HomeMy WebLinkAbout1999-03-09; Municipal Water District; 435; Metropolitan Water District's Governance Issues- PbK
CARLSBHD MUNICIPAL WATER DISTRICT - AGENDA BILL
AB# 43s TITLE: DEPT. HD.
MTG. 03/09/99 UPDATE ON METROPOLITAN WATER
DISTRICT’S GOVERNANCE ISSUES
DEPT. CMWD
RECOMMENDED ACTION:
This item is an informational update. There is no staff recommendation.
ITEM EXPLANATION:
This item is to update the Board on issues related to the Metropolitan Water District’s
governance and strategic vision concerning Metropolitan’s future role as a water provider.
These issues and possible solutions will affect the County Water Authority and, as a result, the
Carlsbad Municipal Water District.
I
FISCAL IMPACT:
This is an informational item and there is no fiscal impact.
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San Diego County
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March 9, 1999
Table of Contents
I. Overview of MWD Preliminary Visions
II. Comments on Draft Situational Analysis
SDCWA Adopted Policy Principles regarding
Metropolitan’s Strategic Plan
III. California Research Bureau Report -- “The Governance
of the Metropolitan Water District of Southern
California: An Overview of the Issues”
August 1998 by Dennis E. O’Connor
IV California Research Bureau Report -I “The Governance
of the Metropolitan Water District of Southern
California: Options for Change”
December 1998 by Dennis E. O’Connor
V Presentation Overheads
Section 1
Section 2
Section 3
Section 4
Section 5
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Sun Dje - - ..I - 1 ,I .-
I - -~ -Igo County Water Authorrty
A Public Agency
3211 Fifth Avenue l San Diego, California 92103-5718
(619) 682-4100 FAX (619) 297-0511
October 30, 1998
David M. Howe
PricewaterhouseCoopers
1001 Fourth Avenue Plaza
Suite 4200
Seattle, WA 98 154
Bv fax: 206-386-8107
Mr. Howe:
As you know, the San Diego County Water Authority is quite interested in the
strategic planning process under way at the Metropolitan Water District. Several of our
MWD delegates have attended the two Strategic Visioning Process workshops held thus
far for the MWD board. Authority staff also has attended the workshops and monitored
other developments related to the planning process, enabling us to keep our entire Board
of Directors up to date about these important proceedings.
As part of our monitoring, we reviewed the three draft white papers released by
MWD - the situation analysis, utility trends and policy issues. We welcome the
opportunity offered by MWD to comment on the white papers, and have chosen to focus
our remarks on the situation analysis.
In general, the situation analysis is disappointing. It reads more like a public
relations piece for MWD than a neutral, insightful analysis of the district’s situation. It
appears to be based on the notion that the status quo is working well for the most part. It
unquestioningly promotes certain points of view and often fails to include dissenting
perspectives. Furthermore, neither MWD’s mission statement nor its enabling legislation
is mentioned. If MWD is working toward a new mission statement, it must build from its
foundations, as adopted by its board and the State Legislature.
The analysis refers several times to MWD as the regional water planner - “the
manager of all water” for the region. This is not the case, nor is it reflected in MWD’s
enabling legislation or mission statement. For example, MWD does not manage the water
that Los Angeles brings into the region from the Owens Valley or groundwater in Orange
County. The document also states that the Integrated Resources Plan vests MWD with
“the responsibility of managing all of the region’s water, both imported and local
MEMBER AGENCIES
CITIES IRRIGATION DlSTRlCTS WATER DISTRICTS MUNIUPAL WATER DISTRICTS * De, hIor . frxmd,do * Na,mnal cq - sonto Fe * South Pay * Hdl. * 01.” . Corkbad * lkwnon.
. O<.onltde * PCWD” . Son Dmgo . “8WcJ * son Dlegwto . clllrenholn f rtm<m de, DMJblo * ‘,dec,rol * Pdrc cmm - “de” C.n,cr
COUNTY * Rolnbow . ““ulrncl
. San Dqo PUBLIC UTILITY DISTRICT FEDERAL AGENCY (C. o‘hcm * Follbrook . P.“dlwa” Mhlary Rererv~lmn
_, -
Comments on drafi siti. n analysis
Page 2
sources.” Actually, the IRP calls on the member agencies to work cooperatively with
MWD toward integrated planning of water resources for the entire region’s benefit.
Additionally, the document fails to mention many significant issues that MWD
faces. These issues are appropriate for a situation analysis - they in fact help to define the
situation in which MWD finds itself. For example, the analysis:
l Fails to describe the differences in the quality of water supplied to member
agencies, and the impacts of such differences. For example, member agencies
that receive primarily Colorado River water are affected adversely by the
water’s high salinity. The salinity management study recently released by
MWD documents this problem.
l Does not examine the lack of correlation between MWD’s rate structure and
the connected capacity that the district has built to serve each of its member agencies. Nor does the document question whether the rate structure equitably
reflects the value that member agencies receive. Since the rate structure does
not discourage member agencies from rolling on and off the system, those
agencies with few or no alternative supplies often wind up paying a
disproportionately large share of MWD’s costs, which not necessarily reaping
any benefits during shortages.
l Does not analyze the potential impact of the lack of contracts or commitments
between MWD and its member agencies. MWD has no contractual obligation
to supply water to its member agencies and the member agencies have no
obligation to buy any water from MWD
l Does not question whether MWD’s capital improvement program is timed
properly and built on commitments by the member agencies to pay for the
projects.
The Authority also has several comments about specific items and sections of the
situation analysis. They follow:
The Role of Metropolitan
l The “Forty Years Later” subsection records several “areas of concern among the
regional water community.” One item asserts that developed areas are demanding that
growing areas bear the financial impacts of growth. The Authority suggests that
another concern be added as a follow-up to this item: “Member agencies in growing areas have disproportionately weak preferential rights and voting strength on the
MWD board when compared to the financial impact that the district’s decisions have
on them. Many member agencies believe that representation on the MWD board
should be based on total financial contributions to the district.”
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Comments on drajl sitk .on analysis
Page 3
Colorado River
l This section states that MWD pays 25 cents per acre-foot of Colorado River water,
“plus any costs associated with transporting and treating the water.” These associated
costs are not spelled out, which may leave readers with the impression that member
agencies pay only a small amount for Colorado River water, instead of the $349 we
actually pay for an acre-foot of raw water. In contrast, the State Water Project section
spells out in detail the cost of SWP water - not just the purchase price from the state.
l This section mentions the possibility that California will buy water from other basin
states to avoid future shortages. Interstate transfers are not allowed on the river.
State Water Project
l The note on water quality is too general and needs to be expanded. For example, it
should refer specifically to the problems caused by bromides and THMs.
l This section refers to how SWP water is blended with Colorado River water for the
‘benefit on Southern California consumers. How many MWD member agencies
actually receive the proportional benefits of this blend? San Diego does not, for one,
but it pays the same rate as every other member agency.
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Water Transfers
l This section states that MWD has “leveraged the use of water transfers.” What does
this phrase mean in the context of this section? The section also lists five transfers
that MWD has achieved. Only the first on the list - the Imperial Irrigation District
Conservation Project - actually is a water transfer. The others are conjunctive use
projects.
l This section states, “The extent to which MWD and/or its member agencies manage
the market for water transfers will affect the quality of the relationship between
MWD and member agencies.” Please clarify this statement.
Equitable Allocation of System Costs
l This section discusses the preferred rate structure of different types of communities.
According to the section, a community with no local water supply prefers a rate
structure based on the property tax. This discussion seems extraneous, however, given
that voters are unlikely to vote by the required two-thirds majority to raise,their
property taxes to pay for their water system. Many communities, including San
Diego, seek a rate structure that reflects the fixed costs incurred by MWD to meet
demand. A structure that considers connected capacity to MWD would better reflect
MWD’s fixed costs than that which is now in place.
Governance
l This section concentrates on numbers - how many directors and how should votes be
allocated. These concerns are important, especially the latter, but MWD’s Directors
should agree among themselves on the district’s appropriate role and mission before
they tackle numerical issues. As the California Research Bureau’s recent report on
Comments on dra# sith: 4 analysis
Page 4
MWD governance states, “It is a maxim in organizational theory that form follows
function. This implies that before one can rationally discuss the governance structure
of an organ&&on - that is, its form - one must know what the organization is and is
not supposed to do.” The Bureau report also notes that MWD’s directors, its staff, the
member agencies and external stakeholders do not agree about what MWD should
and should not do. It is premature to focus on the size of the MWD board before the
district reaches consensus on its appropriate role.
Water Allocations Policies
l The subsection on the 1987- 1992 drought lists several actions taken by MWD in
response to water shortages. Two of the items are incorrect. MWD actually reduced
non-firm supplies by 50 percent and fnm supplies by 20 percent in 1991. This section
also should note that MWD’s Board initially voted for a 90 percent reduction in the
delivery of non-fum supplies and a 30 percent decrease in fnm deliveries before the
so-called “March Miracle” rains allowed for smaller, but still significant, cutbacks.
The vote for a 90 percent reduction followed a notice by MWD that it would reduce
non-firm deliveries by 100 percent over a three-year period, which should have
resulted in a maximum non-firm reduction of no more than 33 in percent per year.
Services
l This section states, “As the amount of water and the sources of water grew, so did the
number of services MWD provided to its member agencies.” There is no inherent
connection between the amount and sources of water available and the number of
services provided. (As an aside, MWD’s sources of water have grown from one to
two.)
l This section discusses how MWD’s Local Projects Program helps to make the
regional water supply more reliable. But the section does not mention the one
drawback to the LPP - It facilitates efforts by member agencies to develop local
resources and so roll off the MWD system. This is especially important if MWD
overestimates future demand for its water. Moreover, the section does not examine
whether all of the member agencies get an equitable return on conservation and local
resources funds paid into MWD.
l The “Business Development” subsection notes that people have voiced concerns
about MWD’s Asset Management and Development program. But the subsection
implies that the main problem with the program is that the member agencies and
MWD Directors “remain confused about the need” for it. In reality, many member
agencies and other interested parties question whether it is appropriate for MWD to
pursue business development ventures and whether the member agencies should be
required to help pay for the program. MWD Directors reflected this sentiment at the
first Strategic Visioning Process workshop.
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Shaping Policy
l This section states that “there is a perception among member agencies and
stakeholders in the California water industry that MWD’s political strength is
i
Comments on draJi sib. -on analysis
page 5
waning.” This sentence should be edited to note that MWD Directors hold this same
perception, according to comments at the first two Strategic Visioning Process
workshops. The section goes on to record three “specific issues regarding political
influence.” The Authority recommends the addition of two more points:
l Actions taken by MWD in response to the Authority-IID water transfer proposal.
l More than two years of intransigence by MWD concerning use of the Colorado River Aqueduct to transfer water from IID to the Authority.
l This section also asserts that one reason for MWD’s waning political influence - or
the perception thereof - is the district’s inability to “foster grass-roots support for its
legislative agenda” among ratepayers and water agencies in its service area. The
problem, according to the analysis, is that because of its appointed board of directors
MWD is removed several times from actual water-users. But the section does not
question whether it is appropriate for MWD to attempt to build support among the
ratepayers, who are, after all, the customers of retail agencies, not wholesalers such as
MWD. Nor does it examine why grass-roots support is important now. At one time,
the analysis implies, MWD had great political strength. But it always has been
removed from water-users due to its governance structure. What has changed to make
grass-roots support so crucial to MWD today?
Please contact me at 619-682-4155 if you have any questions or wish to discuss our
comments further. We look forward to further opportunities for involvement in the MWD
strategic planning process.
Sincerely,
Gordon A. Hess
Imported Water Department Director
cc: Water Authority’s MWD delegates, Maureen Stapleton and Roy Wolfe
..-
Sun Diego County Wafer Authority
A Public Pqency
3211 Fifth Avenue l Son Diego, Colifornio 92lO3-57l8
(619) 682-4100 FAX (619) 297-0511
Febnrary8,lQQQ
Mr. Phiflip 3. Pace Chairman ofthe Board Metropolitan Water District of Southern California P.O. Box 54153
LosAngdes,CA 90054453
Dear Phil:
The San Dii County Water Authority Board of Dlmctors has adopted policy principles regarding M&opolitan’s strategic p&n. The policy principles suggest that the Board focus first on the role Metmpollt8n should play in the future to meet member agency needs and then on specific steps Metropolitan should take to 8ssume this role effectively.
The prindples we have adopted state that Metropolkan in the future should:
l Cffer a menu of unbundled products and services from which its member agencies may pick and choose.
l Be one of several suppliirs of imported water to its member agencies.
l Operate major Southern California regional pipelines, other f8clllties and storage
capacity. (Note: The Authority does not believe that all existing Metropolitan pipelines would or should necessarily flt in this category.)
l Advocate regional positions, in conjunction with its member agencies, on such issues as the State Water PNect and CALFED.
l Provide leadership in sclentirfc 8nd technical rese8rch related to water quality.
To accomplish the above, Metropolitan should:
l Quantify and alkx8te, by source, its water supply 8nd related oosts according to
member agency needs and CMnmitmeat h pry. (Note: The Authority believes that the mi8ted Co!& Of the W8ter supply are inextricably finked to the f8dliis necessary to convey them to the MWD service area.)
l Quantlfy and allocate the a%ts and capacity of Metropolitan facilities necessary to convey, store and Ve8t water within its service area, according to member agency rwe&anclcwMnitmenttig
l Provide through cmtracts addttional water supplies, storage, pipeline operations, treatment, conservation programs or other services through contracts with member 8g8ncW or Others, so that those who desire the products or SerViCeS from Metropolitan psw fM jhpm.
CtTlCS - DOI Mu - ‘funded. * woiwd c,* .O.-.hy.*Dry
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tW8tGATtON OtSTIKn WArEa DIJRICIS AwNKtfN WAIC I msmcrs .smnmf*.lu*Dw ‘Mdm.olw ‘Cd#bd - D- * “*Ma .a- * Iiluam ct Dimbh ‘WVRWJ ‘Li :zc-
fuutc urt1tN msratcr FIMIAL AWNCV * fdbrmb * h”htem YI%wvv Dswnmr”
Phillip J. Psc~ Feb~~ry 8,1999 Page 2
As recently pointed out by Director Freeman, the Metropolitan Board has not yet had a discuss&n of the key policy issues surrounding the strategic planning process. Among these issues is, most crktcatly and fundamentally, who will pay for Metropo!itan’~ capital facilities, supplies and other expanse& Until this discussion takes pIace, the Board should not approve ths $175,000 increase in the consultant’s budget reammended by staff, nor should the c~mrultants create new or hybrid ‘visions” from thosa already under consideration.
Please contact me if you have any questions about our comments.
Fmncasca M. Kmuel
cc: Roy Wolfe, David Howe
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An Overview of the Issueii ‘-
By Dennis E. 0 ‘Connor
California Research Bureau
‘11111 N Srreet. Swtr 3011
IJ.0 Ih 912x.37
S.u.urns~~to. CA ‘44137-0001
(‘J I (I) hi.%-7X-13 phone
(91 h) hj-LjH?~ tis
AUGUST1998
CRR98-013
c: A L 1 F 0 R N I A R E S E A R C H B U R E A U
ThetzaMlmliaRncsrch Bureau provides objective,
nonpartisan, timely, and confidential research to
the Governor’s Office, members of both houses
of the Legislature, and other comtitutional officers.
In-depth research reports are prepared on selected
topics that are tbe subject of current or probable
future legislation.
- ‘,,
The Research Bureau also provides specialized
library services from its capitol office, including
reference and bibliographical services, and obtains
books and materials.
The Legislature and the Governor created the
California Research Bureau within the California
State Library in 1991.
The California Research Bureau can be reached
at: www.library.ca.gov
- CRB C&mria Research Bureau, Califonzia State Library
THE G OVERNANCE
OF THE
METROPOLITAN WATER DISTRICT
OF SOUTHERN CALIFORNIA:
AN .OVERVIEW OF THE ISSUES
BY
Dennis E. O’Connor
August 1998
California Research Bureau
California State Library
CRB-98-013
900 N Street, Suite 360
Sacramento, CA 95814
(916) 653-7643
http:l/~ww.library .cagov
Ex.EcmsuMMARY
-
Assembly Member Bruce Thompson asked the California Research Bureau to investigate
the governance of the Metropolitan Water District of Southern California (MWD). This
report presents the results of that investigation.
MWD is the largest water district in California. Through its 27 member agencies, MWD
provides about 60 percent of the water to 16 million people in Los Angeles, Orange,
Riverside, San Bernardino, San Diego, and Ventura counties.
Recently, there has been much interest in the governance of the Metropolitan Water
District of Southern California (MWD). Much of the current interest in MWD’s
governance results from conflicts within MWD, principally between San Diego County
Water Authority (SDCWA) and some, but not all, of MWD’s other member agencies.
. However, while the catalyst for the current conflicts is a proposed water transfer between
SDCWA and the Imperial Irrigation District (IID), the fundamental issues run deeper.
This report contends that much of the current interest in MWD’s governance has focused
on symptoms of problems, and not the sources of the problems. Moreover, there is a
logical hierarchy of issues, which must be addressed in sequence, in order to resolve these
questions about MWD’s governance. Simply stated, before examining the form of
MWD’s governance, one must examine MWD’s functions. That said, the three key issues
explored in this report are:
(1) What is and is not MWD’s job?
(2) Who is best suited to ensure MWD does this job properly?
(3) How should (2) make these decisions?
The report finds that there is no consensus among MWD’s member agencies of what is
and is not MWD’s proper role in providing water to Southern California. Indeed, it is this
lack of common purpose that has led to many of MWD’s internal conflicts.
Considering just (1), there are at least tbree points of contention:
l Should MWD be the sole supplier of supplemental water to Southern California?
l What should MWD’s official rules under the Metropolitan Water District Act be for
allocating water during periods of drought?
l Whose interests should MWD primarily represent - member agencies, retail water
agencies, end users, the taxpayers, or someone else?
Furthermore, despite current efforts by the MWD board to clarify its role, it is not clear
they can reach a consensus. There are many reasons for this assessment. First, the report
shows that member agencies differ greatly - in their size, organizational structure, service
area, dependence upon MWD of water, and rights to MWD water. Second, the report
demonstrates that a number of member agencies benefit from the status quo. Therefore,
California Research Bureau, California State Library
any change in MWD could potentially weaken their clout in MWD decision making or
possibly limit their ability to provide water to their customers during periods of shortages.
Third, the report points out that there are many legitimate questions regarding how
changing or refining MWD’s role would afkct member agency equity and financial
security for MWD. Finally, despite the moderating views of a number board members,
many other board members have very strongly held positions based on their personal
views of fairness and equity. Again, there is no consensus on what is fair or equitable.
In addition, even if the MWD board could resolve these issues itself, it is not clear that it
would do so consistent with the interest of either the local ratepayers or the greater
statewide public. The report describes how the MWD board consists of 5 1
representatives from 27 member agencies. It is difficult to see how such a member agency
driven board would ever conclude that MWD’s principal job is something besides simply
meeting each member agency’s parochial needs. If these larger public interests are
important, then perhaps someone besides the board of directors or MWD staff should
direct the governance resolution process.
Lastly, report concludes that until the conflicting views of what is and is not Mm’s role
are resolved unambiguously, questions such as the size and composition of the MWD
board are premature.
It might well be that in answering these questions, it is found that MWD’s current
governance structure requires just a little fine-tuning. However, it might just as easily be
that such an investigation would lead to a dramatically different governance structure.
The outcome depends at least in part on who is answering the questions, and who is not.
ii California Research Bureau, California State Library
ExEcuTlvEsuMMARY .*.................................................................................................................... i
CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................... ti
INTRODUCTION .................................................................................................................................. 1
THIS REPORT ........................................................................................................................................ 2
RESEARCH APPROACH.. ......................................................................................................................... 2
ORGANIZATION OF REPORT.. ................................................................................................................ .2
OVERVIEW OF MWD’S GOVERNANCE .......................................................................................... 5
MEMBER AGENCIES.. ............................................................................................................................ 5
THE GOVERNANCE DOCUMENTS .......................................................................................................... 14
THE BOARD OF DIRECITORS ................................................................................................................. 15
PREFERENTIAL WATER RIGHTS.. .......................................................................................................... 19
WHAT ARE THE PROBLEMS’, ......................................................................................................... 25
THE ISSUES ........................................................................................................................................ 29
WHAT Is AND Is NOT MWD’s JOB? .................................................................................................... 29
WHO Is BEST SUITED TO ENSURE MWD DOES THIS JOB PROPERLY?. ................................................... 34
How SHOULD THOSE IN CHARGE MAKE DECISIONS?. ........................................................................... 40
CURRENT EFFORTS TO REFORM MWD ...................................................................................... 45
MWD ................................................................................................................................................ 45
CALIFORNIALEGISLATURE.. ................................................................................................................ 46
CONCLUSIONS ................................................................................................................................... 49
APPENDIX: A BRIEF HISTORY OF THE FORMATION OF MWD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
END NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................. 59
California Research Bureau, California State Library . . . 111
INTRODUCTION
The Metropolitan Water District of Southern California (MWD) is the largest water
district in the state. The Legislature originally created MWD in 1927 to provide Colorado
River water to Southern California.* Today, MWD provides about 60 percent of the water
to 16 million people in Los Angeles, Orange, Riverside, San Bernardino, San Diego, and
Ventura counties.
Southern California has changed greatly since MWD incorporated in 1928. The
population has grown nearly seven-fold, an additional 107 cities have incorporated (an
increase of 124 percent), and the region transformed itself from a largely agricultural
economy into a vibrant and diverse manufacturing and services based economy.
MWD’s role in supplying water to Southern California has changed greatly too.
Membership in the district has grown from 13 cities in two counties in 193 1, to 14 cities,
12 Municipal Water Districts, and one County Water Authority in six counties today. The
service population has grown from 1.5 million to over 16 million. In addition to water
from the Colorado River, MWD now delivers water from Northern California via the State
Water Project and water from other areas of the State through various water transfers.
Moreover, MWD now functions not just as a water wholesaler, but as a regional water
resources manager, providing technical assistance and sponsoring water conservation,
groundwater conjunctive use, desalination, and water recycling projects.
While Southern California, its water needs, and MWD’s role in meeting those needs have
changed greatly over the past 70 years, there have been few changes to MWD’s governing
structure. The few substantive changes that have been made to MWD’s governing
structure generally have been reactions to the economic growth of Southern California
instead of changes made in anticipation of future demands.
Today, many people both within and outside of MWD have serious concerns about
MWD’s governance. Some believe MWD’s 5 1 -member board of directors is simply too
large. Others focus on the alleged unethical behavior of some member agencies in their
dealings with each other. Still others believe MWD’s board’s does not focus on critical
regional water issues. There are other concerns as well.
Several California legislators have introduced bills that address various aspects of MWD’s
governance. Indeed, the California Senate was so concerned about some of the
complaints that it established the Senate Select Committee on Southern California Water
Districts’ Expenditures and Governance (Senate Select Committee) to study MWD
governance and other related issues. Also, the MWD board is currently conducting an in-
house evaluation of its governance system.
l For a brief history of the formation of MWD, see Appendix.
California Research Bureau, California State Library
TmsFb3~0RT
Assembly Member Bruce Thompson asked the California Research Bureau to investigate
MWD’s governance. This report presents the results of that investigation.
This report takes the position that much of the current debate has focused on symptoms of
problems, and not the sources of the problems. Moreover, there is a logical hierarchy of
issues, which must be addressed in sequence, in order to resolve these questions about
MWIYs governance. Simply stated, before e xamining the form of MWD’s governance,
there must be an examination of MWD’s functions. That said, the three key issues
explored in this report are:
(1) What is and is not MWD’s job?
(2) Who is best suited to ensure MWD does this job properly?
(3) How should (2) make these decisions?
This report does not attempt to answer (l), (2), or (3). Instead, it presents the current
range of perspectives on these issues and the rationale behind these perspectives.
RESEARCHAPPROACH
The research for this report took a three-pronged approach. First, the author studied the
early beginnings of the MWD. The author read the original newspaper accounts as well as
modem histories of the origins of MWD. The author traced the original legislation from
its introduction through its many iterations. And the author read MWD’s Annual Reports
and its various published histories.
Second, the author has studied the current conflicts with an eye to identifying breakdowns
in MWD’s decision making process. This included reviewing various analyses, reports,
and news accounts of MWD and its problems. In addition, the author has attended, and
testified, at the Senate Select Committee’s investigative hearings.
Third, and perhaps most importantly, the author interviewed many people and observed
MWD’s board in action. The author interviewed about a quarter of MWD’s board
members, along with MWD’s General Manager John R. “Woody” Wodraska, Former
Attorney General John Van de Ramp, who is currently advising the board on governance
issues, and various other interested parties.
