FPUD, RMWD consider merger of districts

The boards of trustees for both Fallbrook Public Utility District (FPUD) and Rainbow Municipal Water District (RMWD) have discussed the possibility of merging the two water districts as a way to combat ever-increasing water costs at their respective board meetings held earlier this week.

“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 preliminary research 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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14 Responses to "FPUD, RMWD consider merger of districts"

  1. Avo Farmer   April 26, 2012 at 3:49 pm

    I’m all for them studying this consolidation proposal. I had a discussion with Kieth, FPUD ex-GM, a few years ago and he didn’t think it a wise idea because he thought the FPUD ratepayers would be unfairly paying for RMWD’s repairs to an older water system. It sounds like they have figured a way to keep things equitable. I don’t agree with Archie’s objections to FPUD spending the few thousands of dollars on a study to see if this can fly. Archie sounds penny wise but dollar foolish on this one.

    Reply
  2. Al Grams   April 26, 2012 at 5:04 pm

    Encouraging news, hopefully the districts can accomodate each others interest and provide their clients wth a more cost effective and efficient water supply. Good news

    Reply
  3. Fallbrook Resident Since 86   April 27, 2012 at 10:20 am

    I’m somewhat jaded with respect to anything FPUD does………

    no matter what we always end up with higher rates.

    Reply
  4. Lefty   April 29, 2012 at 4:32 pm

    Don’t be fooled Fallbrook. You will still get the increases in your water bill thats not up to FPUD or RMWD. If cost goes up for them to buy it, then they have to pass it to us. Rancho water is also raising there water soon. This is just an idea so the big wigs can sound smart so they can get there raises. It means layoffs and not enough of the little guys to fix things in our neighborhoods. We need these men and women. Let some of theses people retire and don’t fill there postions but Fallbrook can’t afford to lose the men and women that matter. Sounds like the new GM was brought in for one purpose only. To try and merg the districts, then sit back while we all pay for his retirement. Who’s really winning.

    Reply
  5. Barney   April 30, 2012 at 1:17 pm

    Have yet to see a merger of type result in lower costs to the consumer. Anyone remember the hype of Fallbrook Sanitation District merging with FPUD and how much "cheaper" it’d be? Hmmm… Instead the sewer rates more than tripled in the first few years after the merger. Can’t see where this will be any different. Just say "no"…

    Reply
  6. Huh?   May 1, 2012 at 7:08 am

    Wow, how anyone can read anything bad into this is beyond me. Sounds like a good idea that could be expanded into other areas of local government. Study away; then implement!

    Reply
  7. oldtimer   May 2, 2012 at 8:53 am

    Whoa ! Does anyone know anything about what the proposed "consolidation" would entail ? What would it mean to the ratepayers of each district? Why the lack of information about the options? There are, or should be, options. How about FPUD’s enormous debt compared to Rainbow’s ? FPUD is much larger. What chance would projects important to rural water users have with urban Fallbrook in control? Sharing resources is a good idea which needs to be explored. Consolidation would dissolve both districts and if it did not work well, would be irreversible. Another option is Joint Powers, which might have the benefits of consolidation without the obvious drawbacks. Why aren’t the possibilities b ring put forth? Is is so that it can go down before anyone knows what’s happening and can’t ask questions ? Are we being well served or treated like mushrooms:kept in the dark and covered with "growing medium" ? Just wondering.

    Reply
  8. thirsty   May 2, 2012 at 10:27 am

    I’m confuse, if the bulf of their expenses is water cost, then how come I pay $6 a month for water usage and $46 a month for operations charges?

    Reply
  9. thirsty   May 2, 2012 at 10:28 am

    oops, I meant "bulk"

    Reply
  10. Huh?   May 2, 2012 at 6:26 pm

    Oldtimer, boy, talk about "Whoa"!

    Unless you have inside information not availible in the story it sounds like you are getting ahead of the herd. "Does anyone know anything about what the proposed ‘consolidation’ would entail?" No, that’s why they are proposing to study the issue and present the facts to the people we vote into the office, and then let them decide. The story says they are also looking at the Joint Powers deal too.

    Maybe it would behoove us all to wait and see what the research says before taking sides.

    Reply
  11. oldtimer   May 2, 2012 at 9:27 pm

    First, my error in line 6. Not b ring, being.

    Barney: I agree with your first statement. Just say "no" is probably not an option. The goal seems to be to get it done before anyone knows what’s happening…and to avoid a public vote at all costs.

    Huh?: What evidence is there of any kind of study ? Why did Valley Center and Yuima drop out of the consolidation talks ? What are the savings versus the costs of merger ?

    Lefty: You are right about the water costs. According to what has been printed about him, the new GM is a merge-and-move-on specialist.

    Reply
  12. Mark Robak   May 4, 2012 at 3:52 pm

    I applaud what Fallbrook Public Utility District and Rainbow Municipal Water District are doing. With 24 water districts in San Diego County, hopefully even more water districts will form ad-hoc commitees then and undertake full-scale feasibility studies.

    Reply
  13. my two cents   May 5, 2012 at 12:25 pm

    Re: oldtimer – If the goal is to get it done before anyone knows what’s happening they are doing a very bad job of it, holding public meetings and discussing it in a public newspaper. How DARE they! … Not exactly subtle.

    And the public already voted… that is how the Board members get on the Board. Now, lets let get out of the way and them do their job.

    Reply
  14. oldtimer   May 5, 2012 at 1:34 pm

    Is it a full scale feasibility study ? The material both districts have made public is just so much eye wash and no real information.

    Reply

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