Craig Schmidt for EID - article
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Schmidt - article
Schmidt for EID,
League of Women Voters lists Schmidt
Posted: January 16, 2017
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ONE MINUTE NEWS
EID's New Water and Sewer Rates for 2017 and 2018. At EID's December 2016 board meeting, the board decided to go with a 3% vs 5% water and sewer rate increase for 2017 and 3% vs 4% increase in 2018. This is a 2% decrease and 1% decrease in the planned 5% and 4% water and sewer rate increases for 2017 and 2018, respectively. The fact that over 70% of EID's division 3 constituents voted for "change" and 65% of EID's division 1 constituents voted again for Alan Day (i.e. lower rate proponent) sent a strong message to this Board that they need to start listening to ratepayers or they will not be reelected. Thanks again for all of your support and encouragement these past years. We did make a difference together!
November 2016: At EID's November 2016 board meeting the board heard arguments for/against raising water and sewer rates 5% in 2017 and 4% in 2018. Consensus was not reached so the decision (i.e. vote) was moved to the December 2016 meeting.
October 2016: Please see Dawn Hodson's excellent articles in the Mt. Democrat entitled "EID to discuss budget, financial plan" and "EID OKs hydroelectric project" from October 21, 2016 and October 28, 2016, respectively. Simply click on the links above or check your Mt. Democrat newspaper on these dates. Thank you!
September 2016: At EID's September board meetings the board unanimously voted to convert $110,705,000 in variable rate debt to fixed rate debt (3% to 3.3%). EID believes this will eliminate $1.1M in operating expenses each year (i.e. when interest rates begin to rise). Then, Director Greg Prada provided more insights into EID's unfunded pension/healthcare liabilities. Prada estimated EID's unfunded (CalPers) liabilities have grown by $21 million over the past three years. He estimated that the district's debt obligation to CalPers is now $100M to $120M versus CalPers official debt projection of $49.5M. This is mainly due to overzealous financial return projections by CalPers (7.65% projected vs 2.4% achieved). He likened this to a "tidal wave" coming at the district. Director Coco suggested that a 15% rate hike would be needed for the next 15 years just to cover EID's unfunded pension/healthcare liabilities let alone all of the other items listed below (see "Elephant in the Room"). Acting General Manager Tom Cumpston added that EID's unfunded retiree medical care liability (debt) was another $19.8M as of July 1, 2015. Cumpston noted, but did not recommend, that if EID wanted to pull out of the CalPers program it would cost the district $147M to $194M immediately to cover the benefits already owed to EID employees/executives. Irrespective of who's numbers you wish to believe ($70M, $100M or $200M) the magnitude of this issue is staggering particularly when coupled with EID's other financial challenges (see below). For more information, please see Mt. Democrat, page A1, September 14, 2016 (click here).
August: 2016: At EID’s August 8, 2016 Board meeting there were two key topics discussed: EID's Q2 financials and the "Elephant in the Room". On EID's Q2 financials, actual revenues were up $1.2M over budgeted revenues ($41.1 vs $39.9M) mainly due to more housing starts (i.e. new meter connection fees). However, EID’s bread & butter (i.e. water sales) were down. Actual expenses were $2.5M lower than budget ($20.2M vs $22.7M) but expected to increase. EID’s total cash balance grew $5.1M to $91M for the first half of 2016. Good news!
Then, Director Dale Coco bravely addressed the “Elephant in the Room” (i.e. EID’s financial challenges). While all appears good on the surface (see above), EID faces some significant financial challenges that could cause our rates to skyrocket if not properly addressed. These include approximately $400 million in bond debt (i.e. $10,000 per rate payer), a $200M backlog in capital improvements (i.e. new pipes, pumps, dam repairs, etc), $50-$100 million in unfunded liabilities for employee/executive pensions and healthcare benefits, $15-$20 million in FERC obligations (i.e. recreation, lake monitoring, etc), $5 million more per year to cover the increasing cost of power ($25M over 5 years), 2% more to cover the rising costs of materials (i.e. inflation), $180 million more to fund future EID expansion, and unknown amounts to cover the rising cost of ongoing maintenance. Plus, another 3% a year to cover the rising costs of construction. Since EID's total revenues are only $80M per year, this challenge is significant. Based upon the size of the elephant, EID's Board decided no rate decreases this quarter.
