MEMBER AGENCIES Carlsbad Municipal Water District City oi Del Mar City of Esconcl do City of National City City of Oceanside City of Poway City of San Diego Fallbrook Public Utilily District Helix Water District Lakeside Water District Olivenhoin Municipal Water District Olay Water District Padre Dom Water District Camp Pendleton Marine Corps Base Rainbow Mun crpal Water District Ramona Municipal Water District Rincon del Dioblo Municipa Water District San Dieguito Water District Santa Fe l'r'gatior Distr'ct South Bay Irr?gation District Vallecitos Water District Valley Center Munic'pal Water District Vista Irrigation District Yuima Municipal Water Dislr'ct OTHER REPRESENTATIVE County at San Diego San Diego County Water Authority 4677 Overland Avenue 0 San Diego, California 92l23-i 233 (858) 522-6600 FAX (858) 522-6568 April 25, 2017 Shane Chapman General Manager Upper San Gabriel Valley Municipal Water District 602 E. Huntington Drive, Suite Monrovia, CA 91016 RE: Your April 17 letter responding to Water Authority's Board Leaders Dear Shane: I am in receipt of your April 17 letter (enclosed) and have passed it on to our Board Chair Mark Muir and Vice Chair Jim Madaffer, and well as to all of the recipients of this letter. Like you, we welcome an open dialogue about the many serious issues we face at the Metropolitan Water District; in fact, that is why our Board voted to support the outreach efforts the Water Authority's board officers (Mark, Jim and Board Secretary Gary Croucher) recommended to get the word out on issues they believe are critical at MWD. Significantly and tellingly, there has been no response from MWD or anyone else (including you) disputing the core facts about fiscal practices that impact every one of our ratepayers: MWD overcharged ratepayers by $847 million between 2012 and 2015 (Le, revenue collected over and above its adopted budgets); of those overcharges, $10.8 million came from ratepayers within the service area of the Upper San Gabriel Valley Municipal Water District. Operating without a Long Range Finance Plan as it does, MWD's unbudgeted spending totaled almost $1.2 billion over four years (2013- 2016) Having depleted its cash reserves below minimum reserve levels, MWD resorted to borrowing $900 million in unplanned debt in FY 2016. MWD's own financial disclosures show that of $378 million it is projected to have in its unrestricted reserves at the end of this fiscal year, $300 million will be from borrowed funds. As a result of these and other decisions by the MWD board, its rates have more than doubled since 2004, when it last adopted a Long Range Finance Plan. We appreciate your expressions of support for the Water Authority's diversification strategy, which it has implemented to successfully reduce dependence on MWD from 95% in 1991 (550,000 AF) to 41% in 2016 (187,000 AF), with plans to further A public agency providing a safe and reliable water supply to the San Diego region Mr. Shane Chapman April 25, 2017 Page 2 reduce dependence to 21% by 2020 (126,000 AF) and just 13% (88,000 AF) by 2035. With the unified support of our community, the Water Authority has invested billions of dollars in new and more reliable water supplies and in large-scale regional water infrastructure that will serve our community for generations to come. While these investments have contributed to the rising cost of the Water Authority?s supply, they have nothing to do with over-collections, unbudgeted spending, unplanned borrowing and depleted cash reserves all of which have been the focus of the Water Authority?s outreach in recent months. While you have obviously spent time reviewing the Water Authority?s finances - which have no impact on your agency?s ratepayers -- your letter simply ignores the irresponsible fiscal practices at MWD that are costing ratepayers tens of millions of dollars. Why is that? Even with the Water Authority?s reduction in MWD water purchases, MWD remains an important part of the Water Authority's water supply portfolio and, as such, our directors are reasonably concerned about the facts outlined above, as well as other subjects covered in the letters from our Board leadership. Candidly, our board would beg to differ that these facts demonstrate that MWD is "well-managed." Furthermore, none of the public officials we have briefed on these issues has found these practices to demonstrate sound fiscal stewardship. On the rate litigation, I'm afraid there is nothing that can be done to eliminate litigation until MWD sets lawful rates. As you know, MWD has not changed its rate- setting in response to the trial court ruling finding the rates illegal and