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FPUD, RMWD consider merger of districts
Thursday, April 26th, 2012
Issue 17, Volume 16.
"In these economic times, every public agency is looking at ways to save their ratepayers money. The opportunity to merge Fallbrook Public Utility District and Rainbow Municipal Water District will do that," said George McManigle, board president for Rainbow. "Over the last few months, an ad hoc committee made up of directors and general managers from both districts has looked at and evaluated all aspects of reorganization and concluded that not only would a merger save money, it would also make the operations of the organization more efficient."
The ad hoc committees were created to assist the general managers of both the FPUD and RMWD districts with the consolidation process.
"We had reached a point where policy input was needed, hence the request for board involvement," said Dave Seymour, general manager for RMWD. "Once the two ad hoc committees met, it quickly became apparent that FPUD and RMWD had so much in common that an actual consolidation should be considered; that is why we are asking our full boards for permission to conduct a full-scale feasibility study."
McManigle explained that there is currently a duplication of resources, personnel, and assets, from meter readers to general managers.
"For example, service vehicles and facilities: FPUD has a large relatively new administrative building; Rainbow’s needs updates. Rainbow has a very large and well-maintained service area and garages," said McManigle. "Recently, Chuck Sneed, the operations manager at Rainbow retired. Dave Seymour, Rainbow’s general manager has announced his retirement plans in the near future. Brian Brady, the FPUD general manager, not only has much experience in running water districts, but he has also completed similar mergers for other districts. Brian will be a valuable asset during the merger as well as the general manager of the final organization."
Don McDougal, president of the board at FPUD, explained that working on a "functional consolidation" between the two districts came as a result of discussion amongst four North County water agencies to "see what can be done to save operational expenses by combining resources such as laboratories, construction crews, water meter reading, accounting, specialized equipment (vacuum trucks), etc."
"As part of this process we have had some very preliminary discussions with Rainbow (our closest sister agency) about consolidation or merging operations," said McDougal. "The initial investigation is favorable enough that we are presenting to our boards for approval to conduct a formal study into this consolidation."
McDougal explained that the majority of the water districts’ costs came from raw water, which is supplied by the Metropolitan Water District and the San Diego County Water Authority.
"We have no control as to this cost but do have direct cost over operational expenses. The approval of this study will allow us to formally investigate and analyze the possibility of this consolidation," he said.
Brady, general manager of FPUD, explained that the preliminaryresearch would be discussed after investigation but said there would be several benefits for the districts, which are in similar financial states.
"Rainbow has more water and service territory with rural and agricultural clients, while FPUD services more accounts in a more densely populated area," said Brady, who has 40 years experience in the water management industry. "There are various advantages to the concept, which would give the organization of the districts more strength than either district could have alone."
Seymour explained that Rainbow has more fixed assets, but that is to be expected given that the district’s service area is quite a bit larger than Fallbrook’s and requires more pipes, reservoirs, and pump stations to reach outlying areas.
"Our rate structures and revenues are also pretty close," said Seymour. "Even though our balance sheets are comparable, our tentative plan is to keep the finances of the two districts separate from each other. If the consolidation occurs, each of the old districts would operate as different divisions within the same organization for the purposes of accounting. That way you wouldn’t have ratepayers from one district taking on the financial burden of the ratepayers from the other district."
Brady explained that there are three organizational options for the districts that will be discussed by the ad hoc committees.
"We could do everything from combining the entire staff and functions; having a joint powers agency, which would have two separate boards; or an ultimate consolidation, which would need to be approved by the Local Agency Formation Commission (LAFCO) in order to implement," said Brady.
"With the merger set up so that each district would be like a division, accounting and administrative work can be kept separate," said McManigle. "After the initial year or two, the savings will be around $2 million."
Though this merger would be significant for the districts, Seymour stressed that at this point, the concept is still very new.
"The potential consolidation is an exciting concept, but I want to stress that it this point it is only that - a concept," said Seymour. "Brian Brady, the ad hoc committees, and I have reviewed it and are recommending to our full boards that we do a comprehensive evaluation of the cost and benefits of a consolidation. Ultimately both boards will make the judgment once they have all the facts they need to make an informed decision."
The board presidents stated that while they are looking forward to seeing the initial information presented, they are hoping to hear from the public throughout the process.
"I think this is a fantastic opportunity to investigate consolidation with the end result in lowering our customer water cost or at least slowing down the rate of increase," said McDougal.
If the boards approve the study and then eventual consolidation, Seymour stated that the process could be accomplished in about a year.
"Both boards will have the opportunity to vote to proceed with further analysis of a merger and consider options and issues," said McManigle. "We hope to hear from our ratepayers for direction and support for making this a cost effective step for North County water customers."
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