ORGANIZATTONOFREPORT
This report is organ&d into six main sections. After this introductory section, the report
continues with an overview of MWD’s current governance structure and processes. Next,
it presents anecdotal evidence of the need to change MWD’s governance structure.
4
2 California Research Bureau, California State Library
In the section titled “The Issues,” the report analyzes MWD’s governance issues and
describes a range of perspectives on the issues. That is, the report looks at the who, what,
when, where and hows of MWD’s governance. First, the report investigates MWD’s
mission - what MWD is and is not supposed to do. Next is a discussion of who should be
in charge of implementing MWD’s mission. Finally, there is a short discussion of how
whoever is in charge should make the necessary decisions.
The following section describes the processes both MWD and the California State
Legislature have initiated to resolve governance issues. In the final main section, the
author draws some conclusions.
In addition, this report includes an appendix, which presents a brief history of the
formation of MWD.
California Research Bureau, California State Library 3
4 California Research Bureau, California State Library
OVERVIEW OF MWD’S GOVERNANCE
MWD provides water wholesale to its member agencies. Each of these member agencies
then delivers water to other wholesale and/or retail customers. In concept, MWD’s
governance structure is designed to ensure MWD meets all of its member agencies’
supplemental water supply needs. To understand the current governance structure, one
must first understand the characteristics of the 27 member agencies and how their needs
might differ from one another. This, then, provides a context for a discussion of MWD’s
governance structure.
This section of the report describes four key aspects of MWD current governance
environment:
1. The member agencies
2. The Metropolitan Water District Act
3. The board of directors
4. Preferential water rights
MEMBER AGENCIES
MWD has 27 member agencies in six counties: Los Angeles, Orange, Riverside, San
Bernardino, San Diego, and Ventura. (See Figure 1.) Each member agency is one of
three types of organizations:
l City (14) - provides mostly retail water service;
l Municipal Water District (12) - provides mostly wholesale water to their own member
agencies; or
l County Water Authority (1) - provides wholesale water to their own member
agencies.
Until the 194Os, MWD was composed solely of cities.’ In 1942, Coastal Municipal Water
District became the first non-city member of MWD. Later, in 1946, San Diego County
Water Authority (SDCWA) joined MWD. The post World War II era saw an increased
level of new annexations into MWD, all of which were municipal water districts.* Finally,
after an eight-year break in annexations, in 1971 the City of San Fernando became the
latest member of MWD. Table 1 lists the member agencies and the year they became
members of MWD.
l The shift from city memberships to municipal water districts was the result of a MWD board policy,
adopted in 1938, limiting annexations to entire groundwater basins or sub-basins. For a good
discussion on the dynamics of MWD’s annexation policies, see Kazuto Oshio, Urban Water
Diplomacy: A Policy History of the Metropolitan Water Supply in the Twentieth Century Southern
California, (Ann Arbor, MI: University Microfilms International, August 1992)
California Research Bureau, California State Library 5
Figure 1:
Metropolitan Water District of Southern CdifOmia
I
I * il
. ’ . . ‘. :
*.
:! .: I * I .* *-r --
i,/*. !-<
I 1 I .: 221 ** +**.; . ..** ._’ c-
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6 California Research Bureau, California State Library
.-
F-2 The Mctropollt8n Water District of Sotlthenl California
I I I I
Municipal Water fllstricts Cdlolpu -
CamI Buin
ChinoBasin
Cd
EAslem
Foxhill Lu Virgena
~PC-W Tha VtilCyl
UppErSMDabriel
Vdlq
W&Basin
WCSIO-II
I
I
I Member citif!s I
Antirn Glmdde San M&lo
Bwdy Hdlr L0nBB-h smo Ana
BurbUlk La Ang,da slnn Mania
Cmpton Prudena T-
FUllam San Femando
I
I I samDiegoc4lllnty Water Author&
I Cities and Sub-agencies Within Chstituent Municipal Water Districts I
CaIJeguas
Buylvmd HeiBhhoMunul WuerCo.
Bnndeir Muoud Was Canpany
Buder Ranch
Cdifania-American WmerCunpany
Cdifania Water SewiceCpntww (fLlusdl Vdly MWD)
City ofCam8rillo
camrota WuerDimic1
Crestview Mucud Water Canpany
Meu wuer ctmlpmy
Naval Air Weapons Swim Point Magu
Newbury Park Audcmy Wafer Co
Chk Park Water Service
City dOmud
PI-1 Vallev Mlaul water co
Pen Huenaw’Wuer A#ency
City 0fSimi Valley
Southern Cdifomi8 Water Canomw
. City afTbarsnndO&s
Triunfo Saniutim Disbia
V.C W W.D No. 1 & 19
ZcmcMuwl WaorCo
Cent& Basin
BdlflOWU
Bell Gardens
Cdifania Water Sewice Co.
CerricoJ
LA Co Watwwxkr Din#IOQ 16
Rancho Lor Amigos Hapial
Depamnent of Public Wcxks
Hunungcar Park
La Habn Heishu County Watu Dist
L&nWOOd
Lynwood
M8ywcmd Mutual Water Co I 1.2. & 3
Mmlcbello
Not-walk Municipal Water Synan
Orchard Dale WaterDitict
PlnmCUlll
Park Water Company
San Gabriel Valley War Co
Smu Fe Spnngr
Stgnd Hill
Scuthem Cahfania Water Canpny
South Gate
Suburban Water System
Vernon
Walnut Park Mutual Wuer Co
Water Replen:shmmtDin. ofS0 Cd
ClJhBacin ChilKl
Chinotillr
cuumonga Carnly wasl Dhia
Fonona Wnn Company
Mm* Vista Cauntv Water Diattict ontuio .
.%a BanadiaoCo. WUCI Waks X 8
Sanhm Cdifmda Edican
.Upland
Wau Ftiliia and Auhaitia
COatid
‘wine l&d! wus Dilnia
lagun~Bach carny WucrLGuia
MaaCmsdidedWa8erDisnin
NcwponeuJl sauhCoutCcunyWucrDisllin
Tfi-CidaMunidpd WaterDistrict Eastern
Edgcmal1GardmrMu!ud wnerco
Hemn
LakeHeme~Munidpal Wucrdirain
Nwo WunCanpany
Penis
B2whoCdifamiaWMerDiraict
San Jacinm Foothill
crccutu Valley county wna Disuia
lACM~Iti@tiOllDiSUiU
Lu Flmr Water Company
Lincdn Avenue WUnCmmnny Mesa crest wul3 company
Rubio Canam Land & Water Auoc
Vdlq Wlpl canplny
MWD of Onnge County
Bm
Buma Pwk
capisl5=l0vll1ey Water District
EJuormgcCoJnly WmtcrDiurin Fsl TmWuerDisuirin
Funmain Valley
GudelGrwe
Huntington Eeacb
lrvine &ch WOaDiruict
La Habn
La Palm8
Lol Aliwx Water Dimnia
Mesa Cmadidwd Water District
Madton Ni@ad WaDimict
ofwe Dmlge Camy wmr Diswin
SanrMqaioWuerDisuia
Santiqo Aqueduct Canmimian
SarhgoCamy WnuDiraia
SealBach
semnolni~m Diuria
Sathem Cdifanin Wafer Canpsny
Tnbuco canvm wucr Dimin
Twin .
Westminster
wenoNyecamlywaaBbwd
YcdlaLindaWm!rDitia The VaIleys BOY 5CCUUdAmtiU
Caiifania Stnte pdylcehnic Univmity
Coviru Gltndm
Lmamul Devdqnnent car
‘AhIlK
ML San Anmnio Jr. Cd@
Pl#llOlll
Rowland WucrDitia
Soulbern Cdifomir Wa Cannanv
wllnutvrl1y WucrDiraicl . ’
Upper San Gabriel Valley
Arcadia
Azuu
Mtnrovil
Scwhem California Water Company
soulh PawJan wax Dep&mcnt
Valley calmy water Diraid
West Covina WestBaSh
Cdifania American Water Caprny
Cdifania WaerSmiceCac.anv
wua Cmltwllial Din
DmtingvoWuerCapontion
El Seyndo
Hmhme
1nglcwcd
Lain
LaAogdaCo. WuaWcrksDisirias
113BW29
Mmbrrun Beach
sanhem Califomil Water Canpany
Western of Riverside Comfy
Bedfad Hci#hhtr Mu&ml Warr Co.
ComU
Er~lcValley Muual WwrCompny I3 SabnnteMutud Ww,rDimict
Elinarc Vally Municipal War Dia
March Air Force BMC
Rvlcbo California Water Diaict
Source: MWD. Annual ReDor?. Los Angeles: MWD. 1995
Cuidmd Municipal Warn Dirnin
DdMu
Escmdido
Fallbmdr Public tilig Diauict
Hdix WnaDisuia
Nadmd City
ck.un*de
Olivehin Muaicipd Water Dir&t
tnay water nmia
Padre Dam Municipal Wua Dimict
Pendiuon Miliuy Rererv*don
PmnY
Jtainhmv Municipal Wua Dimict
RammaMunicipd WaterDiurict
Rinma dd DiabloMunicipal Wun Dit
San Diqlo
smDieguitoWlraDimia
Santa Fe Ini#8tian Disttia
Ruth Bay Iti@m Disnic~
V11leciua w*QI Dimia
Valley CenurMunicipd WacrDisaia
Visn lwi@on Dimin
Yuima Municipal Wuu Disnia
Contracting Agencies .
SlltedCJifrmir
Cacao City Safety &m&i& Rents
VW Junedon
Cachdla Valley WIcrdiwiQ
DaetlW~aA#my
San G&rid Basin Wamr Qudiy Auth
San Gabriel Valley Muniapd War
Disein
California Research Bureau, California State Library 7
Agency
City of Anaheim
Tabk 1
MWDMemberAgendes
I county
Chw3e City of Beverly Hills Los Angeles
City of Burbank Los Angeles
City of Glendale Los Angeles
City of Los Angeles Los Angeles
City of Pasadena Los Angeles
City of San Marino Los Angeles
City of Santa Ana Orange
City of Santa Monica Los Angeles
City of Compton Los Angeles
City of Fullerton @awe
City of Long Beach Los Angeles
City of Torrance Los Angeles
Coastal MWD Orange
San Diego County Water Authority San Diego
West Basin MWD Los Angeles
Three Valleys MWD Los Angeles
Chino Basin MWD San Bernardino
Eastern MWD Riverside
MWD of Orange County Orange
Foothill MWD Los Angeles
Central Basin MWD Los Angeles
Western MWD Riverside
Calleguas M WD Ventura
Las Virgenes MWD Los Angeles
Upper San Gabriel Valley MWD Los Angeles
City of San Fernando Los Angeles
Source: MWD, h4WD Fact Sheet, Los Angeles: MWD, 1998
1 Year Joined MWD
1928
1928
1928
1928
1928
1928
1928
1928
1928
1931
1931
193 I
1931
1942
1946
1948
1950
1950
1951
1951
1953
1954
1954
1960
1960
1963
1971
Member agencies differ in their size - population, service area, and population density.
Generally, cities have smaller populations and service areas and higher population densities
than municipal water districts and county water authorities. (The notable exception is the
City of Los Angeles.) The range in size is large. For example, the service areas of both
the cities of San Marino and San Fernando are less than four square miles each. (See
Table 2.) This compares to Western MWD, Eastern MWD, and MWD of Grange County
(MWDOC) with service areas of over 500 square miles each, and SDCWA with its 1,400
square mile service area.
The cities of San Marino and San Fernando also serve the smallest populations, with
13,254 and 23,410 people respectively. In contrast, the City of Los Angeles, with its 3.7
million population, is 100 times larger than San Marino and San Fernando combined. In
fact, the three most populous member agencies, Los Angeles, SDCWA, and MWDOC
together encompass nearly ‘/z the population of the entire MWD.
8 California Research Bureau, California State Library
-
Table 2
Population, Service Area, and Population Density
Member Agency
City of Anaheim
City of Beverly Hills
City of Burbank
Calleguas MWD
Central Basin MWD
Chino Basin MWD
Coastal MWD
City of Compton
Eastern MWD
Foothill MWD
City of Fullerton
City of Glendale
Las Virgenes MWD
City of Long Beach
City of Los Angeles
MWD of Orange County
City of Pasadena
San Diego County WA
City of San Fernando
City of San Marino
City of Santa Ana
City of Santa Monica
Three Valleys MWD
City of Tort-awe
Upper San Gabriel Valley MWD
West Basin MWD
Western MWD
Total MWD
Source: MWD
1996 Pop. 1 Rank
295,120 14
40,410 25
99,930 20
492,830 10
1,473,620 4
618,540 7
223,980 15
84,500 23
398,200 12
86,610 22
116,700 19
191,960 16
61,680 24
432,150 11
3,686,540 1
1,666,330 3
136,750 17
2,544,250 2
23,410 26
13,254 27
307,890 13
90,530 21
499,750 9
127,490 18
830,000 5
803,370 6
583,330 8
15,929,124 5,167.88 3,082
Service Area
ittare Miles1 Rank
49.67 15
5.06 25 7,986 7
17.14 22 5,830 13
363.11 6 1,357 24
178.52 8 8,255 6
242.24 7 2,553 22
59.12 13 3,789 18
7.81 24 10,819 3
539.45 3 738 26
21.66 20 3,999 17
22.14 19 5,271 15
30.36 16 6,323 10
121.91 12 506 27
50.26 14 8,598 5
461.89 5 7,98 1 8
541.21 2 3,079 21
22.60 18 6,05 1 11
1,420.24 1 1,791 23
2.37 27 9,878 4
3.75 26 3,534 20
27.43 17 11,225 2
8.05 23 11,246 1
132.96 11 3,759 19
19.54 21 6,525 9
143.71 10 5,776 14
165.72 9 4,848 16
509.96 4 1,144 25
Population Density
m
5,942 12
Most of MWD’s future population growth is.expected to be within the more outlying
member agencies. While there are not offkial state population forecasts for member
agencies, the California Department of Finance @OF) does project county populations.
DOF’s most current forecast shows Riverside and San Bernardino Counties growing much
faster than the rest of the region. (See Table 3.) Nonetheless, all areas of Southern
California will see a significant population increase.
California Research Bureau, California State Library 9
Tabk 3
Pro&cted RegIonaI Popuktion Growth
Estimated Population Projected Growth
County 1996 I 2020 Population 1 Percent
Riverside 1,393,300 2,9 14,700 1,521,400 109%
San Bernardino 1,592,600 3,095,800 1,503200 94%
Ventura 714,800 1,023,100 308,300 43%
San Diego 2,694,900 3,851,100 1,156,200 43%
Los Angeles 9,396,400 12,795,lOO 3,398,700 36%
Orange 2,649,800 3,282,300 632,500 24%
Six County Total 1844 1,800 26,962,lOO 8,520,300 46%
Source: State of California, Department of Finance, Interim County Population Projections, Sacramento,
While San Fernando has the smallest service area and one of the smallest populations, it is
also one of the most densely populated member agencies. With nearly 10,000 people per
square mile, only the cities of Santa Monica, Santa Ana, and Compton have more dense
populations, with about 11,000 people per square mile. By comparison, Las Virgenes
MWD, which serves the Santa Monica Mountains area, and Eastern MWD in Riverside
County are sparsely populated, both with well under 1,000 people per square mile.
Interestingly, the service area of about half the member cities does not cover the entire
incorporated area of the city. As the various Municipal Water Districts formed, they
usually established their boundaries up to the boundaries of adjacent member cities. As
the cities grew, they annexed adjacent .areas that were parts of the Municipal Water
Districts. However, for water supply purposes, these newly incorporated areas remained
part of the original Municipal Water District. Despite consolidations that have occurred
over the last 15 years, there are still areas of some member cities that are not represented
by that city on MWD. Instead, they continue to be represented by the Municipal Water
District.
As shown in Table 4, the total incorporated area of Compton is 10.17 square miles.
However, only 7.8 1 square miles or 76.8 percent of the city is represented on the MWD
by Compton’s director. The other 23.2 percent of the city is represented by someone else
- 23.1 percent by Central Basin MWD, 0.1 percent by West Basin MWD.
On the other hand, most non-city member agencies include no incorporated areas of
member cities. In those that do, the areas of overlap account for only a small portion of
the member agency. As shown in Table 5, West Basin MWD includes the most area within
the incorporated boundaries of another member agency. However, it accounts for just
over 4 percent of West Basin MWD’s service area.
10 California Research Bureau, California State Library
1 Table 4
!krvice Area of Member Cities
City of Anaheim
City of Beverly Hills
City of Burbank
City of Compton
City of Fullerton
City of Glendale
City of Long Beach
City of Los Angeles
City of Pasadena
City of San Fernando
City of San Marino
City of Santa Ana
City of Santa Monica
Citv of Tormnce
ISource: MWD
Service Area of Area Serviced By
Member City Other Agencies
z; 1 Percent
49.67
5.06
17.14
7.81
22.14
30.36
50.26
461.89
22.60
99.8%
88.8%
00.0%
76.8%
00.0%
99.2%
00.0%
98.5%
97.6%
2.37 100.0%
3.75 100.0%
27.43 100.0%
8.05 100.0%
19.54 90.9%
!$E 1 Percent
0.10 0.2%
0.64 11.2%
0.00 0.0%
2.36 23.2%
0.01 0.0%
0.23 0.8%
0.00 0.0%
6.95 1.5%
0.55 2.4%
0.00 0.0%
0.00 0.0%
0.00 0.0%
0.00 0.0%
1.95 9.1%
Total Incorporated
gp
49.77 100.0%
5.70 100.0%
17.14 100.0%
10.17 100.0%
22.15 100.0%
30.59 100.0%
50.26 100.0%
468.84 100.0%
23.15 100.0%
2.37 100.0%
3.75 100.0%
27.43 100.0%
8.05 100.0%
21.49 100.0%
Table 5
Service Area of Non-City Member Agencies
I Member Agency
Calleguas MWD
Central Basin MWD
Chino Basin MWD
Coastal MWD
Eastern MWD
Foothill MWD
Las Virgenes MWD
MWD of Orange County
San Diego CWA
Three Valleys MWD
Upper San Gabriel Valley MWD
West Basin MWD
Western MWD
Source: MWD
Service Area Within 1 Area Exclusive of
Member Cities
F
0.00 0.0% 363.11 100.0%
2.36 1.3% 176.16 98.7%
0.00 0.0% 242.24 100.0%
0.00 0.0% 59.12 100.0%
0.00 0.0% 539.45 100.0%
0.60 2.8% 21.06 97.2%
2.64 2.2% 119.27 97.8%
0.11 0.0% 541.10 100.0%
0.00 0.0% 1,420.24 100.0%
0.00 0.0% 132.96 100.0%
0.18 0.1% 143.53 99.9%
6.90 4.2% 158.82 95.8%
Member Cities
$ise 1 Percent
0.00 O.O%l 509.96 100.0%
ToalServiceAleaI
363.11 100.0%
178.52 100.0%
242.24 100.0%
59.12 100.0%
539.45 100.0%
21.66 100.0%
121.91 100.0%
541.21 100.0%
1,420.24 100.0%
132.96 100.0%
143.71 100.0%
165.72 100.0%
509.96 100.0%
California Research Bureau, California State Library 11
Water service is probably the most obvious way to compare member agencies. Perhaps
not surprisingly, the three most populous agencies, Los Angeles, SDCWA, and MWDOC,
buy the most amount of water from MWD. (See Table 6.) Between 1984-85 and 1994-
95, SDCWA has purchased on average nearly % million acre-feet of water each year,’
Table 6 Average Annual Water Use By Member Agencies r Member Agency
City of Anaheim
City of Beverly Hills
City of Burbank
Calleguas MWD
Central Basin MWD
Chino Basin MWD
Coastal MWD
City of Compton
Eastern MWD
Foothill MWD
City of Fullerton
City of Glendale
Las Virgenes MWD
City of Long Beach
City of Los Angeles
M WD of Orange County
City of Pasadena
San Diego County WA
City of San Fernando
City of San Marino
City of Santa Ana
City of Santa Monica
Three Valleys MWD
City of Torrance
Upper San Gabriel Valley MWD
West Basin MWD
Western MWD
Total
Source: MWD data summarked
Local
Production Use
-xqiGi
44,712 10
0 27
2220 2s
27,377 13
171,328 4
158,865 6
6,695 19
5,487 21
94,627 7
6,192 20
19,174 1s
4,464 22
3,444 24
27,286 14
412,344 1
209,643 2
13,198 16
86,888 8
2,050 26
4,439 23
31,690 12
8,126 18
53,343 9
9,264 17
163,833 S
39,961 11
188,326 3
,794,976
Water Use
MWD Direct
Deliveries
Yiqiiz
25,891 13
13,836 20
20,412 16
93,221 S
83,975 6
36,606 12
41,550 11
4,751 2s
44,262 10
9,893 23
13,256 21
25,213 I4
17,452 18
47,275 9
238,474 2
208,434 3
23,898 IS
496,815 1
826 27
971 26
16,517 I9
8,443 24
62,208 7
20,124 17
10,852 22
148,484 4
60,239 8
i .773.877
r0td Water Use
Tqiizi
70,603 13
13,836 24
22,632 20
120,598 10
255,304 4
195,470 6
48,245 14
10,238 25
138,889 9
16,085 23
32,430 17
29,677 I8
20,896 21
74,560 12
650,818 1
418,078 3
37,096 16
583,703 2
2,876 27
5,410 26
48,207 IS
16,569 22
llS,SSl 11
29,389 19
174,685 8
188,445 7
248,565 S
I,S68,853
Dependence On
izgz
37% 18
100% 1
90% 2
77% 8
33% 21
19% 2s
86% 3
46% 16
32% 22
62% 12
41% 17
85% S
84% 6
63% 11
37% I9
SO% 1s
64% 10
85% 4
29% 23
18% 26
34% 20
51% 14
54% 13
68% 9
6% 27
79% 7
24% 24
SO%
l One acre-foot (af) is a volume or quantity of water covering one acre to the depth of one foot. One
acre-foot is equal to 325,8S 1 gallons. The average family of four uses just under L/ af per year.
-_
A.
12 California Research Bureau, California State Library
making it by far the largest buyer of MWD water. Los Angeles and MWDOC follow,
averaging 238,000 and 208,000 acre-feet per year respectively. Combined, these three
agencies account for 53 percent of water sold by MWD.
However, quantity is only part of the picture. Some agencies are much more dependent
on MWD for their local water supply than others.* On one extreme, Upper San Gabriel
Valley MWD and the City of San Marino rely very little on MWD for water. On the other
end of the spectrum are the cities of Beverly Hills and Burbank. Beverly Hills is 100
percent reliant on MWD for its water supply. Burbank has some local supplies, but still
relies on MWD for 90 percent of its water. However, in aggregate MWD provides about
50 percent of member agency demands; the remainder is met through local water supplies,
including groundwater, the Los Angeles Aqueduct, reclamation, and conservation.
This is not to imply that member agencies’ water needs are static. One of the major
challenges to MWD is the constantly changing water need of the member agencies.
Periods of drought are a special challenge. Agencies that typically rely on MWD for
relatively small amounts of water often turn to MWD for increased supplies as member
agencies’ local supplies literally start to dry up. Perhaps the most dramatic example is
Figure 3 !hrces of the City of Los Angeles’s Water Supply
6UJ
* 303
8 $4lll
% 203
IUJ
3
1517 .X8 1x9 Li90 .a. 1292 1;93 1924 19;c .#6 JP?:
hlyl-Jllnr30
I 8L.!x Lllcd 3- Lam2 I
Source: City of Los Angeles, Urban Water Management Plan: Annual Update Report, Fiscal Year
1996-97; http:Nwww.dwp.ci.la.ca.us/water/supply/uwmplan/
--s--s . . .
*::. -::.
-::. -::. . . . . . .
. . . . . .
*::. *::.
*::. ‘::. . . . . . .
. . . . . .
-::. -
*::. . . .
’ Similarly, some sub-agency members of MWD member agencies are more dependent upon the member
agency (hence MWD) than other sub-agency members of the same MWD member agency.
California Research Bureau, California State Library I3
the City of Los Angeles. During periods of abundance, such as the mid- 1980s and mid-
199Os, Los Angeles buys a relatively small amount of water from MWD. However, as
shown in Figure 3, the City of Los Angeles’s MWD purchases rose tremendously during
the most severe periods of the 1988-93 drought.
THE GOVERNANCE Docmums
MWD’s governance authorities derive from two sources: the Metropolitan Water District
Act and the Metropolitan Water District Administrative Code.
The Metropolitan Water District Act
In 1927, the California State Legislature passed the Metropolitan Water District Act.’