invalidating them on multiple grounds; instead, just as your letter does, MWD has simply ignored the trial court ruling, insisting that it is right and the court is wrong. The fact that your constituents are asking why San Diego should "pay less" suggests a lack of public awareness in your community about cost of service legal requirements (for how costs are allocated) and Judge Karnow's rulings finding MWD's rates are illegal and invalid. Unfortunately, the dialogue at MWD often devolves to a discussion of who will pay "more" or "less," without there ever being a discussion about how costs should be allocated in the first place, according to cost- causation based on sound financial, engineering data and the law. Your letter references that many of MWD's member agencies are reducing demands on MWD, and yet, your agency continues to support MWD spending programs without requiring MWD to identify in advance how the costs will be allocated. This is what led to the most recent unsuccessful effort to establish some level of fixed cost recovery of treated water costs. Despite this exercise in frustration, MWD board members, including your board representative, continue to support MWD's "do everything" Integrated Resources Plan that continues to spend money first and figure out later how it will be paid for, and by whom. Mr. Shane Chapman April 25, 2017 Page 3 On the virtues of negotiation, the Water Authority did discuss these issues in earnest at MWD for more than a decade, in multiple forums, in an attempt to achieve lawful rates at MWD that meet cost of service requirements. In your former roles at MWD, and later as GM of you are well aware of the Water Authority?s tireless efforts to achieve a solution short of litigation. When we couldn't agree on what the proper cost allocation was, we turned to the judicial system in a neutral county to decide the dispute. We very much look forward to the upcoming May 10 hearing before the 1st District Court of Appeal and hope that the Court?s ruling will finally help put these issues to rest and lead to new, lawful rates being established by MWD. In closing, the Water Authority's board leadership does not question for a moment that the community leaders in your region are critical thinkers, or that they care deeply about issues that impact their constituents. This is exactly why the Water Authority's board officers have directed implementation of an enhanced public outreach campaign. As you requested, I would be glad to meet with you during ACWA next month to further discuss these issues. My assistant will follow-up with your office to find a time that works for both of us. Sincerely, MW Maureen A. Stapleton, General Manager Enclosure: April 17, 2017 letter from Shane Chapman, cc: Water Authority Board of Directors Board of Directors service area elected officials April 17, 2017 Ms. Maureen Stapleton General Manager San Diego County Water Authority 4677 Overland Avenue San Diego, CA 92123 Subject: San Diego County Water Authority public relations campaign "stop the spending? Dear Ms. Stapleton: i apologize for not contacting you sooner regarding your public relations campaign ?stop the spending? attacking the Metropolitan Water District (Metropolitan). In the future, please include my board and in any communications with our community leaders so that we may participate in the dialogue and help resolve your concerns. The San Diego County Water Authority?s (SDCWA) long-term strategy to diversify its water supply and lessen the dependence on Metropolitan (captured in 2016 annual report ?Sea Change?) is a tremendous success. It is however, an expensive strategy. The SDCWA's comprehensive annual financial report is a very helpful document in analyzing SDCWA's cost structure. It should not be a surprise to anyone in San Diego County that about 84 percent of the increase in total expenditures since 2007 are unrelated to the rising cost of imported water provided by Metropolitan. total expenditures increased from $380.6 million in 2007 to $589.8 million in 2016, about $209 million or 55 percent. Only 16 percent of the total increase, or about $33 million, is attributed to the rising cost of imported water provided by Metropolitan. Water purchased from Imperial Irrigation District and the Coachella and All American Canal lining now makes up 45 percent ofthe imported water delivered by SDCWA, up from 8 percent in 2007. The HO and Canal lining water accounts for about $87 million or 42 percent of the total increase in expenditures. Depreciation, amortization, interest expense and other accounts for about $88 million, also about 42 percent of the increase in