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Fallbrook, Rainbow could lower water bills by leaving San Diego wholesaler

Farmers and other ratepayers in Fallbrook and Rainbow could see an average saving on their water bills of more than $20 a month by joining the Eastern Municipal Water District in Riverside County, according to a new report.

However, the move may increase the cost of water for other San Diegans by more than $2 a month on average, according to the findings from the Local Agency Formation Commission, or LAFCO.

The San Diego County Water Authority has been hostile to the idea of losing two of its 24 member agencies. The wholesaler has seen its water sales plummet by more than 40 percent since 2007, largely as a result of unanticipated drought conservation.

Amid declining revenue, the agency has had to more than double its rates to cover myriad fixed costs, from debt payments on reservoir, canal and other infrastructure projects to painstakingly negotiated long-term contracts for water.

“LAFCO proposes that everyone else in San Diego County pay more so Rainbow and Fallbrook customers can supposedly save $20 a month,” the water authority said in a statement. “This isn’t a defensible or sustainable way to set policy for our most important natural resource.”

Water managers in Fallbrook and Rainbow have been trying to cut ties for a couple years with the water authority. They’ve argued the agency’s soaring rates — driven in part by an increasingly expensive desalination plant in Carlsbad — have crushed their agricultural sectors.

Tensions rose last winter when the wholesaler proposed building a $5 billion pipeline through the Anza-Borrego desert to transport Colorado River water. Proponents said it could save ratepayers billions of dollars by the end of the century. Detractors called it a potential boondoggle.

The water authority’s aggressive efforts to shield residents from mandatory drought cuts aren’t worth the cost for many rural ratepayers, said Tom Kennedy, general manager of the Rainbow Municipal Water District.

“When you consider an urban area with biotech and tourism and high-density communities, their relationship between price and reliability is different than farmers,” he said. “If you’ve gone out of business because the cost of water is too high, then it doesn’t make a difference how reliable that water is.”

The San Diego County Farm Bureau has declined to take a stance, saying its constituents are divided over the issue.

“We have members that are passionate on both sides of this,” said bureau President Mary Matava.

LAFCO is currently drafting the terms by which Rainbow and Fallbrook could leave the water authority to join Eastern. To help offset any impacts to the water authority’s remaining ratepayers, the agency has proposed an “exit fee” of about $63 million over five years. Neither side was pleased with the number.

Meanwhile, many local officials have expressed concern about the ripple effects of losing the two North County agencies.

“What’s clear is that detachment will have a considerable impact to the region,” said Nick Serrano, deputy chief of staff to San Diego Mayor Todd Gloria. “Ultimately, the city’s position will be about what is in the best interest of the people of San Diego.”

However, Fallbrook and Rainbow aren’t the only agencies looking to ratchet down their purchases from the water authority. Recycling projects such as San Diego’s Pure Water, as well as similar efforts in East County and Oceanside, will also mean declining revenue for the wholesaler.

While the water authority could lose roughly 20,000 acre feet a year if Fallbrook and Rainbow join Eastern, its sales are expected to drop by as much as 60,000 acre feet a year over the next decade as a result of local recycling efforts. (An acre foot is enough water to cover an acre a foot deep or 325,851 gallons.)

The water authority is projected to lose nearly $100,000 in revenue for every lost acre foot, according to a recent analysis by longtime environmental economist Michael Hanemann, who called the situation “quite serious.”

Charging the North County agencies an exit fee in order to stop buying supplies from the water authority seems like a double standard to Jack Bebee, general manager of the Fallbrook Public Utility District.

“What LAFCO has proposed is essentially making us make everyone else whole for a period of five years,” he said. “It’s something no other agency has when they develop their own water supplies and roll off the water authority.”

LAFCO’s 13-member commission, currently chaired by county Supervisor Jim Desmond, is expected to vote on the issue in February. Its decision could be subject to legal challenges, particularly from the water authority. The issue would ultimately require a public vote in Fallbrook’s and Rainbow’s service territories.