June/July 2016: At EID's Jun 27, 2016 Board meeting, on another 3-2 vote (i.e. Dir. George, Osborne and Coco voted "yes", Dir. Prada and Day voted "no"), the board approved taking on $57 million more debt in the form of Certificates of Participation (COP). COPs function like tax-exempt municipal bonds. That brings EID's debt to approximately $392.6 million. That is almost 5 times revenues ($80M). Add in $50 million more in unfunded pension liabilities (see above) and EID is now carrying over $440 million in debt (i.e. 5 1/2 times revenue). Remember when you purchased your first home? The general rule of thumb was that you could get a loan for about three (3) times your income. If you made $80,000 per year, you could get a loan for $240K-$250K (3 to 1 ratio). EID's ratio is now 5 1/2 to 1 ($80M to $440M) headed towards 6 to 1 as employee/executive unfunded pension liabilities continue to grow. How is EID going to pay for this? Answer: You are! Quick math: $440M debt / 40K ratepayers = $11,000 each (debt).
May 2016: 1. At EID’s May 9, 2016 Board meeting, there were three keys topics discussed. First, the Board voted to end EID's Drought Declaration as most/all of our lakes and reservoirs are overflowing. All watering day restrictions are now lifted BUT some watering restrictions still remain in effect. Those include prohibiting the watering of lawns in a way that causes runoff, using non-recirculated water in a fountain or other decorative water feature, watering within 48 hours of precipitation, hosing off sidewalks and driveways, washing automobiles with hoses that do not have a shut-off nozzle, and the use of potable water to irrigate turf in street medians. Second, EID reviewed its 1st Quarter financial results. EID summarized everything as revenues and expenses were approximately flat as compared to Q1 2015... so all rate increases will remain in effect. Third, EID reviewed its employee pension and benefit (P&B) obligations. It was revealed that the average total P&B per employee is now $33,856 per year plus salary. See Board Packet (BP) May 9, 2016, www.eid.org, p. 122. It was also revealed that EID is in the hole to CalPERS (pension plan) $8.85M (i.e. 18.943% of $46,727,501, see BP, p. 125-126) called "unfunded liabilities". In addition, EID's retired health care (OPEB) unfunded liabilities are $6.1M (See BP, p. 136) plus unfunded acturial accrued liabilities (UAAL) are $19.8M (see BP, p. 137). That's over $37.75M in unfunded liabilities (i.e. debt) and going up. The Mt. Democrat (5/18/16) had a very good article on this topic by clicking here.
Mar-Apr: 1. At EID’s March 28, 2016 Board meeting and again reconfirmed at its April 11th meeting, the Board voted 3-2 to end EID's Emergency Drought Declaration ("EDD") in favor of reducing it to a Stage 2 Water Warning ("S2WW") pending further action by the State of California. 2. EID reported that single family residences conserved 19.28% in 2016 (YTD) as compared to 2013. Small farms have conserved 45.20%. Recreation & Turf have conserved 34.47%. Year-to-Date overall conservation is 29%. 3. EID reported they are in contract negotiations with the US Bureau of Reclamation (USBR) to secure an additional 8,500 acre-feet of water (17,000 a/f in total) for the County's use through 2030. The USBR should make their decision by the end of July.
Jan-Feb: 1. After raising rates on residential customers 20% over the next five years (February 1, 2016 thru 2020) and up to 60% on small farmers, with some prodding from 100+ meeting attendees, EID's Board agreed to perform quarterly budget reviews to determine when/if these rate increases can/could be reduced. It is estimated these rate increases will cost ratepayers $9.3M over the next five years. 3. Then, almost simultaneously, Directors Bill George, George Osborne and Dr. Dale Coco voted to raise Jim Abercrombie's (General Manager) and Tom Cumpston's (General Counsel) salary + benefits to approximately $290,413 and $270,499, respectively. Directors Greg Prada and Alan Day disagreed. No matter, the motion passed on a 3-2 vote (as usual). 3. Adding insult to injury, EID's finance folks then projected EID's revenues down for Y2016 to $79.8M. That is approximately $1.6M less than EID's actual revenues in Y2015 ($81.4M) . Down revenues, rate increases for all of us, then big salary + benefit increases for EID's executives.
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2016-2020 RATE INCREASES
Late last year, EID mailed all of its customers a Proposition 218 Notice (www.eid.org/home/showdocument?id=5236). EID is required to do this prior to raising your water or sewer rates. If the majority of customers do not object to these changes (i.e. mail EID a protest leter) then EID has the go-ahead to raise your rates. EID's Board of Directors voted 3-2 to raise your rates anywhere from 20%-60% between 2016-2020 depending upon your rate class (i.e. residence, small farmer, etc). Everyone will get annual water rate increases of 5%, 5%, 4%, 3% and 3% (21.6% cumulative). Small farmers will get "one time" 40% change of rate structure increase immediately (i.e. Tier 2 change) plus the annual water rate increases of 5%, 5%, 4% 3% and 3% for each of the next five years. The directors that voted "yes" to raising rates were Bill George (Div. 3), George Osborne (Div. 1) and Dr. Dale Coco (Div. 4). They believe that rate increases are necessary to maintain EID's infrastructure. The directors that voted "no" on raising rates were Greg Prada (Div 2.) and Alan Day (Div. 5). They believe that EID's rate increases should be limited to 0% by reducing EID's expenses (e.g. executive salaries & benefits) and delaying some infrastructure projects. It's a tough call.