This Act was unique in that for the first time it allowed non-contiguous local governments
to form a regional entity. Only one agency, MWD, has incorporated under this Act or its
successor.
MWD now operates under the Metropolitan Water District Act of 1969’ (MWD Act),
which succeeded the original Act. The MWD Act broadly defines what MWD can and
cannot do and how it is to do it. Among other things, the MWD Act establishes the basic
governance structure of MWD, which include defining:
l The general purpose of MWD,
l The representation on the board of directors,
l The voting rules for the board of directors,
l The officers and key employees,
l The member agencies’ preferential rights to water, and
l The right to fix water rates and to levy and collect taxes and fees.
Only the California State Legislature can change the MWD Act.’
Metropolitan Water Distzict Administrative Code
Under the MWD Act:
The board may make and pass ordinances, resolutions and orders necessary for the
government and management of the affairs of the district, for the execution of the
powers vested in the district and for carrying into effect the provisions of this act?
l For a more complete history of the formation of MWD, see Appendix.
’ The same is true of the enabling act or statute of all other political subdivisions of the State as well;
e.g., cities, counties, special districts, joint authorities, etc.
I4 California Research Bureau, California State Library
The Administrative Code codifies these ordinances, resolutions, and orders. The
Administrative Code covers such governance issues as:
l Defining operational rules for the MWD board,
l Creating board officers,
l Establishing standing, special, and ad hoc committees, and
l Defining the MWD board’s ethics policy for directors.
The Board of Directors can change the Administrative Code by a simple majority.*
THE BOARD OF DIRECTORS
Under the MWD Act, MWD is governed by a Board of Directors. Each member agency
is entitled to one director on the board.’ In addition, member agencies are entitled to one
additional director for each full 3 percent of assessed valuation the member agency holds
’ relative to the entire MWD.’ As shown in Table 7, 10 member agencies currently have
more than one director on the board.+
Because each member agency has at least one director on the board, this tie to assessed
value is not strictly proportional. In general, very high assessed value agencies have
proportionally fewer directors than very low assessed value agencies. For example, the
City of Los Angeles has 20.6 percent of MWD’s assessed value and has 13.7 percent of
the directors on the board. At the other end of the spectrum, the City of San Fernando
has less than 0.1 percent of MWD’s assessed value and has 2 percent of the directors on
the board.
While the number of board members is not proportional to assessed value, the number of
votes each member agency has is proportional. Each member agency receives one vote on
the board for each $10 million in assessed valuation.6 This means that when voting,
member agencies currently cast a total of 87,794 votes. Table 7 also shows the votes each
agency has on the board.
.-
’ The board uses a weighted voting system. The weighted voting system is described later in this section.
t For background on the tie between assessed valuation and representation on the MWD, see page 34 and
page 40.
California Research Bureau, California State Library IS
Table 7
Assesed Valuation, Director Entitlements & Votes
August 1997
Assessed Valuation Director Entitlements
Member Agency
Votes on
Iity of Los Angeles $180,986 20.6%
;an Diego County WA 137,397 15.7%
AWD of Orange County 114,848 13.1%
Yest Basin MWD 62,568 7.1%
Ientral Basin MWD 57,112 6.5%
Jpper San Gabriel Valley MWD 36,137 4.1%
:alleguas MWD 33,86 I 3.9%
:hino Basin MWD 32,s 11 3.7%
:oastal MWD 26,937 3.1%
Vestem MWD 26,649 3.0%
hree Valleys MWD 25,118 2.9%
lastem MWD 18,036 2.1%
Zity of Long Beach 17,72 I 2.0%
Iity of Anaheim 16,120 1.8%
Iity of Torrance 11,134 1.3%
Iity of Glendale 10,713 1.2%
:ity of Santa Ana 10,132 1.2%
:ity of Santa Monica 9,492 1.1%
Zity of Pasadena 8,821 1.0%
:ity of Burbank 8,567 1.0%
as Virgenes MWD 8,496 I .O%
Xy of Beverly Hills 8,197 0.9%
Iity of Fullerton 6,505 0.7%
:oothill MWD 5,507 0.6%
Xy of San Marino 1,973 0.2%
Iity of Compton 1,640 0.2%
Xy of San Fernando 747 0.1%
Total* $877,924 100.0%
Detail may not add due to independent rounding
Lowe: MWD
7 13.7% 18,099
6 11.8% 13,740
S 9.8% 11,485
3 5.9% 6,257
3 5.9% 5,711
2 3.9% 3,614
2 3.9% 3,386
2 3.9% 3,2S 1
2 3.9% 2,694
2 3.9% 2,665
1 2.0% 2,s 12
1 2.0% 1,804
I 2.0% 1,772
I 2.0% 1,612
1 2.0% I,1 13
1 2.0% 1,071
1 2.0% 1,013
I 2.0% 949
I 2.0% 882
1 2.0% 857
I 2.0% 850
I 2.0% 820
1 2.0% 650
I 2.0% 551
I 2.0% 197
I 2.0% I64
I 2.0% 7s
51 100.0% 87,794
When voting, the votes for member agencies with more than one board member are
distributed proportionately among its members present. Assuming all board members are
present, each MWD director has on average 1,328 votes. However, the actual number
varies greatly. As Table 8 shows, each of the City of Los Angeles’s seven directors as well
--
I6 California Research Bureau, California State Library
_-
as Three Valleys MWD’s lone director controls over 2,500 votes. In contrast, the
directors for the cities of San Marino and Compton control less than 200 votes, and the
City of San Fernando has only 75 votes.
Under the MWD Act, member agencies have a number of options when appointing their
representatives to MWD’s board of directors. The representative can be appointed by:
l The chief executive officer of the member agencies with the consent and approval of
the governing body of the agency, or
l A majority vote of the governing body of the agency.’
Table 8 Votes per JHrector August 1997 1
Member Agency
City of Los Angeles
Three Valleys MWD
MWD of Orange County
San Diego County WA
West Basin MWD
Central Basin MWD
Upper San Gabriel Valley MWD
Eastern MWD
City of Long Beach
Calleguas MWD
Chino Basin MWD
City of Anaheim
Coastal MWD
Western MWD
City of Torrance
City of Glendale
City of Santa Ana
City of Santa Monica
City of Pasadena
City of Burbank
Las Virgenes MWD
City of Beverly Hills
City of Fullerton
Foothill MWD
City of San Marino
City of Compton
City of San Fernando
Total/Average
I Votes Directors Votes per Percent of Tota
Director MWD Votes
18,099 7 2,586 2.9%
2,512
11,485
13,740
6,257
S,7l I
3,614
1,804
1,772
3,386
3,251
1,612
2,694
2,665
1,l I3
1,071
1,013
949
1
S
6
3
3
2
1
1
2
2
I
882
857
850
820
650
551
197
164
2,s 12
2,297
2,290
2,086
1,904
1,807
1,804
1,772
1,693
1,626
1,612
1,347
1,333
1,113
1,071
1,013
949
882
857
850
820
650
551
197
164
2.9%
2.6%
2.6%
2.4%
2.2%
2.1%
2.1%
2.0%
1.9%
1.9%
1.8%
1.5%
I .S%
1.3%
I .2%
1.2%
1.1%
I .O%
1.0%
1.0%
0.9%
0.7%
0.6%
0.2%
0.2%
7s I 7s 0.1%
87,794 51 1,328 I .S%
kwce: MWD
California Research Bureau, California State Library 17
The member agency can appoint their representative for:
l An indefinite term at the pleasure of the appointing power, or
l Four-year fixed terms.*
In addition, while board members serve without compensation by MWD, a number of
member agencies either:
l Pay their directors a per diem,
l Reimburse their directors’ expenses, or
l Pay them a salary, as is the case when a director is also an employee of the member
agency.
Decision Making Process
The board operates as a legislative body. Under the Administrative Code, the board has
seven officers: a chair, five vice-chairs, and a secretary.’ Officers serve for two years and
cannot serve more than two consecutive full two-year terms.” In addition, the board has
seven standing committees:”
1. Executive Committee
2. Engineering and Operations Committee
3. Budget and Finance Committee
4. Legal and Claims Committee
5. Organization and Personnel Committee
6. Water Planning and Resources Committee
7. Committee on Communications and Legislation
Except for the Executive Committee, the Chair of the Board appoints the members, chair
and vice chair of the standing committees. Each board member is to serve on at least one
and no more than three standing committees, besides the Executive Committee. The
Chair and Vice Chair of the standing committees serve two year terms, not to exceed two
consecutive full termsI
The full board meets for its regularly scheduled meeting each month for two days. The
first day opens with a plenary session. There, MWD staff and possibly others give
background presentations on the issues before the board that month. After the plenary
session, the standing committees meet successively. The committees discuss, debate, and
make recommendations on issues within their jurisdiction to the full board. Unlike the full
board, votes in the Committees are one vote per director. The standing committees meet
through the first day and into the second. The Executive Committee meets after the
standing committees. It is charged, in part, with reconciling divergent committee
recommendations or actions prior to the regular board meeting. The full board meets on
the second day. Under the Administrative Code, this is the second Tuesday of each
month, at 12:30 p.m.13
x.
18 California Research Bureau, California State Library
The board conducts its regular business at its full board meeting. For most items on the
agenda, one or more standing committees will make a recommendation to the full board.
The full board then discusses the item and takes a vote. Usually, the chair calls for a voice
vote. The board rarely needs to use the full weighted voting system to determine the
outcome of a vote.
In addition to the regular board meetings, the board often holds special meetings and ad-
hoc committee meetings.
Under the Administrative Code, the General Manager is the chief executive officer of
MWD. The board appoints the General Manager by a majority vote. The General
Manager oversees the day-to-day operations of MWD and “shall exercise all executive,
administrative, and ministerial powers not specifically reserved to the Board, General
Counsel or Auditor.“14 The board similarly appoints the General Counsel and Auditor by a
majority vote. The General Manager, along with the General Counsel and Auditor, serves
at the pleasure of the Board.
PREFERENTIAL WATER RIGHTS
Under Section 135 of the MWD Act, each member agency has a preferential right to
water. This right is determined by each agency’s total historic payments to MWD for
capital expenditures, excluding payments for the purchase of water. Therefore, agencies
that have paid the most property tax and “ready-to-serve” charges to MWD have the
largest right to water. Under the preferential rights rules, during periods of water
shortage, MWD would allocate water without regard to historic water use or dependence
on MWD.*
It is important to note at the outset, that there is controversy over whether the preferential
water rights rules would ever be implemented, or if they are even legal. The MWD board
has never implemented preferential water rights; not even with the severe shortages during
the 1976-77 or 1988-92 droughts. Instead, during the recent drought the board reduced
all water deliveries proportionally the same.+ Moreover, the board is considering a
drought management plan that would purportedly dismiss preferential rights as a means,of
allocating water.
l In 1925, the California Senate, in one of its first amendments to the proposed Act, created the
preferential water rights. The apparent rationale was that because the initial construction of the
Colorado Aqueduct and the appurtenant facilities would be financed with local property tax revenues
(which are based on assessed value), those agencies with the greatest financial burden should have the
greatest rights to the water. For additional history of the formation of MWD, see Appendix.
’ The reductions were based on 1989-90 sales. Interruptible water was reduced a greater percentage than
firm water sales.
California Research Bureau, California State Library 19
Furthermore, MWD’s Deputy General Counsel argues that California Water Code sections
350 et seq. supercede the provisions of the MWD Act regarding preferential water rights.’
Section 350 states:
$350. The governing body of a distributor of a public water supply . . . may declare a
water shortage emergency condition to prevail within the area served by such distributor
whenever it finds and determines that the ordinary demands and requirements of water
consumers cannot be satisfied without depleting the water supply of the distributor to the
extent that there would be insufficient water for human consumption, sanitation, and fire
protection.”
Later sections of that same chapter declare that under such an emergency declaration, the
governing boards may adopt regulations and restrictions on the delivery of water that will
conserve the water supply for the greatest public benefit.‘6 Furthermore, the provisions of
$5350 et seq. prevail over any conflicting laws, such as the MWD Act.”
However, 9$350 et seq. apply only when the governing body declares a water shortage
emergency. If, during a period of shortage, the MWD board chose not to follow the
provisions of @350 et seq. and did not declare such an emergency, 9§350 et seq. would
not be in effect.+ In such a situation, preferential water rights under the MWD Act would
apply*
In addition, while developing drought management plans before the beginning of a
drought is laudable, MWD board policy cannot supercede state law; in this case the MWD
Act. Again, in the absence of a declared water shortage emergency, preferential water
rights under the MWD Act would apply.
Generally, member agencies with the highest assessed value have the highest preferential
rights. (See Table 9.) However, the more interesting question is how well do these
preferential rights fit with local water resources needs.
l It is interesting to note that two previous General Counsels came to different conclusions on the
question of $8350 et seq. For a history of MWD’s actions regarding preferentaial water rights,
including legal opinions by various General Counsels, see: MWD, “Source Materials on Metropolitan
Water District Act Section 135: Preferential Rights,” January 1 I, 1996.
’ Moreover, there is nothing in 44350 et seq. that compels a water district to declare such an emergency.
In addition, as long as water was being put to a “reasonable and beneficial use,” restrictions under
Article X, section 2 of the California Constitution would also not apply. The definition of “reasonable
and beneficial use” is also subject to debate.
I_
20 California Research Bureau, California State Library
Table 9
Preferential Water Rights: 1997
8 -1
Member Agency TaX
Collected
Ready-to- Preferential
Serve Misc. Other Total* Rights
Charges (% of Total)
City of Los Angeles $667,333
San Diego County WA 343,580
MWD of Orange County 300,573
Central Basin MWD 255,246
West Basin MWD 220,558
Upper San Gabriel Valley MWD 131,513
Western MWD 82,789
Calleguas MWD 80,282
City of Long Beach 77,587
Eastern MWD 66,995
Chino Basin MWD 61,814
Coastal MWD 64,474
Three Valleys MWD 54,982
City of Glendale 32,767
City of Torrance 32,276
City of Pasadena 3 1,285
City of Beverly Hills 28,914
City of Santa Monica 29,301
City of Burbank 26,696
City of Santa Ana 19,278
City of Anaheim 18,069
Foothill MWD 19,195
City of Fullerton 16,513
Las Virgenes MWD 14,632
City of Compton 7,699
City of San Marino 6,403
City of San Fernando 3238
$33,007 $5,763
60,6 I8 1,174
27,020 5,412
13,631 3,196
19,277 1,473
5,664 2,018
11,553 2,272
11,265 472
5,694 398
10,622 3,443
6,847 1,927
5,334 412
8,933 2,212
3,219 187
2,702 284
1,838 94
1,209 323
985 33
2,305 288
2,077 58
2,883 78
1,342 28
1,497 383
2,534 114
739 41
206 0
182 ~~ 38
$706,104 23.78%
405,372 13.65%
333,005 11.21%
272,073 9.16%
241,308 8.13%
139,195 4.69%
96,613 3.25%.
92,019 3.10%
83,678 2.82%
81,060 2.73%
70,587 2.38%
70,220 2.36%
66,127 2.23%
36,173 I .22%
35,261 1.19%
33,216 1.12%
30,446 I .03%
30,319 1.02%
29,290 0.99%
21,413 0.72%
21,030 0.71%
20,566 0.69%
18,394 0.62%
l7,28 1 0.58%
8,479 0.29%
6,610 0.22%
3,458 0.12%
Total * .$2,693,992 $243,183 S32,121 S2,969,296 100.00%
* Detail may not add due to independent rounding
Two agencies, the City of Anaheim and SDCWA, typically buy twice the amount of water
that they would have under preferential rights. As shown in Table 10, about half of the
member agencies have used a greater share of water than they have under their preferential
rights. If during shortages, MWD allocated water under the preferential rights rules, these
agencies would be the first to be cut. Conversely, a near equal number of agencies use
less water than they have preferential rights. Depending on the severity of a shortage,
many of these agencies could completely avoid any delivery reductions simply by
exercising their preferential rights.
California Research Bureau, California State Library 21
Table 10 Average MUD Dlrtd Ddlvtsits: A&l vs. Preferential Rights
10 Year Average 10 Year Average Under
City of Anaheim
San Diego County WA 496,815
Calleguas MWD 93,22 I
Las Virgenes MWD 17,452
Three Valleys MWD 62,208
City of Santa Ana 16,517
City of Fullerton 13,256
City of Pasadena 23,898
City of Glendale 25,213
City of Burbank 20,412
MWD of Orange County ‘208,434
Western MWD 60,239
West Basin MWD 148,484
Coastal MWD 41,550
City of Tort-awe 20,124
City of Long Beach 47,275
City of Compton 4,75 1
Eastern MWD 44,262
Chino Basin MWD 36,606
Foothill MWD 9,893
City of Beverly Hills 13,836
City of Los Angeles 238,474
Central Basin MWD 83,975
City of Santa Monica 8,443
City of San Fernando 826
City of San Marino 971
Upper San Gabriel Valley MWD
Total*
* Detail may not add due to independent rounding
25,891 1.5%
28.0%
5.3%
I .O%
3.5%
0.9%
0.7%
1.3%
I .4%
1.2%
11.8%
3.4%
8.4%
2.3%
1.1%
2.7%
0.3%
2.5%
2.1%
0.6%
0.8%
13.4%
4.7%
0.5%
0.0%
0.1%
10.852 0.6%
I ,773,877 100.0%
Member Agency Preferential Rights
12,563 0.7%
242,172
54,973
10,324
39,505
12,792
10,989
19,844
21,610
17,498
198,939
57,717
144,159
41,950
21,065
49,990
5,065
48,426
42,169
12,286
18,189
421,831
162,538
18,113
2,066
3,949
83,156
13.7%
3.1%
0.6%
2.2%
0.7%
0.6%
1.1%
1.2%
1 .O%
11.2%
3.3%
8.1%
2.4%
1.2%
2.8%
0.3%
2.7%
2.4%
0.7%
1 .O%
23.8%
9.2%
1 .O%
0.1%
0.2%
4.7%
1,773,877 100.0%
Percent
Difference
-51.5%
-51.3%
-41 .O%
-40.8%
-36.5%
-22.5%
-17.1%
-17.0%
-14.3%
-14.3%
-4.6%
-4.2%
-2.9%
1 .O%
4.7%
5.7%
6.6%
9.4%
15.2%
24.2%
31.5%
76.9%
93.6%
114.5%
150.1%
306.7%
666.3%
However, the effect such cuts would have on each member agency are complicated by the
agency’s dependence on MWD for water. MWD supply reductions affect agencies with
large local supplies less than agencies with small local supplies. That is because for
agencies with large local supplies, MWD supplied water makes up a relatively small
portion of their total water budget. Consequently, reductions in MWD deliveries would
affect a small part of their total water budget.
22 California Research Bureau, California State Library
.- Table 11 Total Local Water Supplies Actual vs. Hypothetical 20% MWD Shortage & Preferential Rights
Member Agency
San Diego County WA
Average Annual Use Hypothetical
(Table 6) 20% MWD Shortage & Percent Difference
Preferential Rights
583,703 280,625 -5 1.9%
Las Virgenes MWD 20,896 11,703 -44.0%
Calleguas MWD 120,598 71,355 -40.8%
City of Burbank 22,632 16,218 -28.3%
City of Glendale 29,677 21,752 -26.7%
Three Valleys MWD 115,551 84,947 -26.5%
City of Anaheim 70,603 54,763 -22.4%
City of Pasadena 37,096 29,073 -2 1.6%
West Basin MWD 188,445 155,288 -17.6%
Coastal MWD 48,245 40,255 -16.6%
City of Fullerton 32,430 27,965 -13.8%
City of Santa Ana 48,207 41,924 -13.0%
MWD of Orange County 418,077 368,794 -11.8%
City of Torrance 29,388 26,116 -11.1%
City of Long Beach ,74,561 67,278 -9.8%
City of Compton 10,238 9,539 -6.8%
Western MWD 248,565 234,500 -5.7%
Eastern MWD 138,889 133,368 -4.0%
Chino Basin MWD 195,471 192,600 -1.5%
Foothill MWD 16,085 16,021 -0.4%
City of Beverly Hills 13,836 14,551 5.2%
City of Los Angeles 650,s 18 749,809 15.2%
Central Basin MWD 255,303 301,359 18.0%
City of San Fernando 2,876 3,702 28.7%
Upper San Gabriel Valley MWD 174,685 230,358 3 1.9%
City of Santa Monica 16,569 22,6 16 36.5%
City of San Marino 5,410 7,598 40.4%
Source: CRB
To illustrate these interactions, Table 11 shows how a hypothetical 20 percent reduction in
MWD supplies would affect member agencies’ total supplies under preferential water
rights rules.* The table compares the agency water use from Table 6 to the hypothetical
scenario. This scenario assumes shortfalls only in MWD supplies - each member agency’s
local supplies are assumed to remain constant.
.-
l This scenario is strictly for illustrative purposes only and does not purport to reflect a realistic drought
scenario. For example, it does not reflect the fact that some agencies, such as the City of Los Angeles,
place significantly higher demands on MWD for water during droughts than during average water
years.
California Research Bureau, California State Library 23
The comparison shows that under strict preferential rights rules, a 20 percent reduction in
MWD supplies would lead to a 5 1.9 percent reduction in total water available to SDC WA
Similarly, Las Virgenes MWD and Calleguas MWD would both experience a more than 40
percent reduction. Conversely, some agencies would, hypothetically, gain water.
Naturally, such agencies would in reality turn back some of their MWD supplies to be
redistributed among the other member agencies. However, this scenario does illustrate
how under current rules, agencies like Los Angeles, Upper San Gabriel Valley and San
Marino have very secure supplies compared to highly vulnerable such as to SDCWA, Las
Virgenes MWD and Calleguas MWD.
-
-,
-
24 California Research Bureau, California State Library
WHAT ARE THE PROBLEMS?
Over the last few years, a number of people have begun to question MWD’s governance.
MWD’s Blue Ribbon Task Force raised the issue in 1994. MWD formed this task force,
composed of 33 private sector community leaders, because of:
concerns that Metropolitan did not enjoy sufficient public support, the perceived low
general understanding of the District’s role in providing wholesale water supplies to
Southern California, and a desire to enlist the private sector to obtain fresh perspectives
about the MWD’s business practices and identify new solutions that might exist.”
The Blue Ribbon Task Force made nearly 100 separate recommendations on ways MWD
could become a more effective and efficient organization. However, the report also noted
there were a number of issues outside of its scope that were still a concern. These issues
included:
Board member selection. There is ongoing concern about whether the Board selection
process adequately generates representative, diverse leadership typical of the
communities that make up the MWD’s member agencies.”
Board member allocation. Many Task Force members were concerned about potential
inequities that may arise as patterns of actual MWD water use increasingly diverge from
the ad valorem criteria that currently governs the allocation and number of Board seats
among member agencies.”
Board oversight cauabilities and functions. The general impression of the Task Force is
that the Board’s oversight functions may be less comprehensive than in previous
periods. Despite a heavy meeting schedule, and numerous specialized committees and
subcommittees, the Board often seems to be presented with limited options and choices
for final approval largely defined and developed by MWD staff, rather than conduct an
independent inquiry of the relevant matters.*’
MWD implemented most of the 100 recommendations made by the Task Force.*’
However, the board apparently paid little attention to the Task Force’s concerns regarding
governance at the time.*
In the intervening period, a few legislators have introduced bills that would have changed
some aspect of MWD’s governance.+ However, much of the current legislative interest in
MWD governance result from the alleged reactions of MWD and some of its member
agencies to a proposed water transfer between SDCWA and the Imperial Irrigation
District (IID).
l The board did initiate its own internal examination of governance structure and function in 1997. This
was also the year both Assembly Member Bruce Thompson and Senator Ruben Ayala introduced bills
(AB 928 and SB 926) that would reduce the MWD board to 15 members to be appointed by the
Governor.
’ Most notably the aforementioned AB 928 and SB 926.
California Research Bureau, California State Library 25
As previously noted, SDCWA currently relies on MWD for 85 percent of its water
supplies and is expected to gain more than one million people by the year 2020. However,
SDCWAs water supply options are limited. SDCWA has aheady exhausted most of its
local supply options. Moreover, while population demands within MWD’s service area
will likely push demand for additional supplies higher, many believe MWD is unlikely to
develop significant new water sources in the future.’ From SDCWAs perspective, the
combination of growing local and regional demands for water and limited supply options,
coupled with MWD Act’s preferential water rights system, left SDCWA in an untenable
situation.