total expenditures. My sense is that the other member agencies don?t take issue with efforts to diversify its water supply; but rather applaud leadership. We are all doing the same thing to varying degrees. However, I am left with the impression that recent public relations campaign ?stop the spending?, and the on-going barrage of lawsuits challenging Metropolitan?s water rates and charges, are very expensive ways to direct attention away from the other cost drivers in your constituent?s water bills. In 2015, the average single-family household water bill in San Diego County was about $83 per month, 49 percent higher than it was in just 2009. This is almost a 10 percent annualized increase. Inflation over this period was about 2 percent per year. The average water bill in San Diego County is 8 percent to 80 percent more than the average bill in any of the other five counties served by Metropolitan. 602 E. Huntington Drive, Suite BI Monrovia, CA 91016 16261 443-2297 (phone) 11626) 443-0617 (fox) Ms. Maureen Stapleton San Diego County Water Authority April 17, 2017 Page 2 Metropolitan is well managed and is doing a good job addressing the challenges facing the imported water system. While imported water rates have risen significantly, this is partly attributed to deliveries of imported water decreasing over 30 percent since 2007; and the challenge of spreading fixed costs over a lower sales base (same holds true for SDCWA). Outstanding debt is only $50 million more than it was in 2007. Metropolitan?s debt service coverage ratios remain strong and credit ratings also remain strong (basically the same as SDCWA). Metropolitan has not amassed unrestricted cash reserves, but rather prudently used cash reserves to shield member agency and municipal budgets from unplanned water rate increases (just as SDCWA does). Labor costs and outside services are under control increasing at about the rate of inflation over the last ten-years (same for SDCWA). Water conservation incentives, including the turf removal rebate program, have reduced the demand for imported water, preserved water in storage and allow quicker recovery of storage levels following a drought. As noted in "Sea Change,? ability to store water at the height of the drought is due to your constituents embracing water conservation as a way of life, including turf removal. Our community leaders are critical thinkers that care deeply about issues that impact their constituents. While they are keenly aware and concerned with the continuing rise in the cost of water service, they also recognize that the challenges facing the imported water system must be addressed. They trust Upper District to carefully monitor Metropolitan's operations and to protect them from undue or unfair cost burdens. recent letter campaign to our community leaders has only raised one critical question: why should their constituents bear an even greater share of the cost of the imported water system so that SDCWA may pay even less, as sought by lawsuits against Metropolitan? Right now, there is no more important conversation than how best to fairly share the risks, benefits and costs of the imported water system. Agreement and consensus here allows us all to move forward together and overcome the very serious challenges we all face. Lawsuits and negative public relations campaigns do not foster a good relationship, and prevent earnest discussion and engagement. I have included Table 1 which summarizes the expenditures since 2007 and imported water sales and Table 2 shows the average single-family household water bill by county served by Metropolitan as calculated in the AWWA California-Nevada water rate surveys. have also attached examples of your earlier letters (attachment 1) and Metropolitan?s responses (attachment 2) for reference. Please don't hesitate to call if there is any way I can assist you. Thank you, Maw?M Shane Chapman General Manager Attachments Table 1 San Diego County Water Authority Total Expenditures and Deliveries of Imported Water Change Millions of Dollars 2007 2016 Total Percent Annual Cost of Water Paid to MWD (including exchange) $237.5 $270.9 $33.4 14.1% 1.8% Cost of Water Paid to llD/Other $28.8 $116.2 $87.4 303.5% 37.9% Operations and Maintenance $34.5 $41.1 $6.6 19.1% 2.4% Depreciation and amortization $23.8 $59.5 $35.7 150.0% 18.8% Operating Expenses $324.6 $487.7 $163.1 50.2% 6.3% Non-operating expenses (bond interest and other) $56.0 $102.1 $46.1 82.3% 10.3% Total Expenditures $380.6 $589.8 $209.2 55.0% 6.9% Total expenditures (not including cost of water paid to MWD) $143.1 $318.9 $175.8 122.9% 15.4% Total Deliveries (millions of acre-feet) 