If you multiply the average monthly rate increases (see P218 notice) for each service (e.g. water, sewer and recycled water ) * 12 months * the number of customers in each class * five years, rate increases for EID customers = $9,308,332 (approx.) out of your pocket. Adding insult-to-injury is the fact the some districts include a "ballot" with their P218 notices to encourage customers to vote. Not EID. No ballot. No protest letter examples. Just $9M in rate increases for us and merit increases for EID's executives!
While we believe that EID's general water and sewer rate increases and staff’s Tier 2 farm proposal have some merit, until EID can prove to us that its current proposal 1) meetsArticle XIIID of the California Constitution, and 2) shows good cause to overturn the COS committee’s final recommendations, 3) stops burying items of this magnitude on pages 254-255 of a 370 page Board packet, and 4) unbundles the Tier 2-3 rate change from the general water rate increases, we cannot support EID's rate increases.
We need to band together to save our county’s way of life. Thank you!
1. Vote for "Craig A. Schmidt" for EID Board director (Div. 3) on November 8, 2016.
2. Join our new Facebook group: FixEID (click here) & SHARE.
3. Tell you friends/neighbors to visit www.FixEID.com
4. Submit a "Letter to the Editor" to our local publications expressing your views. URLs below. It's easy!
Make your voice heard!
Craig A. Schmidt
Candidate: EID Board, Div. 3
Bachelor of Science, Computer Science (CSUC)
Masters of Business Administration (SDSU)
Masters credits (NRO), Engineering (Stanford).
Although we did not succeed in our bid for a seat on EID's board of directors, we did have a major impact on the election. Over 70% of EID's division 3 constituents voted for "change" voting for either Michael Raffety or me. After being on EID's board for 13 years, the incumbent received less than 30% of the vote. That's unheard of in this County. But, times are changing... Folks are tired of EID's 1) Rubber-stamp spending, 2) Rate increase after rate increase, 3) Rising executive salaries and 4) Rapidly increasing debt (4 R's). See the "One Minute News" below.
I want to sincerely "thank" all of you for your support and encouragement. I also want to wish Michael the "best" as our new EID division 3 representative and "thank" Bill George for his 13 years of service to the community. As a first-time candidate I was proud to represent your interests in this year's election. We did make a difference together!
Best wishes, Craig
Original Message from Craig A. Schmidt - Candidate for EID Board, Div. 3
After a lot of encouragement from many of you, I have decided to run for El Dorado Irrigation District's (EID) board of directors (Div. 3) on November 8, 2016. Division 3, population 24,317, encompasses Placerville, Rescue, Gold Hill, Lotus, Coloma, Swansboro, Mosquito and the northern portion of El Dorado Hills, CA. As a fiscal conservative, I know that we all need water at affordable prices (i.e. republicans, democrats, independents, etc). I will work diligently to control rates, keep our water supply safe and curb unnecessary spending. Click here for news release.
During the past four years I have attended the majority of EID's board meetings as your advocate. Countless times I have seen 3-2 decisions in favor of EID’s interests or "big money" versus the interests of residents, business owners and farmers. Today, EID is almost $400 million in debt (i.e. $10,000 per ratepayer), has $50-$100 million more in unfunded pension/medical liabilities, has a $200 million backlog in capital improvement projects, has $15-$20 million more in FERC obligations and this board, on another 3-2 vote by Directors Bill George, George Osborne and Dale Coco, just gave EID's top executives salary and benefit increases to approximately $298,000 and $277,000, respectively ( click here ). Folks are tired of EID's 1) Rubber-stamp spending, 2) Rate increase after rate increase, 3) Rising executive salaries and 4) Rapidly increasing debt (4 R's).
As a business owner and past senior executive for three successful start-ups and two Fortune 500 companies (HP and CA Technologies), I know what it’s like to listen to many diverse views, balance budgets and make tough decisions. Based on my business background and experiences, I will put ratepayers first. Let the people decide our water future, not big money!
I would be honored to receive your VOTE on November 8, 2016. Thank you!
Craig A. Schmidt
Candidate: EID Board, Division 3 (map)
Putting ratepayers first!
Committee to Elect Craig Schmidt for EID Board 2016
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