In order to improve its supply reliability, SDCWA has been working since 1995 to secure a
long-term transfer of water from IID. Under the current agreement, SDCWA would buy
200,000 acre-feet per year for the next 50 years. This would satisfy about a third of
SDCWA’s water needs and would reduce its current dependence on MWD by about 40
percent.+
Critics point to a number of alleged actions by MWD and some of its member agencies in
response to the proposed transfer as evidence that MWD is “a classic example of
bureaucracy run amok.“23 The Senate Select Committee has been investigating many of
these complaints. Without getting into details or weighing in on the validity of the claims,
the alleged actions the Senate Select Committee has investigated include:
l MWD tried to obstruct the transfer by establishing an unreasonably high price to
“wheel” or transport the transferred water to SDCWA via MWD’s Colorado
Aqueduct.
l SDCWA, through its regular MWD payments, is being forced to pay a portion of the
legal fees MWD is incurring in MWD’s legal fight against SDCWA.
l MWD, without prior board approval under the general manager’s contracting
authority, hired the fmn Edelman Public Relations Worldwide to conduct a public
relations campaign to fight the proposed water transfer.
l This is not a consensus view. Many within MWD believe that through its Integrated Resources Plan
(IRP), MWD has laid out a plan for meeting all of Southern California’s supplemental water needs.
Nonetheless, it remains to be seen if MWD can meet all of the IRP’s water management goals.
’ MWD and SDCWA just signed a MOU regarding implementing the SDCWA-IlD transfer. The MOU
is contingent upon a number of items, not the least of which being that the State is to provide $200
million for lining the All American Canal, including the Coachella Branch, and another $30 million
for groundwater conjunctive use programs that are a part of the California 4.4 Plan. It is too early to tell whether or not all the contingency items will likely come to fruition.
26 California Research Bureau, California State Library
_-
l MWD or a coalition of member agencies, under the guise of “The Partnership for
Regional Water Reliability,” conducted “opposition research” - research intended to
embarrass, leverage, and neutral&e legislators who did not oppose the proposed
transfer.
l The Partnership, which consists of member agencies controlling 67 percent of MWD
vote entitlements, violates the Ralph M. Brown Act, by holding closed meetings that
they do not publicly notice.
l There is a “Kitchen Cabinet” of board members that secretly determines MWD policy.
This Kitchen Cabinet excludes board members from SDCWA - in particular one
director who is a Vice Chair of the MWD board.
In defense, many board members assert that the proposed transfer violates the fundamental
purpose of MWD, which in their view is to be the sole supplier of water from outside of
the Southern California coastal basin. Some oppose the transfer because they claim the
transfer, as initially proposed, would increase their costs for water through “cost shifting.”
In addition, some board members maintain that SDCWA believes that because it buys the
most water, it should get special treatment. These board members point out that SDCWA
has received special treatment in the past, and imply that SDCWA ought to be grateful for
these special accommodations. Instead, some assert that SDCWA, through its actions, is
trying to break up MWD. In private, some go as far as describing SDCWA as a cancer
feeding upon MWD, intent on destroying it.
In addition to these two polar views, some board members hold views that are more
moderate. While such moderates find merit in parts of SDCWA’s arguments, they suggest
that fairness and consistency are not served without considering the needs and investments
of each of MWD’s member agencies.
However, there are other issues raised by state legislators and others beyond the SDCWA-
IID-Partnership debate. Some of these issues include:
l MWD is not responsive, especially to local issues,
l MWD has an ineffective ethics policy,
l MWD’s board is too large to ever operate efficiently,
l MWD’s staff- not the MWD board - drive MWD’s policies,
l MWD’s rate structure is too high in light of its $1.2 billion cash reserve, and
l MWD is involved in improper “profit generating” ventures.
Finally, some suggest that after 70 years of existence, perhaps this structure simply is no
longer appropriate, and it is time to modern&. As a recent bill analysis notes, “The whole
world seems to agree that the MWD Board needs revamping, but the question is how to
do it.‘r24
,-
California Research Bureau, California State Library 27
28 California Research Bureau, California State Library
THE ISSUES
-
As noted in the introduction, much of the current debate seems to be focused on
symptoms of problems, and not the sources of the problems. Indeed, there have been a
number of suggested solutions to MWD’s problems. But few if any of these solutions
started with the fundamental questions:
(1) What is and is not MWD’s job?
(2) Who is best suited to ensure MWD does this job properly?
(3) How should (2) make these decisions?
It is a maxim in organizational theory that form follows function. This implies that before
one can rationally discuss the governance structure of an organization - that is, its form -
one must know what the organization is and is not supposed to do. This report takes that
.approach.
Questions (l), (2), and (3) are addressed in order. This report does not take attempt to
answer (l), (2), or (3). Instead, it presents the current range of perspectives on these
issues, and the rationale behind these perspectives.
WHAT Is AND Is NOT MWD’s JOB?
Perhaps the easiest way to determine if MWD has a governance problem is to look at how
well MWD has achieved its goals and objectives. Presumably, if MWD Wills its purpose,
then any governance issues must be minor. On the other hand, if MWD does not fulfil1 its
purpose, then governance might indeed be a problem.
The difficulty with this approach is that there does not seem to be universal agreement on
what MWD’s purpose either is now or should be into the future. Many feel they know
what MWD’s purpose is, it is those other guys who don’t get it. This section describes the
evolution of MWD’s mission and explores some of the implications.
Background
On September 17, 1924, about 250 delegates from thirty-eight Southern California cities
and communities met in Pasadena and formed the Colorado River Aqueduct Association.*
At this meeting, they established a committee to drawl “an act authorizing the formation of
a public district for the purpose of bringing water from the Colorado River . . .“T’
On January 19,1925, Senator A. B. Johnson of Imperial County and Senator Ralph E.
Swing of San Bernardino County introduced the draft legislation as SB 178. The
California State Senate, in one of its first amendments to the proposed act, established the
.-
l For a history of the early formation of MWD, see Appendix.
California Research Bureau, California State Library 29
-
purpose of metropolitan water districts as “developing, storing and distributing water for
domestic purposes . . .“. The Legislature later expanded the purpose of MWD to allow it
to generate electricity. However, the legislated purpose of MWD is otherwise unchanged
from that defined in 1925:
In 1930, MWD’s first Chief Engineer, Frank E. Weymouth, was the first to lay out
MWD’s mission. It was:
1. Meet current and future water needs,
2. Replenish and restore ground water levels, and
3. Protect underground supplies from saltwater intrusion.26
Then, in 193 1, the board adopted a more comprehensive vision of MWD:
Those portions of the Coastal Plain to which the aqueduct system can economically
deliver water are regarded as the ultimate area that should be included within the
.Metropolitan Water District.
Water will be made available to all areas within the District in accordance with their
requirements, domestic use being the dominant use. *’
In this policy statement, MWD defined its ultimate service area as the Los Angeles Basin,
most of Orange County, and what is now known as the Inland Empire. It also implied that
it would meet all water demands within the constraints of the aqueduct’s capacity.
This policy stood for 20 years. However, during the 1940’s MWD changed greatly. It
completed the aqueduct, began delivering water to the member agencies, and a number of
agencies annexed into the district, including one from outside of the coastal plain - the
SDCWA Water Authority. Given all the changes, the 193 1 policy needed revising. The
result was the famous 1952 “Laguna Declaration”:
The Metropolitan Water District of Southern California is prepared, with its existing
governmental powers and its present and projected distribution facilities, to provide its
service area with adequate supplies of water to meet expanding and increasing needs in
the years ahead. The District is now providing its service area with a supplemental
water supply from the Colorado River. When and as additional water resources are
required to meet increasing needs for domestic, industrial and municipal water, The
Metropolitan Water District of Southern California will be prepared to deliver such
supplies.
Tax payers and water users residing within The Metropolitan Water District of Southern
California already have obligated themselves for the construction of an aqueduct supply
and distribution system . . . . This system has been designed and constructed in a manner
that permits orderly and economic extensions and enlargements to deliver the District’s
full share of Colorado River water as well as water from other sources as required in the
years ahead. Establishment of overlapping and paralleling governmental authorities and
l The amendment was to the first version of the Act, which did not clear the Assembly. That same
language, however, was included in the 1927 version of the bill, which became law.
30 California Research Bureau, California State Library
C
water distribution facilities to service Southern California areas would place a wasteful
and unnecessary financial burden upon all of the people of California, and particularly
the residents of Southern California.”
This statement did two things. First, it committed MWD to meeting all supplemental
water supply needs for Southern California. Second, it declared that MWD would be the
sole supplier of supplemental water for the region. With minor modification, chiefly
specifying the State Water Project (SWP) as the “other sources,” the Laguna Declaration
is still the offkial policy of the MWD.29
Since the Laguna Declaration, MWD experienced more changes. More of Southern
California annexed into MWD, it became a member of the state water project, and its role
broadened beyond simply supplying water. MWD’s Integrated Resources Plan Assembly
recognized these changes in its 1994 Assembly Statement:
During the past two decades, Metropolitan has broadened its role not just to function as
a supplier of imported water, but also to play a part in region-wide water management.
Metropolitan has used financial incentives and other means to encourage its Member
Agencies to develop alternative water supplies and to become less dependent on
Metropolitan for water supplies. On their own and in response to Metropolitan’s
incentives, Member Agencies hav’e developed additional groundwater resources,
promoted conservation, developed water reclamation projects, and supported
Metropolitan at the State and federal level to improve imported supplies.30
These changes, however, are not fully reflected in MWD’s offkial Mission Statement.
Adopted January 14, 1992, it reads:
The mission of The Metropolitan Water District of Southern California is to provide its
service area with adequate and reliable supplies of high quality water to meet present
and future needs in an environmentally and economically responsible way.3’
Discussion
The issue here is not whether MWD met its objectives in the past. With the notable
exception of not meeting all supplemental water needs during droughts, MWD has largely
met them. The issue instead is what should and should not be MWD’s role in the future.
And on this there is no agreement.
In interviews with many of MWD’s board members, MWD’s senior staff, and other
interested observers, most say MWD’s mission is “provide supplemental water to
Southern California.” However, while they use largely the same words, they often mean
something quite different. Some mean that MWD’s job is to “Be the sole supplemental
water source for Southern California.” Others mean MWD’s charge is to “Be a
supplemental water source, among others, for Southern California.” This is not a trivial
distinction.
However, the range of views is broader than that. Some suggest MWD has no business
being involved in water conservation, wastewater reclamation, or water transfer projects.
Instead, they believe MWD’s job is to deliver whatever SWP and Colorado River water is
California Research Bureau, California State Library 31
available to its member agencies, short and simple. Indeed, some go as far as suggesting
that MWD ought to completely separate its services into water supply and water
transportation, and price each service separately.
On the other hand, others argue that MWD needs to go farther in the direction of being
the regional water resource manager for all of Southern California. For example, they
contend:
l MWD sponsored water conservation projects provide both local, regional, and
statewide water supply benefits.
l Only MWD has the financial resources to facilitate the diverse kinds of projects
needed in the region.
l Only MWD has the technical expertise necessary to resolve many of the region’s water
problems.
The issue of preferential water rights also has profound implications of what is and is not
MWD’s job. Under the MWD Act, purpose is “developing, storing and distributing water
for domestic purposes.” Moreover, during periods of water shortages, MWD’s job is to
deliver water in accordance with each member agency’s preferential water rights. This
could be described as MWD’s technical job.
However, the MWD board has developed a revealed job. Through past actions, MWD
has established its task during periods of shortage to be to “share-the-cuts” among all
member agencies. A third option suggested by some is for MWD to take a “common
pool” approach to managing water shortages. MWD’s job would be to ensure that each
local water agency within MWD’s purview would have the same proportionate total
supply of water, local and MWD sources combined.
The State Legislature is interested in MWD’s mission as well. For example, Senator Tom
Hayden has a bill, SB 1875,* that in an earlier draft would have established:
the first priority of the Metropolitan Water District of Southern California shall be to
develop and implement cost-effective conservation, recycling, groundwater storage and
replenishment, and alternative supply programs. To the maximum extent feasible, those
programs should include the conservation of water through demand-side, as well as
supply-side, strategies.
Observations
The issue of defining or clarifj4ng MWD’s job is key, and not simply academic. Indeed,
the heart of the dispute with SDCWA is the question, “Should MWD hold a monopoly on
supplying additional water supplies to the region T’ Until this question is resolved to
l This clause was amended out of the bill on June 24, 1998. There are also a number of other bills that
would affect other aspects of MWD’s governance. These bills are recognized at the appropriate place
in the discussion.
-
32 California Research Bureau, California State Library
everyone’s satisfaction, and necessary conforming changes are made to MWD’s
governance structure, policies, and pricing structure, there will continue to be conflict.
The second main point of contention has to with MWD’s job during periods of water
shortage. The offtcial policy of the MWD board has always been to provide all the
supplemental water needed by it member agencies.* Moreover, all member agencies that
annexed into MWD after the original 13 cities, joined MWD under such policies. These
member agencies joined MWD quite possibly believing that although the MWD Act
established rules for allocating water during periods of shortage, there would never be a
shortage. Therefore, they might easily have concluded that the preferential water rights
established under the MWD Act were essentially meaningless.
The problem is that during each of the last two major droughts, MWD has been unable to
meet all member agencies supplemental water needs fully. Consequently, member agencies
are reassessing their expectations of MWD’s water delivery practices during droughts.
This inevitably includes a ree xamination of their preferential water rights.
While the board has adopted alternate drought policies in the past, and is striving to
develop a new drought policy, the simple fact is that MWD policies legally are subordinate
to state law. This includes the MWD Act. MWD’s General Counsel is correct in pointing
out that, during periods of water supply emergency, the board can establish alternative
allocation rules. However, the fact remains that the MWD board must first make an
emergency declaration.
Given the winners and losers under preferential water rights and their relative voting
strengths on the board, such a declaration is by no means a certainty. Moreover, if it were
certain that the board would declare an emergency under @350 et seq. for every water
supply shortage, then preferential water rights would indeed be a moot point. The
legislature, therefore, could eliminate the preferential water rights section of the MWD
Act without any concern on the part of member agencies. At this point, such a “non-
reaction” seems unlikely.
Not just representatives of a specific agency, county, or region raise defining MWD’s job
as being a major issue. This issue is important to a broad range of interests, including
MWD board members, other wholesale and retail water agencies, public interest groups,
and others. Without a common vision of purpose, it is almost impossible for a board to
run the organization effectively.32
People’s views on what role they would like to see MWD plan does not show a bias based
on geography, agency type, or even dependence on MWD. While some have characterized this as a SDCWA versus the World issue, representatives in a variety of
l The Laguna Declaration, which replaced the board’s 1931 policy statement, is still part of MWD’s
Administrative Code.
California Research Bureau, California State Library 33
areas and agency types say similar types of things. Indeed, often one representative of an
agency would have a drastically different perspective than another from the same agency.
In spite of the board’s best intentions, it is not at all clear that MWD can resolve these
issues itself.* One problem is that given the broad range of perspectives, finding common
ground will be difficult - this is especially true since there is not consensus on whether or
not there even is a problem in the first place. A second problem will be resolving the
equity implications of MWIYs newly defined role. Those who are comfortable with status
quo will likely seek some form of compensation or other recognition of their changed
situation. Those who find status quo inherently unfair are likely to resist such efforts.
Moreover, even if MWD could resolve this issue itself, it is not clear that it would do so
consistent with the water resources interest of either the local general public, other
regional agencies, or the greater statewide public. A common complaint about special
districts (like MWD) is that they are single purpose. That is, they do not consider
competing local or regional priorities. Another complaint is that special districts lead to
balkanization. That is, for every area, there are innumerable governments responsible for
services. These governments often do not coordinate their actions and can confhct in their
priorities. Since MWD is a governmental agency ultimately created by the public to serve
the public’s interests, this should be a concem.33
Finally, resolving what MWD’s job is and is not will have significant implications beyond
that of governance. It will redefine how MWD does business. For example, if MWD
officially loses its monopoly status, then there will be increasing pressure by some member
agencies (and perhaps others) to use MWD’s facilities to move “non-MWD” water to their
service areas. This, in turn, might lead MWD to abandon its current “postage stamp”
water rate, forcing it to separate the price of water supply from the price of water delivery,
and pricing each separately. Conversely, if MWD is to maintain its monopoly status, it
might need to explore the demand average versus dry year supplies and price each
separately.
WHO Is BEST SUITED To ENSURE MWD DOES THIS JOB PROPERLY?
Once MWD’s job is better defined, the next question is who should oversee MWD’s
operations. There are a number of facets to this question. These include:
l Characteristics - What type(s) of person(s) are best suited to oversee MWD?’
l Number - How many persons does it take?
l Allocation - If it takes more than one person, how should the positions be allocated?
l Selection - How should these persons be appointed?
l MWD’s current efforts at reform are described beginning on page 45.
’ Such characteristics might include which cdnstituency they represent, personal or professional
background, time availability, etc.
34 California Research Bureau, California State Library
l Terms - How long should these persons serve?
l Representation - As a governmental agency, how well do those in charge represent the
people?
The answers to these questions depend in large part on what MWD’s job is and is not.
Nonetheless, this section presents the rationale for the current system and explores
alternatives.
Background
The initial Metropolitan Water District Act, as introduced by Senators A. B. Johnson and
Ralph E. Swing, proposed that each member agency would have one representative on the
Board of Directors.* In 1927, the California Senate, in one of its last amendments to the
proposed Act, allowed member agencies to appoint one additional director for each $200
million of assessed value. The apparent rationale was that because the initial construction
of the Colorado Aqueduct and the appurtenant facilities would be financed with local
property tax revenues (which are based on assessed value), those agencies with the
greatest financial burden should have a greater presence on the board.
As new agencies joined MWD, and as property values of some areas grew faster or slower
than others, the composition of the MWD board changed. As shown in Table 12, Los
Angeles dominated the early boards. Within 12 months of MWD’s formation, Los
Angeles had appointed five board members and was actually entitled to ten. By the mid-
193Os, Los Angeles filled more than one third of the seats on the board. However, post
World War II growth in both the number and relative wealth of other member agencies
started the decline in relative size Los Angeles’s board presence.
As the assessed value of member agencies grew, the Legislature periodically raised the
threshold for additional directors. By 1968, member agencies needed $1 billion in
assessed value before they received an additional director. Finally, in 1972, Assembly
Member Porter introduced AB 412. This bill changed the allocation of directors to one
per member agency plus one director for each full 3 percent share of the total assessed
value any member agency had relative to the entire MWD. This change eliminated the
periodic need to adjust the threshold and stabilized the size of MWD’s board.
Currently, there are 51 directors on the MWD board. Most member agencies have one
director. The three agencies with the most directors are:
l The City of Los Angeles - 7 Directors
l SDCWA - 6 Directors
l MWDOC - 5 Directors
These three agencies combined currently hold just over one third of the positions on the
board.
l For a more complete history of the formation of MWD, see Appendix.
California Research Bureau, California State Library 35
Table 12 MWD Board Members 1928 - 1998*
Member Agency
City of Anaheim
City of Beverly Hills
City of Burbank
Calleguas MWD
Central Basin MWD
Chino Basin MWD
Coastal MWD
City of Compton
Eastern MWD
Foothill MWD
City of Fullerton
City of Glendale
Las Virgenes MWD
City of Long Beach
City of Los Angeles
M WD of Orange County
City of Pasadena
San Diego County WA
City of San Fernando
City of San Marino
City of Santa Ana
City of Santa Monica
Three Valleys MWD
City of Torrance
Upper San Gabriel Valley MWD
West Basin MWD
Western MWD
City of Colton* *
City of San Bernardino**
1928 1 1
1928 1
1928 1
1960 -
1954 -
1950 -
1942 -
1931 -
1951 -
1953. -
1931 -
1928 1
1960 -
1931 -
1928 3
1951 -
1928 1
1946 -
1971 -
1928 1
1928 1
1928 1
1950 -
1931 -
1963 -
1948 -
1954 -
1928 1
1928 1
13 19 24 37 43 49 50 51
1
1
1
1
4
1
1
1
1
1
1
1
1
1
7
6
1
5
1
1
1
1
1
1
2
4
1
1
1
1
2
3
2
1
1
1
1
1
1
1
1
8
5
1
6
1
1
1
1
1
1
2
3
1
1
1
1
2
3
2
2
1
1
1
1
1
1
1
7
5
1
6
1
1
1
1
1
1
2
3
2
Total
* December of each year. 1998 as of July.
** Withdrew from MWD in 193 1.
Sources: “Cities Meet for Water District”, Pasadena Star News, December 29, 1928;
MWD, Annual Report, Los Angeles: MWD, 1995; and
htto://www.mwd.dst.ca.us/docslboard.html. 7/l/98
Discussion
The current system assumes that to best meet MWD’s mission, each member agency must
have at least one board member. This guarantees a board of at least 27 members. It
further assumes that agencies with a greater financial stake in MWD need more
representatives on the board. Moreover, it assumes that assessed valuation is the best
36 California Research Bureau, California State Library
.-
measure of the financial stake and that a three-percent relative share is the appropriate
threshold.
Perhaps not surprisingly, most directors interviewed agree that all member agencies need
their own representative on the board. A few suggested that some of the smaller agencies
might share a position on the board, but all agreed member agencies require some type of
direct representation. In general, the smaller agencies are indifferent about the
mechanisms for gaining additional board members. As a director for one small agency
said, this is something for the big agencies to work out.
The big agencies have considered different thresholds for additional board members. For
example, Table 13 shows that increasing the threshold to five percent relative assessed
value would reduce the MWD board to 38 members. Five agencies would no longer have
multiple representatives, but the five largest still would.*
Some question whether assessed valuation is the appropriate measure, especially because
property tax revenue now accounts for about 9 percent of MWD’s gross annual income.
They suggest that if financial participation is an appropriate mechanism for apportioning
additional directors, some other measure might be more appropriate, such as total financial
contribution (including operations and maintenance charges), contributions to capital
facilities, or water sales revenues.
A number of people both within and without MWD observe that even if each member
agency had only one director, that MWD would still have a very large board. They point
to research showing that reducing the size of corporate boards makes them more
efftcient.34 So, they ask, why not invigorate the MWD board by reducing it even more?
Others counter that with the large number of members, the MWD board is beginning to
show greater ethnic diversity. They point to the positive influence that diverse viewpoints
bring to board deliberations. Some go as far as suggesting that the benefits of adding even
more board members to increase ethnic diversity would outweigh any additional
inefficiency.
The issue of diverse representation is interesting, and gets to the question of whose
interest board members should represent. The majority of board members interviewed
answered “my member agency.” Some would suggest that they also had a regional water
resources perspective or perhaps a ratepayer perspective. However, first and foremost
they were responsible to their member agency - otherwise they would be fired or wouldn’t
be reappointed. There was one set of notable exceptions to the member agency
perspective - those elected to their member agency board and who were then appointed
by their member agency to the MWD board. Those directors answered “the rate payers -
otherwise I won’t be reelected.”
l On July 14, 1998, the MWD board adopted a position in favor of changing the threshold for additional
directors to five percent relative assessed value.
California Research Bureau, California State Library 37
Table 13
MWD Board Members
Alternative Thresholds For Additional Directors
Member Agency
City of Anaheim
City of Beverly Hills
City of Burbank
Calleguas MWD
Central Basin MWD
Chino Basin MWD
Coastal MWD
City of Compton
Eastern MWD
Foothill MWD
City of Fullerton
City of Glendale
Las Virgenes MWD
City of Long Beach
City of Los Angeles
M WD of Orange County
City of Pasadena
San Diego County WA
City of San Fernando
City of San Marino
City of Santa Ana
City of Santa Monica
Three Valleys MWD
City of Torrance
Upper San Gabriel Valley
MWD
West Basin MWD
8.197
$16.120
0.93%
8.567
1.84%
0.98%
33.861 3.86%
57.112 6.51%
32.511 3.70%
26.937 3.07%
1.640 0.19%
18.036 2.05%
5.507 0.63%
6.505 0.74%
10.713 1.22%
8.496 0.97%
17.721 2.02%
180.986 20.62%
114.848 13.08%
8.821 1 .OO%
137.397 15.65%
0.747 0.09%
1.973 0.22%
10.131 1.15%
9.492 1.08%
25.118 2.86%
11.134 1.27%
36.137 4.12%
62.568 7.13%
3.04%
1 1
1 1
1 1
2 1
3 2
2 1
2 1
1 1
1 1
1 1
1 1
1 1
1 1
1 1
7 6
5 4
1 1
6 4
1 1
1 1
1 1
1 1
1 1
1 1
2 2
3 3 2
1
1
1
1
2
1
1
1
1
1
1
1
1
1
5
3
1
4
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
I
1
I
1
1
1
1
3
2
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1 Western MWD 26.649
5;
1 1
$877.924 100.00% 41 38 32 31 29 28
Source: MWD, CRB calculations
The greater ethnic diversity on the board has been brought on in part by a higher turnover
of directors. It used to be directors routinely served very long terms. However, the recent
trend has been towards shorter terms. Current directors have served on the MWD board an average of six years. The “newest” members have served about half a year; the longest
serving member has been on the board nearly 35 years. However, as little as ten years
ago, board members had served on average more than nine years. In 1989, one quarter of
the board had served 12 or more years and there were six board members who had served
over 20 years. Now two-thirds of the board have served less than eight years and only
two members have served 20 years or more.