0.660 0.402 -0.258 -39.1% Purchases from MWD 0.604 0.223 -0.381 -63.1% Purchases from Canal Lining Water 0.056 0.179 0.123 220.8% 27.6% Table 2 Single-Family Household Average Water Bill* Change County 2009 2015 Total Percent Annualized Los Angeles $43.58 $54.57 $10.99 25.2% 5.0% Orange $39.41 $49.87 $10.46 26.5% 5.3% Riverside $35.46 $45.76 $10.30 29.0% 5.8% San Bernardino $32.54 $46.16 $13.62 41.8% 8.4% Ventura $53.60 $77.13 $23.53 43.9% 8.8% San Diego $56.06 $83.24 $27.18 48.5% 9.7% *Water Rate Surveys published by AWWA California?Nevada section and Raftelis Financial Consultants .l MEMBER AGENCIES Carlsbad Municipal Water District 0on Del Mar City oi Escondido City al Mariana! City al Oceanside City 0! Pawn? City oi San Diego Fallhraoi: Public Ulilily Diana Helix We!" Diurnal lakeside Wclor Dislricl Olivenliom Municipal \Nalur Oiny VValur Dislricl Padre Dam Munlcipal Water Duhicl Comp Pcnd'nlan Marina Corp; Bate Rainbow Mame-pal Water Romano Municipal Wale: Dislricl Rincon rial Oiablo Municipal Water District San Dieguila Water District Santa Fe Irrigalinn Dlilticl Sculls Boy lrrigalian District Vallecilos Water Districl Valley Camel Wnicipol Wale: Vill? Irrigation Disliicl Vuilua Municipal Water District OTHER REPRESENTATIVE County of San Diego ATTACHMENT 1 San Diego County Water Authority 4677 Overland Avenue 0 Son Diego, California 92l23-l 233 (858) 522-6600 FAX (858) 522-6568 Januaryll, 20!? Mark Alexander, City Manager City of La Canada Flintridge 1327 Foothill Blvd. La Canada, CA 9101 1 Dear Mr. Alexander: What would you do if you found out your city spent $30,000 to conserve one acre-foot of water when the going rate was $594 per acre-foot? If your city buys water from the giant Metropolitan Water District of Southern California, that's exactly what your city's water ratepayers were charged. (An acre-foot is about 326,000 gallons enough water to meet the annual water needs of two families of four.) Last year, the Metropolitan Water District of Southern California hastily launched a turf removal rebate program that quickly spun out of control, in which the agency spent $239 million in water ratepayer money to conserve approximately 8,000 acre-feet of water. That works out to nearly $30,000 per acre-foot of water conserved by the program. Assuming those conservation savings will actually be repeated every year for the next 10 years (and there is no assurance it will), that makes turf removal rebate program among the most expensive water supply programs in its history all paid for by our water ratepayers. It?s no surprise to learn that reckless spending on turf removal received a scathing review by the agency?s own internal auditor content/uploadsIZOlG/l Enclosed is the Los Angeles Times story I 61209- story.html reporting on the mismanagement, poor planning and inadequate oversight of the turf rebate program. The San Diego County Water Authority - one of largest member agencies whose ratepayers contribute about 25 percent of total revenues has consistently expressed serious concerns about out-of-control spending practices. For many months, MWD did not even require participants in this turf rebate program to provide any receipts proving they actually spent the money tearing out their turf. Even now, after some safeguards were ?nally implemented, receipts are only required if the applicant is seeking more than $100,000 in rebates. MWD management defends the turf rebate program by stating the obvious: it was wildly popular. If you stood on a street corner handing out $1.000 bills, that would be popular, too. But pepularity does not make a program prudent, ?scally sustainable or good water conservation policy. A public agency providing a safe and reliable water suppbr to the San Diego region PRINTED ON Em PAPER January 11,2017 Page 2 reckless spending has contributed to historic increases in water rates at MWD over the past decade. Since 2006, treated water rate has more than doubled, with rate increases of 7.6 percent, compounded annually. untreated water rate has risen nearly as fast, with rate increases of 6.7 percent, compounded annually. Table l: MWD Water Rates, 2006-2016 $1,000 $900 5800 Fr, 5700 _c $600 t0 3 2005 2007 zocs 2009 2010 20:1 2:112 2013 201a 2015 2016 Calendar Year -?O?'ier lTreatad Rate ?o?Tier lUntrealed Rate It's long past time to reign in the out-of?control Metropolitan Water District. If you're as concerned as we are with the turf removal program, we encourage you to talk to your retail water district provider. Ask them to explain why their appointed representative on Board of Directors believes the turf removal program was a good investment of your