Mr. Robert Cerruti’s July 3 letter to the editor criticized the Santa Clara Valley Water District in handling the debt payoff for the San Luis Reservoir project. It brought water to Santa Clara County in 1987 and supplies the three Llagas sub-basin percolation ponds in Morgan Hill. Cerruti wrote the project was built at a cost of $247.8 million and we now owe an additional $80 million on top of the original capital cost. He spoke about money the water district set aside for repayment and wanted to know where the money went. Specifically, he argued that annual payments should have been made starting in 1987 to pay down the capital cost and the interest.
I investigated this. It’s true that 20 years after turning on the San Luis Reservoir spigot, more is owed now than 20 years ago. Also, Mr. Cerruti understated the interest due the Central Valley Project.
The SCVWD Board Chairman, Mr. Tony Estremera, responded in the Times to Cerruti’s assertions, which he said, wrongly alleged that:
n The district incurred “extra” interest costs that must be paid by ratepayers.
n Funds set aside by the district for CVP were inappropriately spent on other projects.
n The district has not fully informed ratepayers of CVP costs.
All claims, he wrote were invalid. I disagree.
n Regarding the “extra” charges: Mr. Estremera said the district fully expected to pay interest on the unpaid capital and that the interest rate of 3.5 percent. Fact check: On Jan. 9 the SCVWD Board voted unanimously to adopt the first amendment to the original CVP contract of 1977. Exhibit D of the amendment spells it out. We owe $81.7 million in interest for the past 20 years of non-payment to the CVP. Additionally, $134.7 million is owed going into the future. Total interest now stands at $216.4 million. This is on top of the original capital cost. The “extra” payments came about after the water district unwisely elected to pay virtually nothing during the last 20 years and because it stretched out what should have been a 30-year bond payback to 50 years. This year we start a 30-year payback of $440.5 million. It includes the $216.4-million charges. Another pesky little item is the CVP “in-basin” debt. The unpaid balance was $20.9 million as of September 2005.
Total CVP debt: $461.4 million. Talk about passing debt onto your kids.
n Regarding funds set aside for CVP being inappropriately spent: Mr. Estremera accurately reported the water district entered litigation with other water contractors over a 1995 rate setting policy on the part of the United States Bureau of Reclamation. The money was set aside for the CVP for potential settlement or if the challenge failed to cushion a rate adjustment.
Fact check: Litigation was entered in March 2003. The settlement agreement was March 2005. The district’s Comprehensive Annual Financial Report shows $61.1 million set aside for the CVP fund as of June 2000. By June 30, 2003, it dwindled to $18.3 million. Three months after entering litigation, $42.8 million is reported as missing in action from the CVP fund. The litigation was settled in March 2005. The $42.8 million paid nothing to the CVP. Why, Mr. Estremera, wasn’t the money used to pay back the CVP which would have cushioned water rates? Better yet, why wasn’t the entire $61.1 million used to cushion the rates?
n Mr. Estremera says ratepayers were fully informed of CVP cost. Fact check: The 2007 Water Utility Enterprise Report is the yearly summary planning document used by the water district. After 20 years, the March 2007 WUER is the very first one to disclose the magnitude of the accumulated CVP debt.
I reject Chairman Estremera’s analysis of Mr. Cerruti’s letter. The Times reported SCVWD Board members Sig Sanchez and Rosemary Kamei as saying the agency image is unnecessarily tarnished. This was in the wake of the fiasco when CEO Stan Williams hired board member Greg Zlotnick. Events at the district, including this CVP debt mess, are not image related. The issues are numerous, real and serious.
Remember this. In the space of seven years of consecutive rate increases (excepting agriculture) we’ve gone from $115 to today’s $250 per acre foot of water. Consecutive increases are planned to continue for nine more years, ending at $500 per acre foot.
The past seven years of rate hikes is about quadruple the rate of inflation. Does anyone care?
Guest columnist B. Terry Mahurin lives in Morgan Hill and has been a watchdog regarding Santa Clara Valley Water District issues for years. Anyone interested in writing a guest column may contact Editor Sheila Sanchez at
ed******@mo*************.com