38 California Research Bureau, California State Library
A number of board members assert that it takes many years on tbe board before one truly
understands the business of MWD. This is especially a problem now that more and more
directors are not in the water business full time. “In the old days,” they argue, “directors
weren’t expected to open their mouths until they had been on the board for four or five
years.” Now, the four-year terms used by some member agencies mean that just as
directors are really getting up to speed, they are out and new directors are in. Others
counter that the shorter terms have helped MWD. If directors know they only have four
years to accomplish their goals, they don’t have time to wait, especially if they have to
stand for reelection. They have to be involved early and have a much more immediate
effect on MWD policies.
Some outside observers contend that MWD’s board is insulated from greater regional
interests. Indeed, this is a common complaint about special districts in general. The
concern is that insulated boards are not visible, and so are not representative of the public.
Some board members argue that the insulation is a good thing. They contend that water
boards lose their focus when they become “politicized.” Others outside of MWD counter
that what some call politicization is really a sign of boards grappling with the kinds of
trade-offs representative governments are supposed to make.
Observations
The fundamental question remains: Who is best suited to ensure MWD does its job
properly?
If MWD’s job is only to meet the needs of its member agencies, then perhaps the current
structure or some variant makes sense. This includes issues such as the length of terms,
selection processes, etc. However, if MWD’s job is substantively different from only
meeting member agency needs, then that begs for a different structure. For example, if
MWD’s focus broadens from member agency needs to end-users or the general public,
then perhaps population based representation makes more sense. This would lead directly
to the issue of popularly elected board members.
It is highly unlikely that MWD board will conclude that member agency representation is
not the best basis for board representation, regardless of the ultimate resolution of MWD’s
job. Moreover, despite statements that board members should take a regional or ratepayer
view, member agencies most likely will appoint only board members that look out for the
member agencies’ parochial interests. Sometimes these interests will coincide with those
of “good” regional water resources management or those of the ratepayers, sometimes
they will not.
Simply changing the number of directors will do little to resolve the current conflicts
between SDCWA and other member agencies. While the board might make decisions
somewhat more efficiently, the fundamental issue of MWD’s job remains.
The MWD board has opposed all previous attempts to change the director selection
process. For example, in 1992, then Assembly Member Polanco introduced AB 3522.
This bill would have required MWD directors to be elected to two-year terms from 25
California Research Bureau, California State Library 39
electoral districts of approximately equal population. The board opposed that bill on the
basis that it would remove local control. The board’s position was that the member
agencies were the customers of MWD and the member agencies paid the bills. Without
direct representation on board, there would be little accountability to the member agency.
The board has taken similar positions on bills introduced in the current session. For
example, SB 926 (Ayala) and AI3 928 (Thompson) would reduce the board to 15 members
to be appointed by the Governor with Senate confirmation. Without weighing in on the
merits of these bills, they implicitly assume MWD’s job is something besides simply
meeting member agency needs.
From a ratepayer perspective, the current system makes little sense. Consider two
families. Family A lives in the City of Fullerton, Family B lives across the street in the City
of Brea. Family A’s water supplier, being a member agency (the City of Fullerton), has
one director on the MWD board. That director can focus all their attention on meeting
the retail water needs of this rather small geographical region. Family B’s water supplier
is not a member agency. Instead, their water supplier buys its water from MWDOC.
Family B’s representation on the MWD board, then, is via the five MWD directors for the
MWDOC - an agency that provides wholesale water to areas and customers as diverse as
the cities of Seal Beach and Buena Park, tbe El Toro and the Capistrano Valley Water
Districts, and the Santa Ana Heights Water Company and the Southern California Water
Company. MWDOC’s directors must first look out for the wholesale water needs of their
agency, and then needs of all their wholesale customers, before they get to all the Family
Bs in their district. Two families, right across the street from each other, vastly different
representation on the MWD board.
How SHOULD THOSE IN CHARGE MAKE DECISIONS?
Once the membership on the board is resolved, the question is how should they make
decisions. Under MWD’s current governance system, that means determining whether or
not there should there be weighted voting on the board, and if so how the votes should be
weighted.
Background
The original draft legislation introduced by Senators Johnson and Swing provided that
each member agency would have one vote for every 15,000 population.* In 1925, the
California Senate, in one of its first amendments to the proposed MWD Act, changed the
vote allocation to one vote for each $10 million dollars of assessed value. Again, the
rationale presumably was that because the initial construction of the Colorado Aqueduct
and the appurtenant facilities would be financed with local property tax revenues, those
agencies with the greatest financial burden should have a greatest voting presence on the
board. The $10 million threshold for votes remains in place to this day.
’ For a more complete history of the formation of MWD, see Appendix.
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40 California Research Bureau, California State Library
In addition, the Senate limited each agency to not more than 50 percent of the total votes.
Without this limit, the City of Los Angeles would have held 82 percent of the votes on the
original board. This 50 percent limit, too, remains in place, though because of the relative
growth in assessed value of other member agencies, the limit has long ceased to be a
constraint.
Finally, the Act as adopted required that for member agencies with more than one
representative on the board, that their directors must vote as a block. The rationale
apparently was to force each member agency to take a unified position on every issue
before the board. This restriction held until 1968 when it was repealed by Assembly
Member Carley Porter’s AI3 923.35 It is not clear precisely why Assembly Member Porter
wanted to repeal block voting. Still, many member agencies strongly urge their
representatives on the board to vote as a block, at least on “important” issues.
Discussion
The MWD Board of Directors engaged former Attorney General John Van de Ramp in
January 1998 to help them work through some of its governance issues.* As part of that
process, Mr. Van de Ramp surveyed the board members about their views on alternative
methods of allocating votes. Board members representing 15 member agencies
responded.+ For member agencies with more than one representative, some presented a
single member agency response, for others, individual directors responded separately.
Two sets of survey questions are particularly relevant here. One asked respondents to
rank in order of preference alternative methods of allocating votes. The other asked
respondents to identify the single factor or combination of factors (and relative weights)
they preferred for allocating votes. Respondents were given the following potential
factors from which to choose:
IO-year water sales by volume (acre-feet)
Cumulative water sales by volume (acre-feet)
Cumulative total financial contribution, adjusted for inflation
Cumulative total financial contribution, not adjusted for inflation
Cumulative contributions to capital, adjusted for inflation
Cumulative contributions to capital, not adjusted for inflation
Current population
Assessed valuation
l For more details on MWD’s current efforts to resolve its governance problems, see page 45.
’ This discussion is based on a draft summary of results dated April 14, 1998. Responses received by Mr.
Van de Kamp after this date are not reflected here.
California Research Bureau, California State Library 41
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42 California Research Bureau, California State Library
The survey results show a general dissatisfaction with the current system of one vote for
every $10 million assessed valuation. Only one agency supported the current system over
any other system. However, while the dissatisfaction of the current system seemed
widespread, there was little consensus on an appropriate alternative. Six of the eight
factors were both someone’s most preferred (rank 1 or 2) and someone else’s least
preferred (rank 7 or 8) option. By a 2 to 1 margin, respondents preferred using a
combination of factors to using a single factor. However, there was little consensus
among those prefetring multiple factors as to which combination and in what proportions.
Interestingly, the different approaches lead to very similar results. As shown in Table 14,
the three member agencies with the most votes, Los Angeles, SDCWA, and MWDOC,
remain the top three vote holders under most alternatives. (The exception is cumulative
water sales, where Los Angeles drops to fifth behind West Basin MWD and Central Basin
MWD.) Agencies currently holding around one percent of the vote or less generally
remain holding around one percent or less. Indeed, according to MWD staff, few votes in
the history of MWD would have been reversed under any of the alternative voting
structures examined to date.
There is one alternative - ten-year water sales - which would push the combined voting
power of the top three agencies above 50 percent. It is also possible that under some of
the other alternatives they would hold over 50 percent in the relatively near future. Some
have suggested that to limit the power of the larger agencies, votes should be capped at no
more than 15 percent for any one member agency.
Notable by their absence are options that might help resolve the current conflict between
SDC WA and some of the other member agencies. Such options might include assigning
votes based on relative dependence on MWD. Other options notably absent were to
assign votes based on preferential rights or simply one vote per director.
A number of directors question the relevance of the current discussion. They take two
approaches. One group makes the case that MWD has bigger problems than weighted
voting. To their minds, time spent talking about alternative voting rules is time better
spent trying to resolve more pressing governance issues.
Another group takes a more results oriented perspective. They argue that no matter how
voting rules change, nothing will really change. “The big guys stay big - the little guys
stay little.” Besides, they note, motions of the board rarely go to a full weighted vote.
Generally motions are decide by a voice vote with perhaps one or two member agencies
asking their votes to be recorded as abstentions or contrary to the majority decision.
Others counter that the one vote per $10 million of assessed value is clearly inequitable.
As noted previously, property tax revenue now accounts for about 9 percent of MWD’s
gross annual income. They argue that regardless of its relevance in the past, assessed
valuation no longer reflects the relative burden each agency carries.
.--
California Research Bureau, California State Library 43
Observations
Despite the current level of interest, vote apportionment is not important until MWD’s job
is clearly defined, and those best suited to oversee MWD’s operations are identified. Only
if MWD’s job is limited to meeting the needs of the member agencies and only ifall
member agencies have at least one representative on the board of directors does the
current discussion of weighted voting even begin to make sense.
Weighted voting for board members is important only if all representatives are not created
equal and it is important to capture the nuances of this inequality in the governance
structure. Moreover, weighted voting is not the only available tool. For example, super
majorities (e.g., two-thirds votes) are often required to protect minority interests. The
appropriate questions then are:
(1) Why is this inequality important to the effective governance of the agency?
(2) How does this inequality affect the effective governance of the agency?
(3) What is it about weighted voting that makes it the most effective tool to resolve (1)
and (2)?
If the answers to these questions are not obvious to all, then perhaps weighted voting is
not appropriate.
The results of Mr. Van de Kamp’s survey are consistent with information gathered through
the author’s interviews with board members, senior MWD staff, and other MWD
observers. That is, there seems to be little agreement among the member agencies on the
proper way to apportion votes. Indeed, there are a number of directors who question the
need to even discuss changing voting rules. The question “What’s broke?” is often raised.
Nonetheless, the question of the equity of the current system does seem legitimate. It is
not clear why one vote per $10 million of assessed value is still appropriate. If, after
resolving everything else about MWD’s governance, the current governance system
remains, then changing or eliminating the current vote allocation system probably will
make sense.
--
44 California Research Bureau, California State Library
CURRENT EFFORTS TO REFORM MWD
Two groups, MWD and the California Legislature, are trying to resolve some of MWD’s
governance issues. At times, members of each of these two groups have appeared
antagonistic towards the other, The press has carried many stories detailing claims and
counter claims. Not surprisingly, neither group seems to trust the other to solve the
problems.
MWD
The MWD board has taken a three-pronged approach to resolving its governance issues:
l Van de Kamp Consultations
l Strategic Planning
l John Carver Process
Van de Kamp Consultations
In January 1998, the board engaged former Attorney General John Van de Kamp to act as
a mediator and provide advice to the board’s Chair. Through a series of internal reports
and board workshops, the board considered changes in board size, voting structure, and
general board operations. On July 14, 1998, the board voted to support legislation to
change the threshold for additional members from 3 percent to 5 percent. This would
change the size of the board from 51 to 38 members.
Strategic Planning
MWD initiated a strategic planning process in January 1998. Through this process, the
board hopes to clarity and refine MWD’s mission. To facilitate this process, MWD has
hired Pricewaterhouse Coopers and the Rand Corporation; Pricewaterhouse Coopers as a
prime contractor and Rand as a subcontractor.
The consulting team is developing three issue papers, due September 1998, which will:
1. Address broad water policy issues, e.g., is water a commodity or public resource;
2. Describe global and domestic trends in utilities industry, e.g., deregulation of the
power and gas industries; and
3. Analyze the current dynamics at MWD, e.g., wheeling rates and member agency
relations.
Meanwhile, Pricewaterhouse Coopers is conducting research on MWD’s role in Southern
California water. The consultants intend to interview a great many people knowledgeable
about MWD or California’s water resources management, as well as prominent civic
leaders. The goal of these efforts is to analyze all the governance issues and provide an
objective baseline for further deliberations.
California Research Bureau, California State Library 45
In Late September, MWD plans to hold a two-day board workshop on governance. The
purpose of the workshop is for the board to review, validate, and discuss the findings and
to explore the more fundamental public policies related to MWD and water resources
management. Then, in October, the board plans to hold a one-day workshop to set the
stage for developing about six alternative visions of MWD. After the workshop, Band
will develop the six or so visions. For each vision, Rand will identify approximately 12
practical implications. Once Band develops these visions, the board intends to hold broad
public hearings on the visions. The goal is for the board to select a vision by the end of
December 1998. This would complete Phase One. In Phase Two, MWD plans to
restructure itself in line with its new vision.
John Carver Process
To help the board operate more efficiently, MWD has hired governance specialist John
Carver. Mr. Carver’s approach is to:
l Develop “Ends” policies - which define the organization’s policy objectives; and
l Define “Executive Limitations” - which define the scope and limitations of
management.
Mr. Carver has held three workshops for the board, which has begun applying these
concepts to its own structure. The board expects to take greater advantage of Mr.
Carver’s expertise once Phase One of the Strategic Management Plan is complete.
CALIFORNIA LEGISLATURE
MWD is a creation of the Legislature, and not just in a technical or legal sense. The
Legislature took a very active role in defining MWD when it was first created.*
Consequently, the Legislature can play a very legitimate role in reforming MWD.
There are three bills currently active in the Legislature that would affect MWD’s
governance.+ They are::
l Senate Bill 1875 (Hayden)
l Senate Bill 1885 (Ayala)
l Assembly Bill 1919 (Thompson)
l For a history of the formation of MWD, including the Legislature’s role, see Appendix.
’ There were two other bills introduced this session that have died. SB 926 (Ayala) and AB 928
(Thompson) both would have reduced the board to 15 members to be appointed by the Governor with
Senate confirmation. Neither bill cleared its house of origin.
: This information was accurate as of 8/14/98
46 California Research Bureau, California State Library
Senate Bill 1875 (Hayden)
This bill changes specific aspects of MWD’s governance. The bill has two main
governance themes, refinement of MWD’s mission and ethics reform.
Under SB 1875, MWD’s mission would be implicitly expanded to place “increased
emphasis on sustainable, environmentally sound and cost-effective water conservation,
recycling, and groundwater storage and replenishment measures.” The bill calls for MWD
to take a number of specific measures to help achieve this expanded mission. The bill
further requires MWD, each year beginning February 1,2000, to submit to the Legislature
a report on the progress that it is making in achieving these goals.
Besides expanding or clarifjGng MWD’s mission, SB 1875 directly addresses the ethics of
MWD and its member agencies. The bill would require MWD to establish and operate an
Office of Ethics. It would require the office to adopt rules regarding internal disclosure,
lobbying, conflicts of interest, contracts, campaign contributions, and ethics. The bill
would also prohibit MWD and its member agencies from contracting for “opposition
research” on elected officials who vote on MWD policies. It would also prohibit similar
contracts concerning advocacy groups or interested parties that may have matters pending
before the board or its member public agencies. SB 1875 would enhance, not replace,
MWD’s current ethics policies.
Senate Bill 1885 (Ayala)
The initial focus of Senator Ruben AyaIa’s SB 1885 was on the size of the MWD board
and relative voting strength of the member agencies. As introduced, the bill would have
limited the size of the MWD board to one representative per member agency. Member
agencies would no longer be entitled to additional representatives for each 3 percent of
MWD’s total assessed value. In addition, the bill would have frozen each member
agency’s votes at the December 3 1, 1998, level.
Recently, Senator Ayala amended out the provisions changing the board’s size and voting
rules. The bill currently includes just language that “it is the intent of the Legislature to
review the makeup of the Board of Directors of the Metropolitan Water District of
Southern California and to make proper changes determined to be necessary.” The
Senator’s stated purpose is to take this bill to a conference committee to work out a
compromise with MWD.
Assembly Bill 1919 (Thompson)
Assembly Member Bruce Thompson’s AI3 19 19 makes no assumptions about the answer
to MWD’s governance issues. Instead, AI3 1919 would create a 17-member “Special
Commission on the Metropolitan Water District of Southern California” to identify the
strengths and weaknesses of the MWD Board and to investigate alternatives. The
Commission would consist of the Legislative Analyst, the Director of the Department of
Water Resources, and 15 additional members who would represent specific interest
groups.
California Research Bureau, California State Library 47
Upon enactment, AB 19 19 would require the Commission to submit a report to the
Legislature and the Governor by April 1,200O. The Commission’s report must address a
comprehensive list of governance issues, including recommendations regarding:
l The appropriate number of board members
l The appropriate process for selecting board members,
l Whether members should serve full-time or part-time,
l Whether members should be subject to a code of ethics, and what that ethics policy
should contain.
l Whether to keep MWD’s voting allocation system or adopt some alternative system.
l Mechanisms to ensure that the MWD Board is diverse regarding ethnicity and gender.
l Any other issues relating to MWD governance.
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48 California Research Bureau, California State Library
CONCLUSIONS
As noted in the introduction, it seems that much of the current debate has been focused on
symptoms of problems, and not the sources of the problems. Some examples:
l There has been much debate regarding the proposed water transfer between SDCWA
and the IID and the actions and reactions of various parties. While questions of ethical
behavior are clearly important, the root cause of the conflict stem from a fundamental
disagreement on what MWD’s job is and is not. SDCWA and others believe MWD
job is to be a source of supplemental water for the region, amongpossible other
sources. Others believe MWD’ job is to be the sole source of supplemental water.
This distinction is not trivial, and it is this lack of consensus that led to the current
conflicts.
l A number of people observe that MWD has sizable unrestricted reserves and question
MWD’s resolve to keep rates low for the ratepayer. While not specifically addressed
in this report, this issue again gets to what is and is not MWD’s job. If MWD’s
principal job is to meet member agency needs, then there could be advantages to
MWD carrying large reserves instead of each member agency. However, if MWD’s
principal job is to provide water at the lowest possible cost, then perhaps the rate
structure needs adjusting.
l There have been a number of questions regarding the appropriate size of the board. In
particular, some feel that the board would operate much more efficiently with fewer
members. It is generally true that smaller boards operate more efficiently than larger
boards. And, efficiency is an important goal in designing or reforming a governance
structure. However, efficiency is a question of ensuring things are done right. The
more important governance issue is ensuring that the right things are done. By
focusing on size, one avoids the question of who is best suited to oversee the
organization. It might be the case that only representatives of each member agency
can ensure MWD achieves its mission. However, if it is not, then simply changing the
number of board members is a largely meaningless exercise.
These issues illustrate the need to address the root governance issues, and not simply the
symptoms.
The current conflicts between SDCWA and other member agencies warrant special
comment. Some have complained that SDCWA is trying to destroy MWD. In their view,
SDCWA has received a number of benefits from MWD in the past and ought to be
grateful for those benefits. They complain that SDCWA is looking for special treatment
California Research Bureau, California State Library 49
because it is the largest customer. In essence, they complain that SDCWA is trying to
change the status quo fundamentally, and MWD with it.’
What these critics ignore is that under the status quo, SDCWA has the most at risk and
with only 15.7 percent of the vote, simply has not power within MWD to reduce that
risk.+ No other agency is as dependent on MWD for water AND as disadvantaged by the
preferential water rights rules. If MWD faced a 20 percent supply shortfall and, for some
reason, the board did not declare a water emergency under 99350 et seq., SDCWA would
be in a potentially dangerous situation. If just one member agency pressed its preferential
rights, the dominos would begin to fall, numerous law suits and counter suits would be
filed, and SDCWA could be facing a 50 percent shortfall. Given its situation, it would be
both irrational and irresponsible for SDCWA not to try to improve its water supply
reliability. If SDCWA is unable to improve its reliability within MWD, then it must do so
outside of MWD.
‘he maxim form follows function fits. To resolve MWD’s governance problems, it is
important to answer each of the three questions:
(1) What is and is not MWD’s job?
(2) W’ho is best suited to ensure MWD does this job properly?
(3) How should (2) make these decisions?
Considering just (l), there are at least three key issues:
l Should MWD be the sole supplier of supplemental water to Southern California?
l What should MWD’s official rules under the MWD Act be for allocating water during
periods of drought?
l Whose interests should MWD primarily represent - member agencies, retail water
agencies, end users, the taxpayers, or someone else?
It might well be that in answering these questions, it is found that the current system
requires just a little fine-tuning. Nonetheless, it might just as easily be that such an
investigation would lead to a dramatically different governance structure. The outcome
depends at least in part on who is and is not answering the questions.
However MWD’s job is defined, there are many legitimate questions regarding member
agency equity and financial security for MWD. Still, it is possible to change or clarify
MWD’s mission and still protect common goals. For example, one concern is that if
member agencies can transfer water from outside the MWD service area, potential water
sellers could play one member agency against another to get a higher price and therefore
increase profits. One solution would be for MWD to act as a broker for any such
l They also assert that SDCWA representatives have acted unethically. That is a separate issue.
’ Moreover, it is doubtful that SCDWA could form a coalition of similarly affected agencies with
sufficient vote strength to change their situation.
50 California Research Bureau, California State Library
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transfers. Sellers could be required to make their offer to MWD. Then, MWD, if not
interested itself, would act as an agent for any and all interested member agencies. The
challenge facing the board is to find similar solutions to other such legitimate concerns
Despite its best intentions, it is not at all clear that MWD can resolve these issues itself.
One problem is that given the broad range of perspectives, finding common ground will be
difficult - this is especially true since there is not consensus on whether or not there even
is a problem in the first place. However, there is another obstacle, and that related to the
character of MWD problems. In interviews, the author asked if the sources of MWD’s
problems were structural or personality. While a few said it was all personality or all
structural, most responded that it was about 50-50. If this is the case, it is probably the
worst possible proportion if MWD is to resolve its problems itself. Personalities would
likely get in the way of resolving structural problems, and structural problems would likely
hamper resolving personality conflicts.
However, even if MWD could resolve these issues itself, it is not clear that it would do so
consistent with the interest of either the local general publics or the greater statewide
public in Southern California water resources development. Indeed, it is difftcult see how
such a member agency driven board would ever possibly conclude that MWD’s principal
job is something besides simply meeting member agency needs. If these larger interests
are important, then perhaps someone besides MWD should lead the governance resolution process.
Finally, resolving what MWD’s job is and is not will have significant implications beyond
that of governance. It will redefine how MWD does business. For example, if MWD
officially loses its monopoly status, then there will be increasing pressure by some member
agencies (and perhaps others) to use MWD’s facilities to move “non-MWD” water to their
service areas. This, in turn, might lead MWD to abandon its current “postage stamp”
water rate, forcing it to separate the price of water supply from the price of water delivery,
and pricing each separately. Conversely, if MWD is to maintain its monopoly status, it
might need to explore the demand average versus dry year supplies and price each
separately.
Clearly defining MWD’s job is critically important. Moreover, the ramifications of
MWD’s newly defmed role will extend well beyond MWD’s service area. Water systems
in the west are highly interconnected. What MWD’s job is and is not, and how MWD
does this job, could affect water resources management throughout California, the
Colorado River States, and even into Mexico. It is essential, therefore, that all
stakeholders be comfortable with whatever new role MWD takes on.
California Research Bureau, California State Library 51
52 California Research Bureau, California State Library
APPENDIX: A BRIEF HISTORY OF THE FORMATION OF MWD
_-
Origin of MWP
Southern California is blessed with a wonderful year-round climate, but not an abundant
water supply. So, it did not take long for the rapid growth of the late 1800s to begin to
tax these meager supplies. The City of Los Angeles, under the direction of famed
superintendent of the water system William Mulholland, looked outside of Southern
California’s coastal plain for a solution. In 1913, Mulholland’s efforts were rewarded
when he first delivered Owens Valley water to the San Fernando Valley. While this
provided water for Los Angeles, it did nothing to alleviate problems of other Southern
California cities.
These cities were faced with few options. They could:
l Continue to try and make do with existing resources,
l Annex into Los Angeles to get Owens Valley water, or
l Band together and, like the City of Los Angeles, look outside of the coastal plain for
their own supplemental supply.