water ratepayers? dollars and what they are doing to contain costs at MWD and control escalating water rates. You can also learn more about how MWD is spending your ratepayers' money by visiting We encourage you to join us in calling for accountability and transparency at MWD. If you have any questions, please contact .us at mmuir@sdcwa.org. Sincerely, Mark Muir Jim Madaffer Chair, Board of Directors Vice Chair, Board of Directors San Diego County Water Authority San Diego County Water Authority; Councilmember, City of Encinitas Former San Diego City Councilmember and Past President of the League of California Cities Enclosure $105 Augeles flames Massive $340?million turf rebate program plagued by poor planning and oversight, audit ?nds . 'faMatt Stevens Contact Reporter December 10, 2016 The Metropolitan Water District?s massive $340?rnillion turf rebate program which helped thousands of Southern Californians rip out their lawns in favor of drought?tolerant landscaping was plagued by poor planning and oversight by the agency, a new audit found. The rebate program was a key element of California?s drought response, and of?cials say it helped residents conserve water. But the audit found that the MWD did a ?less than satisfactory" job administrating the program due to ?inadequate planning, execution, and follow-up.? As a result, MWD auditors concluded that the agency may have overpaid a contractor tasked with inspecting turf replacements, and that the contractor also may have failed to perform some critical inspections it was required to carry out. 1 The findings represent perhaps the most scrupulous examination of the popular but costly lawn removal program, which was designed to help urban Californians sharply reduce their outdoor water use during Residents began ?ocking to the program after MWD doubled the size of its rebate to $2 per square foot in 2014, and it grew exponentially after MWD poured an additional $350 million into the conservation program a year later. Some watchdogs have long feared that the size of the program would lead to waste and possibly fraud without strong oversight. During the period that auditors reviewed, MWD received more than 85,000 applications to remove about 270 million square feet of turf. More than 46,000 of those applications were approved for a payout of $239 million. MWD Spokesman Bob Muir estimated that the audit, which was performed at the direction of the agency's board, covered the period from May 2014 to July 2015. ?It was extraordinary what [the program] was able to accomplish,? he said. ?We were more than satis?ed with how the program was managed. We know that we can do better and we need to do better." Auditors agreed that the program successfully drove water conservation. But they also criticized MWD on a number of fronts. A review of turf removal applications processed through Nov. 30, 2015, showed that the contractor, EGIA, was paid for completing aerial measurement testing for 212 applications for projects of a certain size. But only 121 such applications were reported as having been measured, the report found. Five applications for turf removal of more than 50,000 square feet were not reported as having been inspected by at all, even though the ?rm was required under its contract to inspect all projects of that size. The auditors noted that the ?ve applicants were collectively paid $4.4 million. The auditors cited two cases in which an applicant got paid to remove signi?cantly more turf than the applicant did. Muir said he did not know if the examples cited by the auditors represented ?actual fraud,? though he acknowledged that they were ?obviously something that needed to be corrected.? The auditors also assailed MWD for failing to ?provide detailed instructions? on how the contractor should have checked the applications. For example, auditors said MWD failed to provide step-by?step instructions on how to measure parcels manually, check customer information and inspect applications that preposed removing more than 50,000 square feet of lawn. In a letter responding to the report, Deven Upadhyay, an MWD manager, said his team generally agreed with the ?ndings. Upadhyay wrote that his team has ?made changes to the ongoing administration of remaining turf-removal wait- list applications and will incorporate the recommendations into the design of any potential turf removal programs in the future.? 