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Study of FPUD, RMWD merger moves forward
Thursday, August 16th, 2012
Issue 33, Volume 16.
A flurry of meetings in June and early July explored a possible merger or joint powers affiliation between Rainbow and FPUD. The sessions came about a year after an initial announcement that those districts and two others were looking at sharing facilities or functions as a way to cut operating costs.
Although two water agencies have since dropped out of the process, the Rainbow and Fallbrook districts continue to study the possibilities. And while much work has been done and potential cost savings have been identified, additional steps must be taken and numerous public meetings would be held before the directors of both water districts make any binding decisions.
"We’re in an information gathering mode right now," Brian Lee, Rainbow’s chief engineer, told the district’s communications committee at its July 2 meeting. He acknowledged that many questions remain unanswered as the fact-gathering process continues to unfold.
It is possible a joint meeting between the Rainbow and Fallbrook governing boards will be scheduled in the near future.
The boards of the two water district held separate meetings in April to review the findings of an in-house analysis of financial and operational aspects of a possible merger or by combining operations through a joint powers authority.
That analysis indicated a merger or consolidation could bring $675,000 in cost savings the first year, $668,000 in the second year and $2,535,000 in the third year and every year thereafter. Most of those savings would come from staff reductions but additional savings could be achieved by combining assets and sharing facilities and equipment.
Many mergers or consolidations focus on cost savings in rank-and-file positions, but in this case the initial savings come from consolidating at the upper levels. By merging, the agency would only need one general manager, one operations manager, one board of directors, etc. Additional staff savings would be realized in lower level jobs as they are reduced through attrition over time.
That initial analysis concluded there would be many financial benefits, and few disadvantages, from a merger or a consolidation of the two independent districts. However, there are political and other considerations that need to be weighed also. As example, a combined district would mean some loss of local control since one board would serve the entire region. Ultimately the two boards will have to consider myriad factors prior to making a final decision on this matter.
The Rainbow district currently serves about 9,100 water and sewer customers over a 78-square-mile area that is mostly rural andis home to about 18,000 residents.
Fallbrook provides water and sewer services to about 14,100 customers. That district is home to about 35,000 people who live in a 44-square-mile area that includes the unincorporated village of Fallbrook.
As part of the merger exploration process, the two governing boards hired consultant Phillip Forbes to further analyze certain financial and operational issues. Forbes has worked in the water supply and corporate finance industries for about 35 years. For about 25 years, Forbes worked as chief finance officer and assistant general manager for the Temecula-based Rancho California Water District. Forbes and his family have been Rainbow water district customers for nearly 30 years.
Forbes presented his report to a June 20 joint meeting of Rainbow’s Board of Directors and its budget and finance committee. The meeting attracted about 25 residents, district employees and other participants.
"It was well attended and I think it was a great meeting, great questions," Forbes said later. "It was run very professionally and businesslike, and it was a great exchange of information."
Forbes identified the Rancho California Water District as a model of how Fallbrook and Rainbow could retain much of their separate functions and identities by becoming sister divisions of a merged agency.
Rancho existed as one of two water districts that served the sleepy Temecula Valley in the 1960s and 70s. Years of effort ended in 1977 when Rancho consolidated with the Santa Rosa Ranches Water District. To this day, Rancho and Santa Rosa operate as separate divisions within one water district. Each division retains its own water rights and is responsible for its administrative, pumping, materials and maintenance costs. Rancho California now serves nearly 100,000 acres that are home to about 144,000 people in the city of Temecula, the Santa Rosa Plateau and other outlying communities.
Using earlier financial projections as well as other data, Forbes concluded that a consolidation or merger would result in financial advantages.
Several potential cost cutting or service boosting opportunities were also presented in the analysis that Forbes conducted.
"There are a lot of aspects to this," Forbes said. "We wanted to present something that was very conservative. The feeling is there are going to be additional savings there."
The analysis done by Forbes is in a format that can be presented to the San Diego County Local Agency Formation Commission as part of a merger or consolidation application.
LAFCO would hold one or more public hearings to consider such a proposal if it wins approval from the Rainbow and Fallbrook boards. A proposal to form a joint powers authority – an umbrella public agency – could be reviewed and acted upon by the two water district boards without the need for a LAFCO review.
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