Many cities chose the latter. In Pasadena, on September 17, 1924, about 250 delegates
from thirty-eight Southern California cities and communities* met and formed the
Colorado River Aqueduct Association. At their first meeting, they established a
committee to draft “an act authorizing the formation of a public district for the purpose of
bringing water from the Colorado River.. . .“37
James H. Howard, City Attorney of Pasadena, and W. B. Mathews, Special Counsel of the
Los Angeles Public Service Commission, drafted the legislation that would create the
Metropolitan Water District of Southern California.
The Legislative Battles
On January 19,1925, Senator A. B. Johnson of Imperial County and Senator Ralph E.
Swing of San Bernardino County introduced the legislation as SB 178. The Los Angeles
Daily Times later referred to the bill as introduced as “one of the most radical and
socialistic proposals ever submitted to the State Legislature.“3*
The Senate heavily amended the bill. On March 17, it amended the bill in 80 places. On
April 10, it amended the bill another 18 places. Many of the amendments corrected
l These communities included: Altadena, Arcadia, Banning, Beverly Hills, Covina, Coachella Valley,
Colton, El Segundo, Fullerton, Glendale, Glendora, Huntington Park, Imperial Irrigation District, Los
Angeles, Long Beach, Ontario, Pasadena, Perris, Redlands, Riverside, San Bernardino, San Dimas, San
Fernando, Santa Ana, Seal Beach, South Pasadena, Tujunga, Van Nuys, and Whittier. The
representative from San Diego, Mayor Bacon, was unable to attend due to illness.
California Research Bureau, California State Library 53
technical errors or omissions. However, most of the amendments were substantive. Key
amendments included the following. The Senate established the purpose of metropolitan
water districts as “developing, storing and distributing water for domestic purposes . . .“.
Another amendment expanded the definition of “municipality and city” to include any
water district incorporated for the service of water in other than municipal territory. The
Senate reduced the amount of debt metropolitan water districts could incur from the
proposed 20 percent of assessed valuation to 15 percent. They added a section that
created a preferential right for cities and municipalities to buy water from metropolitan
water districts in the same ratio as their assessed value bore to the assessed value of the
entire district. The Senate changed the appointment and allocation of directors for each
city from one director with one vote for every 15,000 population and appointed by the
legislative body of the city to one director per city, who shall be the chief executive officer
of the city and will have one vote for each $10 million dollars of assessed value. The
Senate further provided that each director shall have at least one vote and no director shall
have more that 50 percent of the votes. It also limited the MWD’s power of eminent
domain, prohibiting it from condemning water or water rights.
The Senate passed the bill on April 15 on a 29 to 9 vote. Four of the Senators voting
against the measure represented Los Angeles County. They argued that it was premature
to create the district. “What need is there of legislation nine years in advance of any
possible availability of water from the Colorado Rivet?” ask Senator Harry Chamberlin of
Los Angeles.39 Chamberlin also complained about the excessive taxing ability of the
district.
On April 22, the Assembly defeated the bill on a 33 to 44 vote. It seems the bill failed
because of opposition by private power companies to the creation of public power
projects. It was apparently a nasty fight. However, accounts of why the bill failed
conflict. The Los Angeles Daily Times reported that the measure failed:
because a majority of the members of the California Assembly are convinced that those
in charge of the Los Angeles Bureau of Power and Light are actuated by political
motives and have sought to coerce and intimidate other communities in Southern
California.”
The Times further reported pressure to vote for the bill came from “Boss” Al McCabe of .
San Francisco and “the representatives of a Los Angeles Newspaper who sought to
intimidate by threats of public attack Assemblymen now seeking election to the Los
Angeles City council.“*’ The Los Angeles Examiner countered that the measure lost for
two reasons. First, was the apparent vote trading made in support of Senator
Chamberlin’s controversial reapportionment bill.* Second, was “the presence of the
greatest number of hired men of the power companies ever seen to grace the Assembly.“42
Interestingly, after the defeat of the Swing-Johnson bill, public sentiment began to shift
strongly in favor of the bill. Historians point to two key developments. First, on June 2,
*.
* The reapportionment bill failed as well.
54 California Research Bureau, California State Library
..C
1925, the City of Los Angeles held a municipal election. Among the measures was
Proposition 7. The Los Angeles Daily Times character&d the measure as a “straw ballot
to determine popular sentiment toward the project to bring Colorado River Water here.“‘3
The measure passed by a 6 to 1 margin. Then, in the gubernatorial race, Clement C.
Young successfully ran on a platform of strong support for all the Colorado River
projects. Then, in his inaugural speech on January 4,1927, Governor Young called for the
Legislature to authorize the formation of a metropolitan water district to permanently
solve southern California’s water problems.
Two weeks later, on January 17, 1927, Senator Swing introduced SB 132. This bill was
essentially the last amended version of SB 178 from the previous session. There were
only two differences: The previous version had a two-stage limit on taxing authority -
1 cent per $100 of assessed value the first four years, 5 cents thereafter. The new bill
deleted the lower limit for the first four years. The other difference was that the legislative
body of the city would appoint directors, as originally proposed.
The Senate again amended the bill, though not as heavily as in the prior session. On
March 29, it amended the bill in 13 places; on April 1, it amended the bill another three
places. Again, some of the amendments were technical clarifications. Substantive
amendments focused on the appointment process for directors and further limitations on
the district’s power of eminent domain. The Senate again changed the appointing
authority, finally becoming appointed by the chief executive officer subject to approval of
the governing bodies of the cities. The Senate also allowed cities to appoint one
additional director for each $200 million of assessed value, so long as the cities’ directors
voted as a block. They also changed the voting rules, eliminating the requirement that
directors representing at least four cities vote in favor for a measure, in addition to the 50
percent of the total number of votes for all members. Finally, they further limited the
MWD’s eminent domain powers, excluding the right to condemn water or rights to water
stored within reservoirs.
With these changes, the bill saw smooth sailing. It passed the Senate on April 6 without a
dissenting vote. It cleared the Assembly April 27 by a 63 to 2 vote. Governor C. C.
Young signed the Metropolitan Water District Act into law 14 days later.U
Incorporation
On February 15, 1928, the City of Pasadena started the formal incorporation process. In
accord with the Act, it adopted an ordinance calling for the organization and incorporation
of a metropolitan water district and named the cities proposed to be included in the new
district (see table 15). It also set the stage for a validation suit. That November, cities
would hold elections to determine if they would join the new district. To trigger a lawsuit
that would test the validity of the Act, Bessie Chamberlain, Pasadena’s City Clerk, refused
to sign bonds for construction of the aqueduct. The city then immediately sued her in the
California State Supreme Court. On August 3, 1928, the Supreme Court found the Act
valid.“’ .--
California Research Bureau, California State Library 55
r Table 15
Cities Identified in Pasadena’s MWD Incorporation Ordinance
and the Results of the Local Incorporation Election, if Held
Result 1 Citv Result 1 City
Fullerton P Anaheim
Arcadia
P Beverly Hills
P Burbank
P Colton - Covina - Culver City
Key: P Passed
Source: “Starts Test of Water Dist
IWater District”, Pasadena Star News, December 29, 1928, p. 1
P Glendale
F Glendora
P Los Angeles
Ontario
F Orange
P Pasadena
Result 1 City
Redlands
Riverside
P San Bernardino
P San Marino
P Santa Monica
P Santa Alla
Whittier
’ Failed - No Incorporation Election Held
:t”, Pasadena Stat New, February 14, 1928, p. 1; “Cities Meet for
On November 6, 1928, voters in 11 of the 13 cities holding incorporation elections voted
to join the new district. On December 28, with 122 representatives of southland
municipalities looking on, 11 of the 13 directors of new district met to formally organ&
the Metropolitan Water District of Southern California.
The directors selected W. 0. Harris of San Bernardino to be the temporary Chairman and
Pasadena as their temporary headquarters. By the board’s third meeting, on February 9,
1929, the permanent organization of the District was formed and its top appointments
made: William P. Whitsett of Los Angeles was Chairman of the board, Franklin Thomas
of Pasadena as Vice-Chairman, and S. H. Finely of Santa Ana was Secretary. From then
on the meetings were held in the Los Angeles Department of Water and Power building.
The City of Los Angeles held most of the power in the early years. As shown in Table 16,
Los Angeles had half the votes and could seat half the directors.*
In 193 1, when it came time to author& construction bonds, two cities, Colton and San
Bernardino withdrew. However, four additional cities joined (Compton, Fullerton, Long
Beach and Torrance), thereby comprising the “original thirteen” cities.
-,
l Los Angeles didn’t actually seat ten directors until February 1961. By then, the board had expanded to
38 directors.
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56 California Research Bureau, California State Library
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Table 16
Directors and Voting Rights
January 1,1929
City Assessed
Valuation
Allowable Percentage Number of Votes on
of District Directors the Board
Burbank
Beverly Hills
Glendale
Los Angeles
Pasadena
Santa Monica
San Marino
San Bernardino
Colton
Anaheim
$23,393,795
$59,412,840
$74,424,860
$1,863,559,210
$124,126,620
$63,923,940
$14,607,065
$18,239,928
$2,168,099
$7,878,185
1.03% 1 2
2.61% 1 6
3.28% 1 7
82.02% 10 40*
5.46% 1 12
2.81% 1 6
0.64% 1 1
0.80% 1 2
0.10% 1 1
0.35% 1 1
Santa Ana $20,336,065 0.90% 1 2
Total $2,272,070,607 100.00% 20 80
* Limited to 50% of total by the Metropolitan Water District Act. Without the limitation, Los Angeles
would have had 186 votes. I Source: Franklin Thomas, “Metropolitan Water Distribution in the Los Angeles Area” Annals of the
American Academv of Political and Social Science. Vol. 148. Part Il. March 1930. D. 8 I
California Research Bureau, California State Library 57
58 California Research Bureau, California State Library
ENJ.I NOTES
i Two excellent histories of MWD and its governance are:
Jerome W. Milliman, The History, Organization and Economic Pmblems of the Metropolitan Water
District of Soufhem California, Unpublished Ph.D. Dissertation, UCLA, 1956.
Kazuto Oshio, Urban Water Diplomacy: A Policy History of the Metropolitan Water Supply in the
Twentieth Cenrury Southern California, Ann Arbor, MI: University Microfilms International, August
1992.
* Statutes of 1969, Chapter 209. (The Metropolitan Water District Act is not codified.)
3 Metropolitan Water District Act $61.
4 Ibid. $51.
’ Ibid. 552.
6 ibid. $55.
’ Ibid. $51.
’ Ibid. $54.
9 Administrative Code of the Metropolitan Water District of Southern California $2200.
lo Ibid. $2201.
‘I Ibid. $2400.
‘* Ibid. $2401.
I3 Ibid. $2100.
I4 Ibid. $64 10.
Is California Water Code $350.
I6 California Water Code 4353.
” California Water Code $357.
‘* Blue Ribbon Task Force, Final Report, Los Angeles: MWD, January 1994, p. i
I9 Ibid., p. 73.
*’ Ibid.
” Ibid., p. 74.
** For a review of MWD’s responses to the Blue Ribbon Task Force’s recommendations, see : California
State Auditor, Metropolitan Water District of Southern California : A Review of Evaluations and Audits
Conducted By Other Entities, Sacramento, Calif. : California State Auditor, 1996.
23 “Senators Go After Water District,” San Diego Union-Tribune, March 4, 1988, p, A-3.
24 Senate Local Government Committee, Bill Analysis: AB 1919 (Thompson), May 22, 1998.
2s “Southland United for Colorado Aqueduct,” Los Angeles Daily Times, September 20, 1924, Part 11 p. 1.
26 Oshio, op. cit. p. 83.
California Research Bureau, California State Library 59
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” Board of Directors, Metropolitan Water District of Southern California, “Statement of Policy of the
Metropolitan Water District of Southern California”, January 9, 193 1.
** Board of Directors, Metropolitan Water District of Southern California, “Laguna Declaration:
Statement of Policy”, December 16, 1952.
29 Metropolitan Water District Administrative Code $4202.
3o Metropolitan Water District of Southern California, Integrated Resources Plan Assembly, Assembly
Statement, San Pedro, Calif.: MWD, June 9-11, 1994, p. 4.
3’ Metropolitan Water District Administrative Code $4201.
32 See, for example, Mark G. Popovich, ed., Creating High-Performance Government Organisations, San
Francisco: Jossey-Bass Inc., 1998.
33 A very accessible discussion of the strengths and weaknesses of special districts is in April Manatt,
What’s so special about special districts? : a citizen’s guide to special districts in California, 2nd ed.
Sacramento, CA : California State Legislature, Senate Local Government Committee, 1993. A more
theoretical discussion can be found in Kathryn A. Foster, TJre Political Economy of Special-Purpose
Government, Washington D.C.: Georgetown University Press, 1997; especially Chapters 2 & 8.
34 See, for example, The Conference Board, Corporate Boards and Corporate Governance, Report
Number 1036, 1993.
35 Statutes of 1968, Chapter 167.
36 This appendix draws heavily on: Oshio, op.cit; and Metropolitan Water District, History and Annual
Report for the Period Ending June 30, 1938, Los Angeles, Calif.: The District, 1939.
37 “Southland United for Colorado Aqueduct”, Los Angeles Daily Times, September 20, 1924, Part 11 p. 1.
38 “Water District Act”, Los Angeles DaiJy Times, April 22, 1925, Part II, p. 4.
39 “Water District Bill Wins”, Los Angeles Daily Times, April 16, 1925, Part I, p. 2.
4o “Power Bureau’s Water District Bill Defeated,’ Los Angeles Daily Times, April 23, 1925, Part 1, p.1.
4’ Ibid.
4’ “Cities’ Water Defeated By Lower House” Los Angeles Examiner, April 23, 1925, p. 1.
43 “Vote For Water Bonds” Los Angeles Daily Times, June 1, 1925, Part II, p. 4.
44 Statutes of 1927, Chapter 429.
45 City of Pasadena v. Chamberlain, 204 Cal. 653 (1928).
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60 California Research Bureau, California State Library
!$~~:‘L’,~~jN\g 1, fl -._^- --L-_--I-- r i> I: \ ‘5 , I’ I tl $ f,
Governance of the
Metropolitan Water District
of Southern California:
Options for Change
,-
By Dennis E. 0 ‘Connor
DECEMBER 1998
CRB-98-018
.-
CONTENTS
CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................... i
INTRODUCTION .......................... . ............................................. . ......................................................... 1
THIS REWRT ........................................................................................................................................ 1
CAVEATS ........................................................................................................................ ......................2
THE GOVERNANCE DEBATE ............................................................................................................ 4
PREVENT REPEAT OF TURMOIL ........................................................................................................... ...4
PREPARE FOR FUTUREPROBLEMS ......................................................................................................... .
CHANGE TO PREFERREDFORM ............................................................................................................ 10
SUMMARY .......................................................................................................................................... 12
WHOSE INTERESTS SHOULD MWD SERVE? .............................................................................. 13
CURRENTSTATUS~~CONFLICTS ......................................................................................................... 13
THEQUESTIONINDETAIL ................................................................................................................... 15
IMPLICATIONS FOR GOVERNANCE& STRUCTURE ................................................................................. 16
WHAT SHOULD BE MWD’S ROLE IN MEETING SOUTHERN CALIFORNIA’S WATER
NEEDS” ................................................................................................................................................. 18
CURRENT STATUS & CONFLICTS ......................................................................................................... 18
THE QUESTION IN DETAIL ................................................................................................................... 20
IMPLICATIONS FOR GOVERNANCE& STRUCTURE ................................................................................. 25
WHO IS BEST SUITED TO MAKE THESE POLICIES & HOW SHOULD THEY MAKE
DECISIONS” ......................................................................................................................................... 26
CURRENT STATUS & CONFLICTS ......................................................................................................... 26
THE QUESTION IN DETAIL ................................................................................................................... 28
IMPLICATIONS FOR GOVERNANCE& STRUCTURE ................................................................................. 30
ALTERNATE GOVERNANCE STRUCTURES ................................................................................ 31
INTRODUCTION ................................................................................................................................... 3 1
FINELY FOCUSEDSTATW QUO ............................................................................................................ 32
SUPPLY & DELIVERYJOINT AUTHORITY.. ........................................................................................... 34
CORPORATE MODEL ........................................................................................................................... 36
REPRESENTATIVEGOVERNMENT ......................................................................................................... 38
STATE BOARD.. .................................................................................................................................. 40
No MWD - DWR OPERATES ............................................................................................................. 42
ENDNOTES .......................................................................................................................................... 44
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California Research Bureau,Califomia State Library i
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INTRODUCTION
The Metropolitan Water District of Southern California (MWD) is the largest water
district in the state. The Legislature originally created MWD in 1927 to provide
Colorado River water to Southern California. Today, MWD provides about 60 percent of
the water to 16 million people in Los Angeles, Orange, Riverside, San Bernardino, San
Diego, and Ventura counties.
This is the second in a series of reports exploring the governance of MWD. The first
report was The Governance of the Metropolitan Water District of Southern California:
An Overview of the Issues.’ In that report, I described MWD’s current governance
structure. I then explored the root sources of MWD’s conflicts. The three key issues I
discussed were:
(1) What is and is not MWD’s job?
(2) Who is best suited to ensure MWD does this job properly?
(3) How should (2) make these decisions?
I found that there is no consensus among MWD’s member agencies of what is and is not
MWD’s proper role in providing water to Southern California. Indeed, it is this lack of
common purpose that has led to many of MWD’s internal conflicts.
Considering just (l), I found there were at least three points of contention:
l Should MWD be the sole supplier of supplemental water to Southern California?
l What should MWD’s official rules under the Metropolitan Water District Act be for
allocating water during periods of drought?
l Whose interests should MWD primarily represent - member agencies, retail water
agencies, end users, the taxpayers, or someone else?
THIS REPORT
On August 24, 1998, the Conference Committee on SB 1885 asked the California
Research Bureau (CRB) to “prepare a report that identifies options for resolving the
[MWD’s] governance problems.“’ This report does just that. I begin by exploring why
some people contemplate changing MWD’s governance. I then explore a slightly
modified list of questions posed in the last paper:
l Whose interests should MWD serve?
l What should be MWD’s role in meeting Southern California’s water resources needs?
l Who is best suited to make and oversee these policies?
l Dennis E. O’Connor, The Governance of the Metropolitan Water District of Southern California: An
Overview of the Issues, (Sacramento: California Research Bureau, California State Library August 1998)
California Research Bureau, California State Library I
Each of these questions is multifaceted, and I discuss each topic in relation to the various
motives for changing MWD’s governance.
I conclude the report by examining six optional governance structures for MWD. Each
structure reflects a different set of answers to the questions posed above. Some of these
structures are original, some are similar to those suggested by others.
CAVEATS
Some caveats are in order.
Options - Not Recommendations
This is not an exhaustive list of options. There are many variations on these themes. My
intent is to illustrate how different sets of answers could lead to different organizational
and governance structures. Also, some of the options presented are provocative. The
CRE3 neither recommends nor embraces any one option. Rather, my goal is to help frame
and stimulate debate.
Legal Implications
Virtually all of the options presented would require changes to the law - almost certainly
to the Metropolitan Water District Act and, depending on the option, perhaps others.
However, I make no attempt to identify which laws would need to be changed for any
given option. Similarly, I do not assess how easy or difficult implementing any given
option might be. I only observe that when everyone agrees that a law needs to be
changed a particular way, it is easily changed. However, if there is disagreement on the
need or manner of change, otherwise simple changes can be difficult if not impossible.
Equity Adjustments
Changing MWD’s governance structure could raise equity issues. Member agencies
joined MWD with certain expectations. They assumed a financial risk and contributed
money to join MWD. In return, they understood that their priority to water would be
based on contributions to capital, their voting strength would be determined by assessed
value, etc. Assuming the Legislature decides to change MWD, the question is this. Is
there a legal, ethical or moral requirement to compensate member agencies for their
changed state? Member agencies that feel somehow diminished under the new
organization would likely answer yes, and would seek some form of compensation or
other recognition of their changed situation. However, those who find status quo
inherently unfair are likely to resist such efforts. At this point, I simply note that this
could be a major issue for the Legislature to resolve, and resolving it could be
challenging.
2 California Research Bureau, California State Library
Not A Stand Alone Report
This report is the second in a series. I assume the reader is familiar with MWD, its
governance structure, and the debate of the last two or three years. Throughout this
report, I try to note where in the previous report one can find additional information.
However, if you are unfamiliar with MWD or are interested in a more full discussion
MWD:s governance and organization structure, I strongly encourage reading the first
report.
* Copies of the report are available from the California Research Bureau or can be down-loaded from our web site under “CRB Reports” at http://www.librarv.ca.gov/.
California Research Bureau, California State Library 3
THE GOVERNANCE DEBATE
Over the past two yer+us, a number of legislators have expressed interest in changing
MWD’s governance. Moreover, these legislators are not alone. Those interested in
changing MWD include various retail and wholesale water agencies, a number of public
interest groups, and some MWD member agencies.
People contemplate changing MWD’s governance for a variety of reasons. Most of these
reasons fall into one of three categories:
l To prevent a repeat of the internal turmoil of the last 2-3 years;
l To prepare MWD for future policy problems; or
l To change to a more preferred form of governance.
I discuss each of these in turn.
PREVENT REPEAT OF TURMOIL
MWD has just weathered a three-year storm of controversy. Most of the struggle
stemmed from the alleged reactions of MWD and some of its member agencies to a
proposed water transfer between the San Diego County Water Authority (SDCWA) and
the Imperial Irrigation District (IID). However, as I described in the first report, much of
the discord focused on symptoms of problems, not the sources of the problems.
At its root, two issues drove the conflict. One was the legal mechanism by which MWD
allocates water during periods of shortage. The other was the question whether MWD
was the sole supplemental water source for Southern California or a supplemental water
source among potential others.
It appears that MWD is now on a path to resolve these two issues. However, successful
resolution of either issue is by no means guaranteed. Moreover, even if these issues are
resolved, nothing prevents similar conflicts from recurring without conforming changes
to MWD’s governance system.
Drought Water Allocations
Under the MWD Act,2 each member agency has a preferential right to water.+ This right
is based on each member agency’s total historic payments to MWD for capital
expenditures, excluding payments for the purchase of water. Under the preferential rights
l For example, three bills were introduced in 1998 to change MWD’s governance. They were AB 1919
(Thompson), SB 1875 (Hayden), and SB 1885 (Ayala). Governor Wilson signed SB 1885 into law as
Chapter 78 1, Statutes of 1998. For a description of each bill, see O’Connor (1998), pp. 46-48.
’ For a more full explanation of preferential rights, see O’Connor (1998), pp. 19-24.
-.
4 California Research Bureau, California State Library
rules, during periods of water shortage, MWD would allocate water in proportion to each
agency’s capital payments, instead of historic water use, dependence on MWD, or some
other measure of water needs.
The problem with the preferential rights system is twofold:
l Some member agencies rely on MWD for much more water than they have
preferential rights to. For example, Las Virgenes MWD bought over 80 percent more
water from MWD than would have been allocated under preferential rights during
1984/85 - 1994/95 .3 Consequently, any shortage allocated under the preferential
rights system would disproportionately reduce their supplies. For such agencies, it
would be a one-two punch: First, reducing to the preferential rights level, then
reducing to the allocated shortage level. In the case of Las Virgenes MWD, a 20
percent reduction in MWD supplies allocated under the preferential rights rules could
lead to a more than a 44 percent reduction in Las Virgenes MWD’s total supplies.4
l There is no mechanism under the MWD Act for such highly dependent water users to
gain greater rights.
MWD is working to develop a “Water Surplus and Drought Management Plan.” The
plan’s goals are:
l Avoid mandatory import water allocations to the extent practicable.
l Equitably allocate imported water on the basis of agencies’ needs.
Considerations to create an equitable allocation of imported water may include:
l Impact on retail consumers and economy
l Reclamation/Recycling
l Conservation
l Population and economic growth
l Investment in local resources
l Change and/or loss of local supply
l Participation in Metropolitan’s Non-fkrn (interruptible) programs
l Investment in Metropolitan’s facilities
l Encourage storage of surplus supplies to mitigate shortages and improve water quality.’
MWD is negotiating the plan with the member agencies. The current goal is for the
board to adopt the plan by spring of 1999.
An agreement on a new drought policy could go a long ways towards reducing tensions
regarding preferential rights. However, MWD policies legally are subordinate to state
laws - laws such as the MWD Act and the sections defining preferential rights. As long
as preferential rights are a part of the MWD Act, the threat of preferential rights remains.
Moreover, while a majority on the board supports the new policy’s goals, board approval
of a final agreement might be a different matter. So, while the current situation is
hopeful, there is no guarantee that the drought allocation rules will be resolved to
everyone’s satisfaction.