2 MEMBER AGENCIES Carlsbad Municipal Water Dnlricl City cl Del Mar City of Escondido City oi National City City of Oceanside City of Pawn-y City ol San Diego Failbmk Public Utility District Helix Wuior Districl Lakeside Water District Olimliain Municipal Wuler Dislricl Dioy Wnier Districl Purim Dam Municipal Wutor Dilialcl Camp Pundlnian Marin! Corps Base Rainbow Municipal Wale: Districl Ramona Municipal Districl Kincon del Disable Municipal Weller District San Dieguilo ?blot Dishld Sonia Fe irrigation District Scullu Boy Irrigation Districi Vallecil'os Wuior Din?cl Valley Carrier Municipal Water District Vim: luigaiioli 0W6 Yulrno Municipal Wain: District OTHER REPRESENTATIVE County oi San Diego San Diego County Water Authority 4677 Overland Avenue 9 San Diego, California 92123-1233 {858] 522-6600 FAX (858] 522-6568 February 28, 2017 Aaron Adams, City Manager City of Temecula PO. Box 9033 Temecula, CA 92589 Dear Colleague: When we began writing to you a few weeks ago, we hoped to start a dialogue about ?scal and governance concerns at the Metropolitan Water District of Southern California, and how they are impacting our ratepayers. .We?re glad to report the conversation is now under way. In our last letter (Jan. 26, 2017), we commented on claim that it spent $450 million on conservation and turf removal subsides, ?without impacting water rates.? We showed that MWD overcharged ratepayers by $847 million between 2012 and 2015 revenue collected over and above budgeted expenses), thereby amassing a huge amount of money that MWD then spent on turf subsidies and other unbudgeted spending. Operating without a Long Range Finance Plan as it does, unbudgeted spending totaled almost $1.2 billion over four years. In another move that will have long~term rami?cations for all of our ratepayers, MWD also authorized $900 million in new, unplanned debt. Here?s a summary of MWD overcharges, unplanned spending and unplanned borrowing: MWD Oval-charges, Unplanned Spending and Unplanned Borrowing, 2012-2016 $1.300 ?an .3 I .5 $100 . ?0 - I 201: an: an? zen an? Heal fear I in Overch arses over Four Years I $1.28 In Unplanned Spending over Four Years I Authorized in Unplanned Borrowing In One Year The fact that MWD collected $847 million more than it needed means only one thing: WD '5 rates were higher than necessary. Then, rather than hanging on to this money to avoid more rate increases, MWD chose to spend it almost $1.2 billion in unplanned spending. MWD spent so A public agency providing a safe and reliable water supply to the San Diego region ON RECYCLED PAPER much money, so fast, that it nearly depleted its cash reserves below its minimum reserve levels. What did MWD do to cover its spending and replenish its cash reserves? It borrowed money: The MWD board aulhorized $900 million in unplanned debt in less than a year. As to claim that it could spend hundreds of millions of dollars ?without impacting water rates,? below is a chart showing average annual increases of 4.5% in treated water rate since 2011.I MWD Rate Increases (Treated Tier 1) Compound Annual Rate Increase: 4.5% 51,050 51,000 $950 1 . 5900 a. 2 $850 . 3 I 5800 5750 5700 I 2011 2012 2013 2014 2015 2016 2017 2018 (Adopted) Calendar Year We also encourage you to ask your water district or provider to ask their MW representative for further details; if any are wrong, we will stand to be cozrected. We know from experience how important the planning and budgeting process is to municipal government, and we believe you will agree with us that we need to demand more transparency and fiscal accountability from MWD. We also know how increasing water rates impact our businesses and residences. Given the chart above, it?s apparent we should all ask more questions of our water wholesaler. We have been asked where we come up with our numbers. The answer is: from MWD. For more details, go to We look forward to hearing from you. You can reach us at mmuir@sdcwa.org. Sincerely, Chair, Board ot Directors Vice-Chair, Board of Directors San Diego County Water Authority San Diego County Water Authority and Councilmember, Former Councilmember, City of San Diego, City of Encinitas and Past President, League of California Cities Numbers are from website: http:/Iw ATTACH ME NT 2 cw?: ?if? 0? on THE METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA 17?0?: Of?ce of the Board of Directors January 20, 2017 Mark Muir, Chairman Jim Madaffer, Vice Chair San Diego County Water Authority 4677 Overland Avenue San Diego, Califomia 92123 Dear Chair Muir and Vice Chair Madaffer: Metropolitan is in receipt of your recent letter sent to a number of cities and retail agencies throughout Metropolitan?s service area criticizing Metropolitan?s regional conservation program and recent effort focused on turf removal. As part of the Southern California water community, I assume you are aware of Metropolitan?s and