, and it will probably cost at least $200,000 more before it’s over. EID should win, but there are no guarantees in court. And if Throne wins, EID (we) will be on the hook for millions, plus Throne’s attorneys’ fees.

Four out of five EID Board members voted to fight this lawsuit: everyone but “ratepayer advocate” Greg Prada.

Now, Greg Prada want to be re-elected! I support his opponent, Pat Dwyer. Pat is a breath of fresh air, and he wants to earn your support.

Go to www.patdwyer4eid to learn more about him, and please vote in November.

http://inedc.com/14/retired-eid-general-counsel-opines-about-eid-lawsuit-costs

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A Proven Ethical Leader for EID

EDITOR:

We need a fresh face on the El Dorado Irrigation District Board of Directors, a proven problem solver who brings people together, a constructive voice representing our interests, a person who understands operations as well as finances. Above all, we need an ethical leader with a proud history of serving his community and his country, one who makes decisions based on facts, not politics. Thankfully we have such a person running for the EID board, Division 2, this November.

Let me tell you a little bit about this amazing person who would who would represent us with integrity and professionalism on the EID Board of Directors. Pat Dwyer considers serving on the EID board a way to give back to his community, similar to his serving on the Mother Lode Rehabilitation Enterprises Board for eight years and serving on El Dorado County Fire Safe Councils for 12 years, all without pay, of course.

Pat Dwyer is a proud veteran of the U.S. Air Force moving through enlisted ranks, ultimately becoming an officer. Pat was put in charge of aircraft maintenance and repair at McClellan AFB, where he directed over 1,500 workers and managed a budget of over $100 million. Later, Pat, as a civilian, directed the transfer of McClellan from military to civilian use, a huge undertaking, which was accomplished on time and under budget. This is a leader who knows how to work with others to get the job done.

Pat has master’s degrees in business and accounting. As adjunct professor he taught operations for 16 years at Golden State University, being named Outstanding Faculty Member.

I know Pat and I’ve known a number of EID directors over the years. No director has been better suited to the job than Pat. He will bring professionalism and effective leadership to the EID Board of Directors. You can learn more about Pat on his website at patdwyer4eid.com and on Facebook. Please support and vote for Pat Dwyer, El Dorado Irrigation District Director, Division 2, on Nov. 6.

HARRY NORRIS
Camino

A proven, ethical leader for EID

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Ag Water Rates

EDITOR:

Thank you for the informative coverage of the possible effect on water rates for county farmers. The El Dorado
Irrigation District’s Proposition 218 lawsuit is necessitating huge EID expenditures to fight it n— all money going down an unnecessary rat hole. We are all one county and rather than pit one area against another, we should rationally look at the potential effect the EID suit would have on all of us.

The clarion cry of “you pay too much” has been a loud and repeated salvo of Director Greg Prada since he ran for the EID board. His one-sided and inaccurate diatribes against family farmers have become a singular and irrational rant. After a detailed study of the potential changes for both residential and agricultural water users, the savings for residential customers would probably buy a few more cups of coffee. That’s an understandable perk, but the effect to farmers would be catastrophic. They already pay a high percentage of their costs for water, and readily do it because it allows them to keep farming.

Consider, please, what your reaction would be if the cost of anything you had to buy to survive was increased by 1700%. The margin for most if not all farmers would not allow for an increase of this magnitude. Farming would have to stop. Second, third and fourth generation farmers would see their children having to end their dream of staying in farming. A major economic driver for the county would stop – dead.

And please also consider what will ultimately replace agriculture. If you moved here from any place to the west, from Sacramento to the Bay Area and beyond, those lands used to include farms years ago. It is a sad fact that once farm land has been paved over, you never regain farming and the ability to grow products to feed people.

History could be repeating itself right here in rural El Dorado County.

MARYAQNN ARGYRES

Camino

Ag water rates

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EID Capital Improvement Plan focuses on asset replacement

focuses on asset replacement
By Jim Abercrombie

A recent My Turn column completely misrepresented EID’s Capital Improvement Plan (CIP) as subsidizing “big developers.”

Nothing could be further from the truth.

The fact is EID’s five-year CIP consists of about $140 million for vital rehabilitation and replacement projects that keep EID’s customers in service they can rely on, in normal years and dry years alike.

The majority of the capital reinvestment outlined in EID’s CIP focuses on continuing to replace water conveyance flumes and water storage and distribution facilities as well as wastewater pipelines and lift stations that have deteriorated over the years.

More than 80 percent of the $140 million in the five-year CIP — over $113 million — is for water reliability projects and water conveyance/storage projects that replace the deteriorated assets our customers rely on every day.

The complete list of projects for the CIP can be found on the EID website at eid.org/i-want-to/what-is-a-cip.

As EID plans for asset replacement, we allocate replacement costs between rates and facility capacity charges (FCCs, or new hook-up fees). A good example to illustrate this cost allocation is flume or canal replacement.

EID allocates 47 percent of the flume replacement to ratepayers and 53 percent to new customers. Why this proportion? This allocation is based on the percentage of existing water rights obtained by purchasing the assets (flumes and canals) from PG&E and the percentage of new water recently obtained through the water right procurement process.

Existing ratepayers pay for a smaller portion of these vital replacements, while new customers pay the majority of the replacement.

If the flume or canal needs to be replaced immediately, EID either borrows the money or dips into FCC reserves to replace the canal before it fails. Both existing ratepayers and new development pay for this replacement through rates or FCC payments. FCCs are charged to new development and include an allocation of the debt carrying costs (interest) for assets constructed that have a growth-related component.

And the flume or canal we replace does not increase capacity for developers—it replaces vital infrastructure that conveys a reliable source of water to existing customers.

This is not capacity expansion for “big developers.” It is asset replacement in which new hookups help pay for replacement as part of the “buy-in” fee.

I urge everyone to review the EID Capital Improvement Plan to see the types of projects EID plans to replace. There are no projects that subsidize developers, big or small.

Finally, the My Turn column stated that the forecasted budget is different than the actual audited financial statements. That is correct! Forecasts are always different than the year-end actual statements. The two primary reasons for this are that it is impossible to forecast the weather in October for the following year and it is difficult to know how much development will occur the following year.

If it is a wet winter — lots of snow and precipitation — hydroelectric revenues could be in the $11 million range. If it is a dry year, revenues may be in the $4 million to $6 million range. EID conservatively uses a $7 million hydroelectric revenue estimate.

Regarding development fees: over the past 10 years, they have ranged from $1 million to $15 million per year. EID conservatively forecasts about $5 million each year.

If there are surplus FCC revenues, that money is collected and then used for either capacity expansion (so we do not need to borrow the money) or used to replace assets, part of the “buy-in” piece.

New hook-up fee revenue cannot legally be used to subsidize rate revenue or compensation, as was stated in the column. The FCC fees must be used for capital spending, not to fund operations and maintenance budgets—and certainly not to fund salaries.

Please take the time to review EID’s CIP. I believe you will agree that most, if not all, of the projects are for asset replacement and to ensure reliable customer service. I would encourage those interested to attend the next public EID board meeting on Aug. 13 where there will be a line-by-line examination of EID’s CIP to transparently show there are no projects that subsidize development.

The fundamental business EID is concerned with is reliable customer service — ensuring our customers receive their services day after day and year after year. Prudent reinvestment into EID’s complex infrastructure is what allows us to do just that.

Jim Abercrombie is the general manager at El Dorado Irrigation District.

EID Capital Improvement Plan focuses on asset replacement

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