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By Tina Richards
The anticipated decision regarding the future operator of the Area 7 sewer system – East Orange County Water District or Irvine Ranch Water District -- has been postponed until April.
It is up to the Local Agency Formation Commission (Lafco) to select an operator for the North Tustin/El Modena area system, but its decision has been delayed almost a year by an ever-changing game plan, incomplete applications, and a maze of bureaucracy.
During the Dec. 9 Lafco meeting, commissioners were slated to rule on the viability of East Orange County Water District (EOCWD) as the operator, because its application was the only completed document at that time.
The Irvine Ranch Water District’s (IRWD) application was missing county approval to re ceive property taxes, in the event it was Lafco’s selection. The property tax transfer could not be addressed until IRWD reached an agreement with county sanitation concerning the destination of waste flows from Area 7. To date, most of those flows end up at the county’s water reclamation facility. A small portion goes to IRWD’s recycling facility, and county authorities want to ensure that the status quo is continued.
Change of plans
EOCWD had already reached a flow agreement with county sanitation, and had received supervisors’ approval for a property tax transfer. EOCWD, however, made a last-minute change to its completed application, bringing the Lafco deliberations to a halt. East Orange amended its application to include a 50 percent rate cut for users, to match the cost structure that IRWD offered. EOCWD had previously offered a 10 percent rate cut to avoid issuing a bond to make up the shortfall. IRWD’s 50 percent rate cut would come with bond debt for future users. EOCWD’s “pay as you go” structure appealed to many Area 7 customers because ratepayers would be levied about 20 cents more per day, but face no debt down the road.
EOCWD’s new plan creates bond debt. “We proposed it so we could meet IRWD’s 50 percent cut,” said Lisa Ohlund, EOCWD general manager. “When you put our proposal side by side with IRWD’s, the main difference is the rate structure, and that’s what everyone focused on. Our annual operating budget is actually lower than IRWD’s, but the perception is we cost more. We think we are the best choice for Area 7 and don’t want to lose out because of an incidental rate difference.”
The commissioners were not happy with EOCWD’s last-minute rate plan. “Is there an end to this?” Commissioner County Supervisor Todd Spitzer asked. “When are the parties done?” He did note, however, that Lafco had brought this on itself by not imposing a timeline or setting ground rules. “We kept the door open,” he said.
A two-way cheat
Commissioner John Withers, who is also an IRWD board member, recommended rejecting the new data from EOCWD. “It feels like East Orange is cheating,” he said. “It violates good faith. Changing components is not good public policy.”
The irony of Withers’ “cheating” charge is that EOCWD’s application for Area 7 was submitted and made public a full year before IRWD’s. IRWD had the benefit of reviewing its competitor’s application as it prepared its own.
Cheating aside, Lafco staff has reviewed both (complete and incomplete) applications, and is recommending that commissioners select IRWD. Its choice is based on IRWD’s experience with sewers, its resources and economies of scale. The cities of Orange, Tustin, Villa Park and the Foothill Communities Association support EOCWD, as do many Area 7 residents. East Orange supporters cite its lack of debt, proximity to Area 7 (its water service overlaps it) and the value of “local control” (EOCWD is located in Orange, its board members are neighbors).
Stack the deck
Although the agenda for that Lafco meeting was ostensibly to evaluate EOCWD, it was more about the perceived superiority of IRWD. The staff presentation tempered EOCWD’s strengths (faster response time, no debt or unfunded liability, geographic advantage, community support) with an analysis that favored IRWD’s size, training and experience at every turn. Following public comments from supporters of both districts, and a lengthy discussion of East Orange’s amended rate plan, the timeline for IRWD’s negotiations with county sanitation, and
the seemingly endless process Lafco had enabled, Chairman Derek McGregor motioned to accept staff’s recommendation. There was no second. Withers motioned to continue without accepting EOCWD’s amendments, but withdrew it after a plea from Spitzer. “We’re letting IRWD catch up,” the third district supervisor said. “How will the story unfold if we don’t allow East Orange to be competitive?”
Commissioner Allen Bernstein, a Tustin resident, motioned to continue the discussion at a future meeting, allowing IRWD to finish its application and accepting EOCWD’s new rate plan, but considering no new data from now on. The motion passed.
The future meeting will likely be in April.