all Southern Californian water agencies? incredible track record on conservation and demand management over the past 25 years. We began making important conservation improvements in the l9905 with the largest toilet replacement program in the nation. This was followed with a shower head replacement program and development of rebate programs to incentivize the widespread adoption and retro?tting of water saving devices. Metropolitan also worked closely with trade associations, businesses, and federal agencies in deveIOping industry criteria for water savings. Metropolitan further sponsored and supported state legislation spurring deveIOpment of water saving performance criteria that lock in savings on new devices generating code-based water savings without financial subsidies. Recently, Metropolitan sponsored the landmark ?20%x2020? legislation which passed in 2009 that is driving statewide demand reduction. This systematic and comprehensive approach to conservation has proven very successful generating a marked reduction in per capita household water use throughout Southern California. Thanks to this approach, Southern California has signi?cantly reduced its reliance on imported water from 1990 while adding more than 5 million people to our service area. All of Southern California should rightfully be proud of these accomplishments. This past decade in California has been extremely dry with two Governor-declared water emergencies. The drought?s darkest period was 2013-2015, which shattered a number of records for highest recorded temperatures, lowest snow pack, least precipitation and runoff, and smallest State Water Project allocation - amongst other dubious distinctions. Governor Jerry Brown took action declaring an emergency coupled with an executive order that called for a mandatory reduction in all retail water use by 25% and established a statewide goal of removing 50 million square feet of turf. Metropolitan?s Board demonstrated leadership by responding to this challenge with bold and aggressive action. Over the two-year period of 2014-20 1 6, Metropolitan?s Board approved an unprecedented campaign of demand management actions that budgeted $450 million for public outreach, and rebates for water saving devices and turf removal. 700 N. Alameda Street. Los Angeles. Califomla 90012 - Malling Address: Box 54153, Los Angeles, California 90054?0153 - Telephone (213) 217-6000 Mr. Mark Muir Mr. Jim I'Vladaffer Page 2 January 20, 20 7 And the public responded. Applications for turfremoval rebates soared from 3,600 in a six month period in 2014 to almost 50.000 over the same period in 20 5. Interest in device rebates likewise soared with requests for efficient toiletsjumping from 14,000 to more than 65,000 in the same time frame. Southern California built on its 25-year track record of conservation and met the Governor?s conservation goal. Metropolitan more than tripled the Governor?s statewide goal for turf removal and removed more than 160 million square feet of turf throughout our service area. Responding to California?s challenging drought, Metropolitan?s historic investment in conservation will be remembered as the strategic moment when Southern California?s landscape transformed from lawns. Governor Jerry Brown personally met with Metropolitan?s Board to thank Metropolitan for its statewide leadership on conservation. Your letter attempts to twist this strategic and historic investment into ?reckless? and ?out of control? spending. Turf rebates generate water savings over the life of the program at approximately $600 per acre?foot, as has been reported to Metropolitan?s Board. Yet, your letter only refers to a single year of savings to falsely come up with a $30,000 per acre-foot ?gure. You mischaracterize Metropolitan?s internal auditor?s report as ?scathing? when it actually ?nds less than a 2% variance between square footage removed and square footage reported, better than industry averages for turf removal programs. Most hypocritically, you fail to mention that website throughout this period steered San Diegans to Metropolitan?s turf removal rebate program and lauded the bene?ts of water smart landscaping. City of San Diego Councilrnembers Alvarez and Cate wrote in support of Metropolitan?s program. When Metropolitan?s Board was making this investment, City of San Diego Mayor Faulconer was announcing the doubling of the City?s own turf replacement budget. In ail, San Diego County received approximately 23% of Metropolitan?s rebates over this period. Numerous San Diego golf courses, homeowners associations, schools, and businesses, such as San Diego Gas Electric, received turf