California Research Bureau, California State Library 5
“The” Vs “A ” Supplemental Supplier
When MWD first formed in 1928, the Legislature defined MWD’s job as “developing,
storing and distributing water for domestic purposes.. . .” The Act said nothing about
whether MWD was responsible for providing all sypplemental water or whether MWD
had a monopoly on providing supplemental water. So, over the years the MWD board
refined its job.
One key refinement was the board’s 1952 Laguna Declaration. The Laguna Declaration
did two things. First, it committed MWD to meeting all supplemental water supply needs
for Southern California. Second, it declared that MWD would be the sole supplier of
supplemental water for the region. With minor modification, the Laguna Declaration is
still the official policy of the MWD.”
The problem is that the last drought demonstrated that MWD, despite its best intentions,
simply could not meet all the supplemental water supply needs of Southern California.
Consequently, SDCWA began looking for another source of supplemental water, and
found it with IID.
The saga of MWD and the SDCWA-IID transfer is long and complicated, with hints of
conspiracies, wealthy out-of-state land barons, and political intrigue.’ However, MWD
and SDCWA have finally worked out their differences, with the help of $235 million
from the State of California. In essence, SDCWA will deliver IID water to MWD’s
Colorado River intakes in exchange for a like amount of water from MWD.
However, while MWD and SDCWA have agreed to terms for this exchan 7 e, the
SDCWA-IID deal is by no means certain. A number of key steps remain. And, the
agreement does nothing to resolve the fundamental question, “Is MWD the sole supplier
of supplemental water to Southern California, or is it a supplemental supplier, among
others?’ So, while the current agreements have lessened the animosities significantly for
now, until this question is resolved, the potential for future conflicts remain.
PREPAREFORFUTUREPROBLEMS
With the turmoil of the last few years possibly behind us, many are interested in ensuring
that MWD will be better able to solve the water resources problems ahead. Legislators,
board members, and others have identified a number of issues likely to be problems in the
future. These include issues such as:
l Supplemental water is the water local areas need in addition to their local supplies to meet local water
demands.
’ Not the least of which being reaching a side agreement with Coachella Valley Water District regarding
its priority to Colorado River water.
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6 California Research Bureau, California State Library
l How to accommodate the water needs of fast growing areas
l How to provide more reliable drought year supplies
l How to increase usable local supplies
l How to increase the efficient use of water
l How to ensure adequate drinking water quality
For most of these issues, the question is not so much what should be done but rather who
shouldpay for it. A large number of board members already are concerned that MWD’s
current rate structure is inequitable.* A slightly smaller number of board members also
complain that MWD does not allow member agencies to buy only those services that they
want. Consequently, member agencies often pay for benefits they do not want or cannot
receive. These two issues are different aspects of the same problem: MWD needs to
better match its services with specific local needs and charge just for those services.
A second major problem facing MWD will be to become better at avoiding or resolving
disputes. As one board member commented, “the MWD board as currently structured
has demonstrated that it does not consistently and competently tackle key policy issues,
such as preferential rights, menu of pricing, voting formulas, etc.“9 Many of those
interested in changing MWD believe that MWD governance structure ensures that
conflicts will continue to be a problem.
Match Services With Local Needs & Price “Appropriately”
The 27 member agencies of MWD are distinctly different.* For example:
Some, like the City of Beverly Hills, rely on MWD for virtually all their water
supplies - others, like Upper San Gabriel Valley MWD, get less than 10 percent of
their water from MWD.
Some, like the City of Los Angeles, rely on MWD more for dry year supplies -
others, like the MWD of Orange County, can shift almost entirely to local supplies
during dry periods.
Some, like the City of San Marino, are completely built out with zero population and
service area growth over the last 40 years - others, like Calleguas MWD, are today
annexing additional high population growth areas into their service area.
Some, like the Three Valleys MWD, overlie polluted or otherwise unusable
groundwater basins - others, like MWD of Orange County, overlie groundwater
basins with large usable supplies.
Some, like Calleguas MWD, receive only state water project (SWP) water from
MWD - Others, like SDCWA, receive only Colorado River water.
Some, like the City of Pasadena, provide primarily retail water directly to their
customers - others, like Central Basin MWD, provide mostly wholesale water to a
mix of cities, public water agencies, and private water companies, each with their
own unique needs.
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* For a more thorough discussion of member agencies, see O’Connor (1998), pp. 5-14.
California Research Bureau, California State Library 7
This diversity leads to different water resource needs. If MWD is to fulfil1 all these
needs, MWD will need to offer a variety of different services. Some examples:
l Member agencies highly dependent on MWD supplies are interested in immediately
improving their average and dry year reliability.
l Fast growing areas are interested in MWD developing additional supplies and
transportation capacity.
l Member agencies overlying polluted or otherwise unusable groundwater basins are
interested in groundwater cleanup or desalting facilities.
l Member agencies receiving principally State Water Project water are interested in
advanced water treatment technologies to prevent disinfectant by-products such as
trihalomethanes.
l Member agencies receiving principally Colorado River water are interested in
receiving water with lower total dissolved solids (TDS).
No single member agency wants or needs all these different services. And, few member
agencies want to help pay for services that do not benefit them. For example, build-out
areas are unlikely to want to pay for additional supplies and transportation capacity. Yet,
MWD’s current structure does not allow agencies to pick and choose among the services
they do and do not want.
However, even if MWD allowed member agencies to pick and choose services “cafeteria
style,” member agencies would still pay for services they did not receive. MWD’s rate
structure distributes all of MWD’s costs among all member agencies. While the rate
structure does attempt to adjust for different service requirements (for example, through
ready-to-serve charges) there is no direct link between MWD charges and services
received.
As one board member observed:
Growth should pay its fair share, but this is not the only problem. Different rates could
be charged based upon real factors of economic reality, not some of the “trumped up” special rates that now exist where benefits are provided by [MWD] without a quidpro
quo back to the MWD.”
Further complicating the issue are questions about how Proposition 218 will affect water
agencies. At this point: it is not clear how the courts will resolve all the outstanding
Proposition 2 18 issues. However, court decisions might force MWD to tie each member
agency’s water charges more closely to the costs of providing water to that specific
member agency. Such a decision could force MWD to change how it does business.
* For an assessment of the current debate, see Dean Misczynski, Proposition 2 I8 After Two Years, (Sacramento: California Research Bureau, California State Library, October 1998).
8 California Research Bureau, California State Library
Avoid or Resolve Future Disputes
If the events of the last three years have shown anything, it is that MWD has a difficult
time resolving major disputes itself. MWD was apparently unable or unwilling to help
SDCWA improve its regional water reliability to SDCWA’s satisfaction. SDCWA was
similarly unable or unwilling to drop its pursuit of higher regional water reliability. It
was only when, at the suggestion of the Director of the Department of Water Resources
(DWR), the Legislature stepped in with $235 million that the hostilities began to cool.
Still, the issues need not be so fundamental to lead to significant conflict. There are times
in practically all democratic institutions when the minority strongly disagrees with a
decision by the majority. MWD is no exception. Recent examples of where a vocal
minority on the Board pushed hard for a different decision include:
l The Board’s decision to retrofit two of its water treatment plants for ozonation - a
number of board members argued MWD was getting too far ahead of the regulations.
l The Board’s decisions regarding “wheeling” charges* - the issue was so contentious,
it went to court.
l The board’s decision to construct the “Inland Feeder” pipeline - some board members
remain seriously concerned about the need for the project and whether there are
options to stage the project or otherwise reduce costs.
Moreover, not all disputes are internal. Occasionally MWD decisions are contrary to the
interests of other groups. For example, the board decided to bar body contact recreation,
such as swimming, water skiing, and personal watercraft, at its Eastside Reservoir. This
decision was over the objections of nearby communities that wanted expanded water
recreation opportunities in order to simulate additional local economic development. The
reaction of the local area was so strong that they turned to their local legislator, who has
twice introduced bills to overturn the decision.
There are at least two strategies to prevent these kinds of problems in the future:
l Avoid ConfIicts - for example, the board could more flexibly tailor services with
needs, the legislature could clarify MWD’s role in providing certain services, or the
legislature could mandate that MWD use a specific pricing system.
l Resolve Conflicts - for example, the board could allow member agencies to petition
the board to address certain issues before they become critical, the board could
develop a formal process to resolve disputes once they became critical, or the
legislature could establish a formal mediation process.
Changing MWD’s governance structure could promote either of these strategies.
* Wheeling means to move or transport water. A wheeling charge is the price to move water from one
point to another.
California Research Bureau, California State Library 9
CHANGE TO PREFERRED FORM -
Southern California has changed greatly since MWD incorporated in 1928, and so too has
MWD’s role in supplying water to Southern California. Membership in the district has
grown from 13 cities in two counties in 193 1, to 14 cities, 12 municipal water districts,
and one county water authority in six counties today. The service population has grown
from 1.5 million to over 16 million. In addition to water from the Colorado River, MWD
now delivers water from Northern California via the State Water Project and water from
other areas of the State through various water transfers. Moreover, MWD now functions
not just as a water wholesaler, but as a regional water resources manager, providing
technical assistance and sponsoring water conservation, groundwater conjunctive use,
desalination, and water recycling projects.
Southern California, its water needs, and MWD’s role in meeting those needs have
changed greatly over the past 70 years. However, in that time there have been few
changes to MWD’s governing structure. The few substantive changes that have been
made generally have been reactions to the economic growth of Southern California
instead of changes made in anticipation of future demands. Simply stated, to some,
MWD is facing 21” Century problems w&an archaic, 1920s governance structure.
Advocates of reforming MWD often hold at least one of two sets of goals:
l Adopt an alternate governance structure, or
l Reduce or eliminate the amount of government.
Alternate Governance Structures
When MWD formed in 1928, there were few examples of regional governments beyond
the county level from which to learn. Consequently, the designers of MWD largely had
to guess what structure would work best. One of their biggest challenges was to balance
two major concerns. One concern was to keep the City of Los Angeles, which had the
greatest population and largest property tax base, from dominating MWD. However,
because MWD would finance construction of its facilities through property taxes, the
other concern was to give those who would pay the most into MWD the most
representation. The compromise was to give each member agency one board member,
assign extra board members and weight votes based on assessed value, and to limit the
City of Los Angeles to 50 percent of the vote.*
Seventy years later, the need to balance those concerns is gone. The City of Los Angeles,
with just over 20 percent of the vote, cannot dominate MWD alone. In fact, the three
largest member agencies combined hold less than 50 percent of the votes.+ There is also
little need to tie representation to the property tax base, as property taxes now account for
l For a history of the formation of MWD, see O’Connor (1998), pp. 53-57
’ This would be true even if votes were assigned on the basis of population. See O’Connor (1998), 41-43
IO California Research Bureau, California State Library
only 9 percent of MWD’s annual revenues. With the elimination of these two concerns,
many are questioning the need to keep MWD’s current structure.
Now, local governments such as MWD are relatively common and take on a variety of
forms. For example, some, like joint-powers authorities, are confederations of local
governments that, through contracts and memoranda of understanding, agree to work
cooperatively towards a specific common purpose. Others, such as the Fort Ord Reuse
Authority, expressly include representatives from all the affected local governments.
Still others, like the Regional Water Quality Control Boards, include representatives of
not only affected local governments, but also representatives from water using industries,
nongovernmental organizations, and the general public. But perhaps most relevant, is
that for over 95 percent of all water agencies in California, the representatives stand for
election.
Each of these approaches has its advantages and its advocates. Moreover, if the
Legislature were to create a MWD today, it would likely take some variant of one of
these alternative forms.
Less Government
Many advocate for smaller and more streamlined governments - what some refer to as
“rightsizing.” “ Rightsizing governments focus funding on core functions, deliver these
services more efficiently, abolish unnecessary work, and reduce or eliminate nonpriority
programs.“’ ’ Advocates argue that rightsizing has many benefits, such as:
0 Save taxpayers money
l Increase flexibility
l Improve service quality
l Increase efficiency and innovation
l Streamline and downsize government
l Improve maintenance’*
Promoters of these views offer a number of tools for reducing government or
governmental costs. Some tools include: I3
l Contracting out or “outsourcing” - governments contract with private organizations
to provide specific services.
l Commercialization or “service shedding” - governments stop providing certain
services.
l Corporatization - governments reorganize internally along business lines.
l Private infrastructure development and operation - governments finance capital
projects using “build-operate-transfer” and “build-own-operate” arrangements.
Rightsizing, streamlining or otherwise reducing the size of MWD would likely require
changing MWD’s governance structure.
,-
California Research Bureau, California State Library I1
SUMMARY
People contemplate changing MWD’s governance for a variety of reasons. Some of
these reasons are:
1. To prevent a repeat of the internal turmoil of the last 2-3 years, for example by
clarifying:
l Drought water allocations, and
a “The” vs. “A” supplemental water supplier.
2. To prepare MWD for future policy challenges, such as
l Matching services with needs and pricing accordingly, and
l Avoiding or resolving disputes.
3. To change to a more preferred form of governance, for instance
l Alternate governance structures, and
l Less government.
Motives are important - but they only get you so far. There are whole sets of questions
that one must answer to describe fully the necessary characteristics of a preferred form of
governance. In the next three sections, I explore these sets of questions.
12 California Research Bureau, California State Library
WHOSE INTERESTS SHOULD MWD SERVE?
Perhaps the most important question for any organization is, “Whose interests does it
serve?’ The answer affects not only how an organization is structured or organized. It
inherently shapes the organization’s corporate philosophy and fundamental way of doing
business. l4
CURRENTSTATUS& CONFLICTS*
Most people have a simple and immediate answer to the question whose interests should
MWD serve - the person at the tap. However, there are many other potential players.
For example, there can be four layers of water providers between the source of water and
the tap. Take a person in Simi Valley. The water flowing through his or her tap could
have been captured first in Lake Oroville by DWR. DWR would have then transported
the water through the state water project (SWP) to MWD, which is one of 29 SWP
contractors. MWD would have then delivered the water to Calleguas MWD, which is
one of MWD’s 27 member agencies. Next, Calleguas MWD would have delivered the
water to one of its 23 retail customers - the Southern California Water Company.
Finally, the Southern California Water Company would have delivered to one of its
12,000 customers in Simi Valley.
However, it is even more complicated than that. For example, a retail water supplier can
be:
l A MWD member agency - such as the City of Pasadena
l A city sub-member agency - like the City of Carlsbad
l A public water agency - such as the b-vine Ranch Water District, or
l A private water company - like the California American Water Company.
Each water provider undoubtedly takes a different view as to whose interests it
represents. For example, private water companies need to be concerned about their
shareholders. Municipal water districts focus on their submember agencies. Locally
elected directors of water districts are concerned about the voters in their electoral
district. Mayors are concerned about all water users in their city. And so on.
For most MWD board members today, the issue of whose interest should they or MWD
represent is almost a non-question - but not the way you might think. When asked the
question whose interest board members should represent, most board members I
interviewed answered “my member agency .” Some would suggest that they also had a
regional perspective or perhaps a ratepayer perspective. However, first and foremost they
were responsible to their member agency - otherwise they would be tired or wouldn’t be
l For background on the mission of MWD, see O’Connor (1998), pp. 29-3 1
California Research Bureau, California State Library I3
reappointed to the MWD board. There was one set of notable exceptions to the member
agency perspective - those elected to their member agency board and who then were
appointed by their member agency to the MWD board. Those directors answered “the
ratepayers - otherwise I won’t be reelected.”
While individual board members might represent their member agency’s interests, MWD
through its voting system represents the interests of a majority, but not necessarily all,
member agencies. Moreover, it is an unusual definition of majority. Because MWD uses
a weighted voting system based on assessed valuation, the interests of the largest and
wealthiest agencies carry greatest weight.* Consequently, MWD can and does take
positions contrary to those of some of its member agencies. As one board member
complained, “small agencies are often ignored in terms of their operational needs and
long-term reliability issues.“”
Moreover, not all those involved in Southern California water issues share the board’s
dominant view that its focus ought to be the member agencies. Representatives of sub-
member agencies, agencies that are members of MWD member agencies, assert that the
board is not considering their interests. This could occur because their member agency
was on the minority side of a vote, or because the submember agency took a minority
position within its member agency. Private water companies, other non-MWD water
agencies, and other governmental agencies similarly talk about how MWD’s decisions
affect their water needs or policies. In addition, a number of community and advocacy
groups and individuals maintain that MWD is often unresponsive to their issues as well.
Some board members concede that there is “the perception of arrogance in MWD by our
‘sub agencies.“‘16 A number of board members also acknowledge that the board has a
“weak relationship with the 16 million .we serve.“” As one board member commented,
“MWD is organized to be accountable to member agencies. If MWD is to be accountable
to actual users, major changes should be sought.“”
Significance To The Proponents Of Change
While the question of whose interests should MWD serve seems unimportant to MWD’s
board, it is critically important to many that propose changing MWD’s governance. In
the 192Os, the Legislature created MWD because the people, the citizens of Southern
California wanted additional water.+ Seventy years later, are the people at the tap still
MWD’s focus? To many interested in changing MWD, the answer is no.
To some, an important requirement of government is that to both be and appear to be
representative of the affected interest group. To them, identifying the affected group is
* For a discussion of MWD’s weighted voting system, see O’Connor (1998), pp. 15- 17
’ Some will argue that the principal motives behind creating MWD were something else, such as
developing additional electrical supplies, encouraging real estate development, etc. The historical record
is not clear as to the credibility of such hypotheses. What is clear is that MWD was sold to the voters as
the way to improve local water supplies.
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necessary to ensure proper representation. If that group is not clearly represented on the
governing body, the governing body is suspect.
The question of whose interests should MWDserve is important to others who ponder
changing MWD as well. For example, many concerned with avoiding the turmoil of the
past believe that if MWD truly represented the needs of all member agencies, it would
have found ways to better deal with SDCWA’s dry year water supply needs. Similarly,
People who want to prepare MWD to better deal with future conflicts are interested
because a change in MWD’s focus could lead to a better match between MWD’s services
and local needs.
THE QUESTION IN DETAIL
In the previous discussion, I broadly described the current debate. However, the
question, “Whose Interests Should MWD Serve?’ has a number of aspects. Let’s quickly
run through the full set of questions and potential answers.
Whose Interests Should MWD Serve?
Keep in mind that while the answer to this question can be a specific group of persons,
companies, or agencies, it need not be. For instance, it could be either an egalitarian mix
or a hierarchical listing of different interest groups.*
l Member Agencies - Currently, MWD principally serves its member agencies.
Proponents of MWD maintaining the member agency perspective make the following
points:
l The effort to create MWD was by the original member agencies.
l Member agencies are MWD’s customers.
l Member agencies made the investments in MWD to make it what it is today.
l Wholesale Agencies In Service Area - Another option is to focus on all wholesale
agencies that buy water, either directly or indirectly, from MWD. One argument in
favor of this is that wholesale agencies could be stuck between MWD policies and the
needs of their retail customers.
l AZ1 RetaiZ -As retail agencies are the next to the last user of water, strong arguments
can be made for their being the focus of MWD.
l Closest to the customer
l Have to balance MWD supplies and costs with local supplies and costs
l They are the ones who hear the complaints when something goes wrong with the
supply or costs
l Most attuned to the needs unique of their water users
* For example, for over fifty years the Johnson & Johnson Company has had such a hierarchical list. Its
Credo places customers first, employees second, communities third, and stockholders last. See Johnson
& Johnson. “Our Credo”. httr,://www.ini.com/who is ini/cr usa.html.
California Research Bureau, California State Library 15
All Ratepayers - Another potential focus is the end user of water. That is, the
ultimate customer. After all, they are the ones paying the water rates and demanding
water (in the economic sense). As noted in MWD’s 1993 Strategic Plan, “From the
ratepayer’s viewpoint, both regional and local water resource projects and programs
will be paid for from the same pocket.“19
Southern California General Population - As more water becomes reused, it
becomes more difficult to determine precisely who is the end user of a specific water
molecule. In addition, ample and efficiently used water has numerous third party
benefits to the region as a whole, beyond those of the end users. Both of these
suggest a broad Southern California focus.
All of California s General Populatidn - MWD acquires its water principally from
the State Water Project and the Colorado River. Because of the statewide competing
demands and uses of these two water sources, decisions made by the MWD board can
affect the water resources of regions as far removed as Redding, San Diego, Oakland,
and El Centro. As the State holds water in trust for all the citizens of California, and
since MWD’s water resources decisions could affect most of the State’s population, it
might make sense for MWD’s focus to be all of California’s citizens.
Others Governmental and Non-Governmental Organizations (NGOs) Afected By
Water - There are still others affected by MWD’s decisions. Such groups include:
l Sewage treatment
l Flood control districts
l Watershed conservation groups
l Environmental interests
l General business
Some or All of the Above?
In meeting the needs of the targeted interest group, should MWD focus on meeting the
needs of the all members, or a majority? And if it is a majority, should it be a simple or
super majority?
What Should Be the Timeframe of Reference?
From the perspective of time, whose interests should MWD serve? Currently, it is not
clear. Is it the taxpayers of days gone by, whose investments are still considered in
establishing preferential rights of water? Is it the current set of property taxpayers, whose
assessed value of property determines representation and voting strength on the board?
Alternatively, is it the future water users, for whom MWD is actively working to shore up
the value of its currently unexercised contractual rights to water?
IMPLICATIONSFORGOVERNANCE &STRUCTURE
The answer to the question, “Whose interests should MWD serve?’ has profound
implications to MWD’s governance and how it does business. These include:
16 California Research Bureau, California State Library
l Representation On Board - Who needs to be on the board and what should be their
qualifications or other distinguishing characteristics ? Presumably, representatives of
those whose interests MWD is to serve would be prime candidates for membership on
MWD’s board. If they are not clearly represented, then perhaps the board needs to
change.
l Scope and Mix of Services - Does MWD simply provide water supply and delivery, is
it a full-service water resources manager, or is it something in between? This
depends in large part on the needs of those whose interests MWD is to serve.
l Pricing Of Services - Strictly commodity based pricing or all through the property
tax? Single fixed rate for all customers or prices proportionate to cost? Depending
on whose interest MWD is to serve, the answers might differ.
l Place Within Water Policy Hierarchy - Should MWD be the maker or leader of water
policy or should it respond to policy made by others? The more broad the interest
base, the easier it is to justify MWD taking a leadership role.
California Research Bureau, California State Library 17
WHAT SHOULD BE MWD’S ROLE
IN MEETING SOUTHERN CALIFORNIA’S WATER NEEDS?
Once one has identified whose interests MWD should serve, the question is how should
MWD meet their needs?” This is more than simply identifying MWD’s scope and mix
of services. It also includes determining:
l The principal function of MWD (simple supply 8z delivery to regional water
manager);
l The type of water (imported, local surface, groundwater, etc.) with which MWD is
concerned;
l Whether MWD has a monopoly in the services it provides; and
l MWD’s placement in the hierarchy of water policy-makers.
For most of MWD’s history, its role was clear - it simply supplied, treated, and delivered
imported water to its member agencies. This water came first from the Colorado River,
and then later from the State Water Project. While MWD aggressively defended its
rights to these water supplies, for the first 50 years of MWD’s history, MWD was
essentially a supply taker.
It was also during this period that MWD declared its monopoly on supplemental water.
While the seeds of this position were sown in the 30s and 40s the formal statement was
the 1952 “Laguna Declaration.” This declaration did two things. First, it committed
MWD to meeting all supplemental water supply needs for Southern California. Second,
it declared that MWD would be the sole supplier of supplemental water for the region.*
However, this all changed beginning with the failure of the Peripheral Canal in 1982.
To assure regional water reliability MWD, expanded into less traditional services. In
1982, MWD began providing incentive payments to help fund local water reclamation
projects. Since in 1988, MWD has provided substantial incentive payment for
conservation projects undertaken by member agencies. In 1991, MWD started
encouraging local agencies to treat and make use of degraded groundwater resources by
contributing up to $250 per acre-foot each year of yield for recovered groundwater.
MWD also no longer relies solely upon SWP and Colorado River water. It has executed
a water transfer with IID, a pilot program with Palo Verde for dry-year water supplies,
and is looking for other opportunities for future water transfer and conjunctive use
projects. In addition, MWD is building its own reservoir. It plans to store water during
l For a history of MWD’s mission, see O’Connor (1998), pp. 29-3 1
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periods of plentiful supplies to be used later during periods of drought or emergency
disruptions of SWP or Colorado River due to earthquake or other disasters.
MWD has expanded into other areas as well. For example, MWD’s Business
Development Office is an attempt to market some of MWD’s areas of expertise as a way
of generating additional revenue. Some of these areas include expertise in management
of large water systems, a new method of desalinating seawater, and a method of detecting
the Cryptosporidiurn parasite in treated or untreated water.
