League of Women Voters of Fremont, Newark and Union City "Because democracy is not a spectator sport"

  

League of Women Voters of the Bay Area
Linda Craig, President
1611 Telegraph Ave.
Oakland, CA  94612

Dear Linda,

The LWVFNUC has reviewed currently known issues with the Hetch Hetchy Water System and SFPUC governance of it.  I am enclosing a summary written by our Environmental Director, Susan Gearhart, of the problems with and potential solutions for the Water System and its governance.  I believe you will see these issues affect a large number of Bay Area residents.  The LWVFNUC suggests the Bay Area League take an active stance on correcting the System's governance problem as this would facilitate solving the multiple problems plaguing the Hetch Hetchy System.

We also suggest that the January LWVBA meeting  focus on this issue.  We understand that salt ponds and restoration of bay wetlands is also under consideration for the January meeting.  We feel that while a worthwhile topic, solutions are already being addressed by many agencies working in concert.  No agency we know of is interested in solving the governance problem associated with Hetch Hetchy.  In light of the recent natural disaster along the Gulf coast and the resultant water emergency, we can see strong reasons to address Hetch Hetchy governance before a major earthquake hits us.

We hope this summary will be a useful tool for you as the LWVBA works for resolution of this issue.

Miriam Keller
President
League of Women Voters of Fremont, Newark and Union City

  

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Water:  Governing a Vital Regional Resource

Susan R. Gearhart, LWVFNUC, Environmental Director provides this summary of the Joint Legislative Audit Committee and the UCLA Resolution to the governance issues.

In 1913 The United States Congress passed the Raker Act.  This law authorized the use of federal lands in the Sierra Nevada and its foothills for a water collection and delivery system designed to supply water to the City and County of San Francisco and the growing nearby metropolitan area.  Since 1934 the system has been delivering water to the Bay Area, approximately 2.4 million residents of San Francisco, San Mateo, Santa Clara and Alameda Counties, as well as thousands of businesses and institutions such as schools and hospitals.

While less than one-third of the residents served by this system live in San Francisco, only they have a voice in the Water System decisions.  The San Francisco Public Utilities Commission (SFPUC), all of whose members are San Francisco residents appointed by the Mayor of San Francisco, manages the regional system.

Residents and representatives of the three-county service area have neither voice on the SFPUC nor any voice in the financing of necessary repairs to the system.    The "outside" customers use about two-thirds of the water delivered by the SFPUC and pay more money to the SFPUC in water rates than do customers residing in San Francisco.  This has led to independent audit of the SFPUC.   The Joint Legislative Audit Committee (composed of representatives from both the State Senate and Assembly) agreed that an outside examination was warranted and directed the California State Auditor to investigate the SFPUC's ability to manage the capital improvement program.

Findings:  The Auditor's report was issued in February 2000 concluding:

• SFPUC's slow pace for assessing weaknesses in its Water Delivery System and for completing capital projects increases the risk of service disruptions and water shortages.
• The SFPUC has no centralized automated system to trace its capital and maintenance projects.
• Long term water supply planning has been postponed until recently, although the need for additional sources of water to augment current supplies has been known at least since the drought of 1987.
• The reliability of the system, which crosses three major earthquakes faults, could be cut off to San Francisco and other communities in the SFPUC service area for up to 60 days.  SFPUC's delay has jeopardized the safety and reliability of the system.
• The work necessary to restore the regional water system depends on the willingness of San Francisco voters to approve the bond issues to raise the necessary capital.  The residents of "outside" communities will play no role in that process even though, if and when the bonds are issued, they will be expected to pay about two-thirds of the cost.
• Without a voice in the governance of the system, residents of neighboring communities will nevertheless be asked to shoulder the largest share of the cost burden.
• To date, the SFPUC has failed to properly manage the system and all ratepayers will suffer as a result.
• The fact that this municipal water department mainly sells water to customers to whom it is not directly accountable politically makes for several governance challenges and opportunities.
• In Oct. 2000, San Francisco supervisors voted against a plan to use surplus electricity sales from the Hetch-Hetchy system to finance the renovation of the water system, thus the benefits of power sales accrue only to San Francisco and not to the system as a whole.

Resolution was carried out under the direction of UCLA faculty entitled "Water Governance in the San Francisco Bay Area:  Challenges and Opportunities."

The problems that beset the SFPUC's stewardship of the regional water system will not be solved without significant reform in how the system is governed.   The study proposes two alternative governance structures:

• A Joint Powers Authority (JPA) comprised of San Francisco and all neighboring communities served by the regional water system.   SFPUC could form a JPA, typically governed by a board of representatives of the participating organizations to form a new organization sharing specific elements of the authority.
    
  
• One potential advantage would be an improved funding structure for maintenance and expansion
• Another is that participating customers would have greater direct influence over the water system planning and operations in their service areas.


• A Special District governed by an elected board.  Most retail water agencies in California are special districts.  They tend to have tax and bonding authority and exclusive legal authority for their operations, as the state law authorizing their formation.  An advantage for the SFPUC service area is that these elected directors would have direct control over operations, planning, and financing; that is; the authority of the citizens of San Francisco would be extended to citizens throughout the service area.

Note:  The SFPUC and the City/County of San Francisco chose not to participate in any fashion, including personal interviews.  Therefore, this report lacks any SFPUC advice on the merits of alternative reform strategies.

Discussion of a consortium of water management agencies:  The Bay Area Water Users Association (BAWUA) is an important wholesale customer, representing 29 cities, water districts and other agencies in San Mateo, Santa Clara and Alameda Counties that buy all or some of their water wholesale from the City/County of San Francisco.

In Summary:  The following conditions argue in favor of reform

• System upgrades and repair are currently severely under funded.
• The SFPUC has many undesirable characteristics of an unregulated monopoly, lacking either political or regulatory oversight for its service to the great majority of its customers.  These are not merely local issues.
• The State of California has a legitimate interest in ensuring that this major regional water system - distributor to about half of the state's second-largest metropolitan region - is dependable, efficient, responsive, and accountable to users.
• Inadequate projection of future water demand.
• The persistent need for alternative sources of water given drought or disaster.
• The auditor was concerned specifically about the lack of a formally adopted plan for projects and their financing.

The need for peak demand capacity is and will continue to be driven by non-San Francisco-based customers who represent the majority of anticipated growth in the service population (presently, the San Francisco Customers pay about $750,000; the BAWUA cost is $1.7 million).  There is no transparent incentive for the SFPUC to provide better or cheaper service to non-San Francisco based customers.   Since these cities, water districts, and their residents have no direct representation in system governance, they cannot directly affect San Francisco electoral politics.

Governance reforms that better support long-term planning and finance are in the interest of all SPFUC customers, and to the state of California.  There are enough severe water issues without stakeholders working against each other.   All involve risks from the inadequately maintained and planned distribution network for an essential commodity.   In addition, wholesale customers are frustrated with their dependence on an unregulated provider over which they have no direct political or economic influence.  From their perspective, the system lacks political accountability and is unresponsive to routine, legitimate customer concerns.   Each concern appears both reasonable and attributable, at least in part, to the current governance structure.