removal rebates and expressed their support and appreciation. Despite the continued efforts of SDCWA to criticize virtually every action by Metropolitan, I am pleased that the overwhelming majority of the Metropolitan Board remains steadfast in support of a balanced approach to fund conservation, local resource development and reinvestment in our imported water supply systems. And I am very pleased that many San Diego area businesses and residents embraced our conservation effort and lowered their water use. We lead best when we lead by example. I want to thank the forward looking people in the San Diego area for recognizing the importance of conservation and taking action. I only hope that someday the SDCWA will also demonstrate a similar spirit of regional cooperation and leadership. Sincerely, Maw Randy Record Chairman of the Board 700 N. Alameda Street. Los Angeles, California 90012 - Address: Box 54153, Los A?ngeles. California 90054-0153 - Telephone (213) 217-6000 Mr. Mark Muir Mr. Jim Madat'i'cr Page 3 January 20. 2017 cc: Metropolitan Board ofDirectorb Metropolitan Member Agency Managers San Diego County Water Authority Board of Directors 700 N. Alameda Street. Los Angeles. California 90012 - Malling Address: Box 54153. Los Angeles. California 90054-0153 - Telephone (213) 217-6000 HILMI Hf Office of the Board of Directors March IO, 20] 7 Mark Muir, Chairman Jim Madaffer, Vice Chair San Diego County Water Authority 4677 Overland Avenue San Diego, California 92123 Dear Chair Muir and Vice Chair Madaffer: The Metropolitan Water District of Southern California (Metropolitan) is in receipt of your February 28 letter sent to local elected of?cials throughout Metropolitan?s service area criticizing our governance and ?scal decisions. Before entering the recent historic drought, Metropolitan, as is our custom, set rates after an exhaustive study that was designed to recover anticipated costs. As the historic drought unfolded, Member Agencies began to request far more water than forecast. Our ability to meet this demand avoided tremendous economic hardship in San Diego and the entire Southland region. Two signi?cant investment opportunities arose in recent years, and Metropolitan's Board of Directors decided to take bold actions. We purchased valuable land assets in the Palo Verde Valley (which your agency unanimously supported) to support the reliability of our water supplies from the Colorado River. We purchased land in the heart of the Sacramento-San Joaquin Delta which is an important investment for multiple potential values consistent with the co-equal goals of a restored Delta and a reliable water supply from the State Water Project. In 20 we responded to Governor Brown?s emergency drought declaration by investing to transform Southern California landscapes to permanently lower outdoor water demand. The decline in demand that Metropolitan (and your agency, to a greater extent) has experienced is a good thing and part of a much broader conservation trend that bodes promise for all of us to withstand dry cycles and maintain adequate reserves in storage. As we await the outcome of the litigation over Metropolitan?s rate structure at the appellate court, Metropolitan has set aside disputed payments pursuant to our Exchange Agreement. Metropolitan used cash from its funds to purchase the Palo Verde and Delta properties. While the acquisitions resulted in Metropolitan issuing additional bonds, our per-capita debt ratio is 60 percent lower than your own agency. It is among the reasons why Metropolitan maintains some of the highest credit ratings of any government agency in California. Mark Muir, Chairman Jim Madaffer, Vice Chair San Diego County Water Authority Page 2 Thanks to the return oi" rains in California, we are now in the midst ofstoring more water this year than perhaps any year in our history. Our liquid reserves are being replenished at a ?nancial value in the. hundreds ofmillions ()Ftlollal?s, bene?tting all of us. The investments our Board has made over the decades to advance a reliable water system for Southern California is paying dividends now and will continue in the decades to come. Attempts to contort this track record into a negative light are not succeeding. Our reliability and low water rates (50 percent lower than those of your agency) speak for themselves. Sincerely, Mecord Chairman of the Board Attachment cc: Metropolitan Board of Directors Metropolitan Member Agency Managers San Diego County Water Authority Board of Directors Maureen Stapieton, General Manager, San Diego County Water Authority Melinda Cogle, Clerk of the Board, San Diego County Water Authority