However, despite all these efforts, MWD was unable to meet the Laguna Declaration’s
commitment to meeting all demands for supplemental water during the last drought.
So, the question remains, what should MWD’s proper role be? The range of opinions is
vast.
As noted in the previous report, most of MWD’s board members, MWD’s senior staff,
and other interested observers say MWD’s mission is to “provide supplemental water to
Southern California.” However, while they use largely the same words, they often mean
something quite different. Some mean that MWD’s job is to “Be the soEe supplemental
water source for Southern California.” This view is consistent with the Laguna
Declaration. Conversely, others mean MWD’s charge is to “Be a supplemental water
source for Southern California, among others.” This is an important difference of
opinion and the board seems to be split evenly. At the September 24, 1998 MWD board
workshop, the consultants posed the question, “Is the Laguna Declaration still valid?’
Comments posted by the directors during their main group input session ran about 50/50
in favor or opposed to the Laguna Declaration.
While many board members support activities like the local programs, the further away
MWD gets from simple supply, delivery and treatment, the less broad the support. As
one board member commented, “Met has no business being in the ‘business
development’ business.“*’ Some board members further suggest MWD has no business
being involved in water conservation, wastewater reclamation, or water transfer projects
either. Instead, they believe MWD’s job is simply to deliver whatever SWP and
Colorado River water is available to its member agencies.
On the other hand, MWD’s 1995 Integrated Resources Plan Assembly argued,
“Metropolitan is Southern California’s lead agency in regional water management.“**
This suggests that MWD needs to maintain and possibly expand its current wide mix of
services. For example, proponents of this view contend:
l MWD sponsored water conservation projects provide local, regional, and statewide
water supply benefits.
l Only MWD has the financial resources to facilitate the diverse kinds of projects
needed in the region.
l Only MWD has the technical expertise necessary to resolve many of the water
problems of the region.
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Part of the concern about the breadth of MWD’s services is because MWD provides them
on an all or nothing basis. That is, member agencies cannot decide not to participate in
some program or project. Instead, MWD spreads the costs of all of its programs across
all member agencies - regardless of the benefit to any given member agency.
However, there is perhaps an even more fundamental question. Is MWD subservient to
the member agencies, or are the member agencies subservient to MWD?
In describing the relationship of member agencies with each other, directors of MWD,
staff, and others use a variety of terms, each with different implications. Some describe
MWD as a confederacy of member agencies. This suggests agencies coming together for
the joint exercise of some power. This also implies independence on the part of the
members of the confederacy. Others describe MWD as a partnership, suggesting perhaps
a greater level of interactions, though members of the partnership are not subordinate to
MWD.
Yet, some imply that MWD is somehow superior to the member agencies. As one board
member commented, “an effective regional agency requires members to accept a
subordination of some of the parochial thinking.“23
Significance To The Proponents Of Change
The question of MWD’s role in meeting Southern California’s water needs is critical to
those interested in changing MWD’s governance. Most are pondering change in large
part because of perceived problems with MWD’s current role. For some, the problem is
that MWD’s role is either ambiguous, needs clarifying, or perhaps simply reaffirming.
For others, MWD’s role is clear, it’s just wrong.
For those wanting to avoid repeating the problems of the past, the “The” vs. “A”
supplemental supplier debate is key. Much of the MWD/SDCWA dispute revolved
around whether MWD had a monopoly on supplying supplemental water. Many who
wish to avoid future conflicts are interested in clarifying MWD’s customers and services
as well. The more clear the responsibilities and the more flexibility all parties have to
meeting needs local water needs, the greater MWD’s ability to avoid conflicts. Those
interested in smaller, less costly government are especially interested in MWD’s services
and responsibilities. Proponents of this perspective see many opportunities to privatize or
otherwise open the Southern California water market to competition, if only MWD’s role
was properly constrained.
THE QUESTION IN DETAIL
Again, I have just touched on the broad policy issues regarding MWD’s proper role in
meeting Southern California’s water needs. The detailed questions and potential answers
follow.
20 California Research Bureau, California State Library
What Should Be MWD’s Function?
The question here is what is and how broad should MWD’s job be. The answers range
from simple supply and delivery to full service regional water manager.
Simple Supply & Delivery - The original concept MWD was for it to be simply a
supply and delivery agency. This might or might not include water treatment.
Nothing in the historical record suggests that when the Colorado Aqueduct
Association formed in 1924, that they intended MWD to do anything more than bring
whatever Colorado River water they had rights to into Southern California. MWD
today could simply deliver whatever State Water Project and Colorado River water is
available through existing contracts and agreements.
Aggressive SuppZy & Debvery - MWD could take an aggressive stance in a simple
supply and delivery role, by actively searching for additional supplies outside of
Southern California and through water transfers, deliver it to member agencies.
Regional Facilitator - MWD could, besides providing supply and delivery services,
also facilitate regional cooperation and mediate regional disputes. In addition, it
might act as a broker for water transfers. It would do so, however, only when
specifically asked.
Regional Planner - MWD could be the regional water planner. In this role, besides
supply and delivery services, MWD would coordinate the development of a regional
water resources plan. However, MWD would not implement the plan, beyond its role
as a supply and delivery agency.
RegionaZ Manager - As regional manager, MWD would provide a full range of
services, from water supply and delivery, to funding conservation projects,
reclamation projects, groundwater cleanup projects, and so on.
What Types Of Water Should MWD Manage?
This is another question where multiple selections are allowed.
Imported Water - MWD was originally formed to import water into Southern
California. This remains MWD’s principal focus.
Local Groundwater - While Some of Southern California’s groundwater basins are
under judicial control, many more are not. MWD is currently funding projects to
clean polluted groundwater basins. The question is should MWD’s management
expand to all groundwater basins. This is especially important when considering that
some of MWD’s member agencies can meet most if not all of their local demand
during drought by shifting to groundwater. If MWD managed southern California’s
groundwater basins, it could more effectively balance its resource water supply mix
during droughts.
ReclaimedRecycZed Water - MWD currently participates in water reclamation
projects only as a financial partner. MWD could become a major developer and
seller of reclaimed water.
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l Conserved Water - Currently, MWD must rely on its member agencies to implement
water conservation programs. MWD could seek authority to mandate compliance
with water conservation program. Moreover, MWD might then gain “title” to any
water conserved through a MWD funded program.
l Desalination - Desalination frequently is mentioned as a potential supply for
Southern California. MWD has built desalination plants for treating brackish
groundwater. MWD could expand the programs and, if cost effective, desalinate
ocean water as well.
Should MWD Be Sole Supplier Of Supplemental Water?
This question is closely related to the previous one. Also, while the focus recently has
been on supplies from outside MWD’s service area, this question also applies to local
supplies within MWD’s service area.
l Sources Within Service Area - During the last drought, some member agencies
considered selling some of their water to another member agency. However, MWD
moved to prevent the transfer. The question is if a member agency, though its local
resources, had surplus water during a drought period, does it have the right to sell that
water to another member agency? Or, does MWD retain the sole right to provide
supplemental water within its service area?
l Sources Outside of Service Area - Are member agencies free to acquire water from
outside of the MWD service area?* If not, what about member agencies that have
out-of-basin water rights that predate the formation of MWD, such as the City of Los
Angeles’ Owens Valley water rights? Should they be allowed to bring such water
into their service area simply because they existed first? Or should MWD’s
monopoly extend to all water brought into Southern California?
What Is MWD’s Place in the Water Policy-Making Hierarchy?
Should MWD be the chief water policy-making agency for Southern California? If so,
MWD will by definition have broad powers. Or should MWD be a policy taker? If it
should, to whom should it be subservient? Possible candidates include:
l Member Agencies - sometimes it is difficult to tell if the member agencies drive
MWD policies or vice versa.
l The California Legislature - the Legislature created MWD through the Metropolitan
Water District Act.24
l The Cal$ornia Department Of Water Resources (DWR) - DWR’s California Water
Plan is supposed to be the master plan for developing the water resources of the
state.*’
* At this point, I am only interested in the right to acquire the water. The price of wheeling water is a
separate question.
.-
22 California Research Bureau, California State Library
_- l Local Or Regional Governments - land use decisions can greatly affect water
resources needs and vice versa.
l The General Population - ultimately, all forms of government derive their power
from the people.
To Whom Should MWD Provide Services?
The list of potential customers is similar to the list of interest groups MWD might serve.
Again, the answer might include more than one group.
Member Agencies - Current practice (sort of), MWD generally does not provide
services to sub-members except with approval of its member agency.
Sub Agencies - The principal distinction here is that MWD would provide services to
sub-member agencies without seeking the approval of the corresponding member
agency.
All Southern California Agencies - MWD would provide services to any public
Southern California water agency without regard to its status within MWD.
Private Agencies - MWD would provide services to private water companies.
Other Local Governments And NGOs - MWD would provide services to public
agencies, such as park districts, as well as non-governmental organizations, such as
watershed protection groups.
.-
Full Service vs Cafeteria
The question is, must customers of MWD participate financially in all services. Or, can
they select and pay for just those services that they want.
Potential Services
To varying extents, MWD is providing most of these services now. Again, MWD could
provide some or all of these services.
l Average Year Supply: SWP/CR - MWD would provide water from the SWP and
Colorado River during average and wet years.
l Average Year Supply: Other Sources - MWD would acquire water from other sources
such as water transfers.
l Dry Year Supply: SWP/CR - MWD would draw down its reservoirs that store SWP
and Colorado River water to provide water during periods of drought. This would
include both releases from surface reservoirs and extractions of SWPKR water from
conjunctive use projects
l Dry Year Supply: Other Sources - MWD would provide dry year supplies from
sources besides the SWPKR. Such sources would include dry year transfers and
extractions of non-SNP/CR water banked in conjunctive use basins.
California Research Bureau, California State Library 23
Transportation - MWD would transport water from its acquisition point to its
delivery point.
Additional Supply And/Or Transportation Capacity In Anticipation Of Future
Demands - Built out areas might not be interested in expending additional funds for
increasing capacity that they (built out areas) will not need.
Treatment: MWD Supplies - MWD would treat the water it supplies to make it
potable.
Treatment: Local Supplies - MWD would treat local water agencies’ supply to make
it potable.
Water Conservation Cop - While MWD has strongly encouraged its member
agencies to promote water conservation, some member agencies have been more
successful than others. MWD could have the power to establish and impose water
conservation standards upon member agencies.
Transfers Broker - MWD could be the point of contact for persons interested in
transfers within MWD service area. MWD might have first right of refusal. If MWD
did refuse, MWD could then offer the transfer to any of its member agencies, then
submember agencies, then anyone.
Financial Partners In Local Programs - MWD would grant funds for local programs
that improve the local area’s water reliability or quality. This would include local
conservation programs, water recycling projects, and groundwater protection projects.
Recycling/Reclamation As Owner Operator - MWD would become a regional
reclaimed water wholesaler. MWD would build reclamation plants and sell reclaimed
water through its member agencies.
Groundwater Cleanup: As Potential Claimant To Rights - MWD would clean
impaired groundwater basins and establish an appropriative right to the then usable
groundwater.
Desalination - Developer And Marketer of Supplies OR of Technologies - MWD
would develop desalination technology. The purpose could be to either sell or license
the technology or to develop and deliver new potable supplies.
Regional Water Resources Planning - MWD would develop “The ” water resources
management plan for the entire South Coast Region. MWD’s regional plan would be
the official plan. Local agencies would be either required to develop conforming
plans, or allowed to develop independent plans, which may or may not conform to
MWD’s plan.
R&D On New Technologies - MWD would research and develop technical solutions
to a variety of its water management challenges using MWD staff and facilities. This
would be instead of contracting out for such technologies. Such research could
include water treatment technologies, water management models and software, or
groundwater monitoring technologies. In addition to using these technologies itself,
MWD would then either sell or license these technologies, or release these
technologies into the public domain.
24 California Research Bureau, California State Library
l Expertise/Consulting - For a fee, MWD would, offer its expert staff as consultants to
the local, state, national, or international water industry. Potentially, clients could be
both public and private agencies.
l Property Management - MWD owns a lot of property. MWD could actively market
access to these properties for a variety of uses. In addition, instead of simply selling
any properties deemed “excess” to current and projected needs, MWD could develop
the properties.
l Advocacy - MWD could be the official advocate for regional water issues. Such
advocacy could include:
l Lobbying
l Education
l Public outreach
l Intergovernmental affairs
Since MWD would be the official advocate for the region, MWD might be given the
power to impose sanctions for any member agency that countered the official regional
position.
IMPLICATIONSFORGOVERNANCE &STRUCTURE
The answer to the question, “What role should MWD play?’ has significant ramifications
for MWD. These include:
,-
l Representation On Board - The broader MWD’s scope of authority, the more people
will want to ensure they are represented. Moreover, the mix of services MWD
provides might have implications for the necessary qualifications of board members.
l Pricing Of Services - Under Proposition 2 18, the price of services must reasonably
reflect the costs of services. Otherwise, the fee may be a tax, subject to voter
approval. The precise application of Proposition 2 18 to water services is at this point
unclear.26 However, if some services are provided for some areas, and not for others,
it might be necessary to “unbundle” the pricing structure and more closely tie fees to
services.
.-
California Research Bureau, California State Library 25
- WHO IS BEST SUITED TO MAKE THESE POLICIES
& HOW SHOULD THEY MAKE DECISIONS?
The previous section dealt with defining MWD’s job. Now I turn to the question of who
is best suited to ensure MWD does its job properly.
CURRENTSTATUS& CONFLICTS
How does one know a good board from a bad board? In the corporate world, the key
measure is the financial return to stockholders. However, other characteristics of a good
corporate board include:
l Ability to make timely decisions,
l Ability to identify and consider alternative strategies,
l Ability to anticipate and avoid major problems, and
l Ability to adapt to changing circumstances.
In addition to those characteristics, public boards must meet other requirements as well.
These include:
l Both be and appear to be representative of the interests of the affected interest groups,
l Have an open and inclusive decision making, and
l Be fair and ethical in their dealings with the public and each other.
So, how does MWD’s current structure measure up? The answer depends greatly upon
ones perspective.*
The current system of governing MWD assumes a lot of things, including:
l MWD’s purpose is to meet member agency needs.
l To best meet those needs, each member agency must appoint at least one board
member.
l Member agencies with a greater financial stake in MWD need more representatives
and more votes on the board.
l Assessed valuation is the best measure of the financial stake.
l A three-percent (soon to be five-percent) relative share is the appropriate threshold
for additional board members.
A number of board members argue that this is how .it should be. However, as noted in the
section “Whose Interests Should MWD Serve,” a number of others believe MWD’s focus
ought to be elsewhere, such as the person at the tap. This suggests the board should
.- l For background on MWD’s board of directors and their voting rules, see O’Connor (1998), pp. 15- 18,
34-44
26 California Research Bureau, California State Library
reflect a different perspective, which further suggests someone besides the member
agencies should select the board. Two important first steps, then, are to identify what
those perspectives should be and who instead should do the selecting.
Many of MWD’s board members complain of problems with the current board structure.
At the board’s October 22, 1998 workshop, the consultants asked, “What are the
significant liabilities of Metropolitan 7” Over 40 percent of the board’s responses were
about problems with the board. These included comments such as:
l “Agency representation (voting) is no longer equitable”
l “Lack of central direction by the board”
l “Lack of interest in directors to do the homework necessary to make informed
decisions”
l “Government by ‘kitchen cabinet’, excluding open board discussions”
l “Board unwilling to discuss the ‘undiscussibles”’
a “Its lack of vision and resistance to change”27
These comments strongly suggest that the board does not have many of the
characteristics of a good board.
Many people both inside and outside of MWD note that even if each member agency had
only one director, MWD would still have a very large board. They point to research
showing that reducing the size of corporate boards makes them more efficient.2* Indeed,
a recent survey of corporate CEOs showed over 60 percent felt the ideal board had 7 to 9
members.29 This suggests that even if it is determined that MWD should have a member
agency focus, a smaller board might be desirable.
Some outside observers contend that MWD’s board is insulated from greater regional
interests. Indeed, this is a common complaint about special districts in general. The
concern is that insulated boards are not visible, and so are not representative of the
public, Some board members argue that the insulation is a good thing. They contend that
water boards lose their focus when they become “politicized.” Others outside of MWD
counter that what some call politicization is really a sign of boards grappling with the
kinds of trade-offs representative governments are supposed to make.
Generally, the populace elects governing boards of special districts. Nationally, the
populace elects the governing boards of more than half of all special districts in the U.S.3o
Here in California, the governing boards of over 95 percent of water districts stand for
election.
Significance To The Proponents Of Change
Changing MWD’s governing board means changing MWD’s form of governance.
Consequently, for those preferring alternate forms of government, these questions get to
the heart of their issue. The selection, number and qualifications of board members also
has relevance to those wanting to avoid or resolve disputes. To the extent MWD’s
governing body reflects and is united behind a common purpose, disputes at least within
California Research Bureau, California State Library 27
the board should be at a minimum. Unfortunately, these questions have little direct
relevance to those wishing to avoid the turmoil of the past. Those problems stemmed
largely from an ambiguous purpose and will be prevented more directly by resolving
MWD’s focus, role, and service mix.
THEQUESTIONINDETAIL
Again, I have just touched on the broad policy issues regarding MWD’s proper role in
meeting Southern California’s water needs. The detailed questions and potential answers
follow.
Who Selects
The answer to the question, “Whose interests MWD is to serve,” in large part determines
the person or persons that select the governing body. The interests of those selecting the
governing body should reflect interests of the group(s) MWD is to serve. Selecting
bodies and the interests they represent include the following:
l Each Member Agency Appoints - The MWD board would be composed of at least
one director appointed by each member agency.
l All Member Agencies Get A Say - Representatives of all MWD member agencies
would select the board of directors. This would be somewhat akin to stockholders
electing members to their board. In this case, member agencies would act as the
stockholders. Each member agency would have its own block of votes. Candidates
to the board would be elected by a majority vote of the votes cast. Other options
could be election by a plurality or by a super-majority.
The question of how many votes should each member agency cast is critical. If the
analogy to stockholders holds, then some measure of “shareholder equity” would be
appropriate. For example, one potential measure of shareholder equity could be the
present value of total contributions to MWD’s assets. Such assets might include not
only investments in capital, but also the value of any water rights turned over to
MWD as a condition of annexation.
l Governor/Legislature Appointments - The Governor and Legislature would appoint
the members of the board. One option would be similar to that proposed by
Assemblyman Bruce Thompson in AB 19 19 for the Special Commission on
Metropolitan Water District3’ That bill called for a 15member board, 13 members
appointed by the Governor and one member each by the President Pro Tempore of the
Senate and the Speaker of the Assembly. The Governor’s appointees would represent
specific interest groups, such as member cities, private water companies within
member municipal water districts, etc.
l General Populace - The general populace would elect members to the board.
Districts would be apportioned by population. Assuming a 7-member board, each
director would represent about 2.3 million Southern Californians.
28 California Research Bureau, California State Library
l Director of DWR - MWD would become a part of the Department of Water
Resources, similar to the State Water Project. The Director of DWR, through his or
her staff, would oversee operation of MWD.
Conditions of Appointment
After determining who selects, the conditions of appointment need to be defined. These
conditions include determining the following:
l Full/Part Time - Would board members serve either full or part time?
l Paid/Volunteer - Would board members be salaried, paid a per diem and expenses, or
volunteer their time?
l Fixed Terms/At Pleasure - Would board members serve either fixed terms or at the
pleasure of the appointing body?
Special Qualifications?
Depending on the interests MWD is to serve, board members might have to meet specific
requirements. These might include:
l Professional Background - Such requirements might be that a certain number of
directors must have specific professional skills or background. For example, the
board might have positions designated specifically for a civil engineer or a
hydrologist.
l Special Interest Group - The board might be required to have a certain number of
representatives of specific interest groups. Such groups might include:
l Member agencies,
l Submember agencies,
l Private water companies,
l Water replenishment districts,
l The Southern California business community,
l Environmental interest groups, or
l The general populace.
How Many?
The number of representatives is also important. On the one hand, there needs to be
sufficient members to ensure proper representation of the interests MWD is to serve. On
the other hand, the more people on the board, the less likely it will make decisions
efficiently.
l More Than 27 - Assuming each member agency is allowed to appoint at least one
member to the board, a key question is, “Should some member agencies have more
than one director? And if so, why ?” If the answer to the first part is “Yes”, then the
answer to “why” would provide insight into how to determine the criteria for
determining how many more per member agency. For example, assume the answer
to “why” is that some member agencies rely more on MWD for water than other
California Research Bureau, California State Library 29
.--
member agencies, and therefore are more affected by MWD decisions than others.
Then some measure of reliance would be the appropriate criterion.
l 27 - If the answer to the first part of the previous question is “No,” then the
representative interests of all member agencies are equal (though there could still be
weighted voting - see below).
l Around 13 - This is a proxy for the number of specific targeted interest groups that
might need to be represented on the board. The actual number of interests would
determine the precise number.
l 7-9 - This is the ideal size of a corporate board, according to surveys of corporate
CEOs.
l One - This is the benign dictator option. Most likely, this option would be selected
only if MWD became a part of the DWR or was completely privatized.
Voting Rules
Weighted voting for board members is important only if representatives are not all
created equal and it is important to capture the nuances of this inequality in the
governance structure. The appropriate questions then are:
(1) Why is this inequality important to the effective governance of the agency?
(2) How does this inequality affect the effective governance of the agency?
(3) What is it about weighted voting that makes it the most effective tool to resolve (1)
and (2)?
If the answers to these questions are not obvious to all, then perhaps weighted voting is
not appropriate.
IMPLICATIONSFORGOVERNANCE &STRUCTURE
The structure of MWD’s board should reflect the governance requirements of MWD. As
such, the board does not have implications for governance and structure as much as it
reflects MWD’s governance and structure. Still, the size and type of governing body
does have some further implications.
l Place Within Water Policy Hierarchy - The two extemes would be:
l If MWD was part of DWR, the MWD itself would not have any influence - any
influence would derive from the Director of DWR.
l If the MWD board was elected by the populace, each director would carry the
political weight of potentially millions of people - the Chair of the Board might
rival the director of DWR or any other water authority in California.
30 California Research Bureau, California State Library
ALTERNATE GOVERNANCE STRUCTURES
In the previous three sections, I posed a series of questions.
l Whose interests should MWD serve?
l What should be MWD’s role in meeting Southern California’s water needs?
l Who is best suited to make these policies and oversee the programs?
The answers to these questions describe what is and is not MWD’s job, its ideal
governance structure and its decision making process.
Many readers will have answered these questions for themselves as they read along. A
number might be asking themselves at this point, “So, what would MWD look like in my
ideal world?’ To help answer that, I have developed six alternate governance structures
based on my assessment of likely answers. The six alternate governance structures are:
l Finely Focused Status quo
l Supply & Delivery Joint Authority
l Corporate Model
l Representative Government
l State Board
l No MWD - DWR Operates
For each alternative, I first describe the essential characteristics of the structure. I then
highlight key features of the alternative; such as how the board is selected, the types of
services it would offer, etc. I conclude each section by assessing how well the alternative
addresses the motives of those pondering changes to MWD’s governance. In addition, I
have included a checklist showing the answers to all the questions that led to each option.
Please note - I am recommending none of these alternatives. Instead, they are my
attempt to describe what type of MWD would result from likely sets of answers. Also, I
have provided only general descriptions of these alternatives. Additional details would
need to be developed before pursuing any option. My purpose simply is to:
1. Illustrate how different perspectives on MWD’s proper role can lead to different
perspectives on the type of organization MWD should be.
2. Describe by example a framework whereby people can explore their own views of
what sort of MWD makes the most sense based on their own assessment of whose
interest MWD should serve, what is MWD’s proper role, etc.
-
California Research Bureau, California State Library 31
r
FINELY FOCUSED STATUS Quo
Essentially, this model is the current MWD. I have suggested some changes to resolve
some outstanding issues. However, MWD’s mission remains to be to meet member
agencies’ needs both now and in the future, while recognizing the contributions made in
the past.
MWD’s role would continue to be the master planner of Southern California’s water
resources. MWD would develop the plan and the member agencies would implement it.
MWD would continue to prohibit transfers among member agencies. However, there is a
change regarding transfers from outside its service area. MWD would remain the sole
contact point for anyone interested in transferring water into MWD’s service area.
However, MWD would no longer vigorously protect its monopoly right to supplying
supplemental water to its member agencies. Instead, MWD would simply have a first
right of refusal to any transfer. If MWD declines the transfer, MWD would offer the
transfer to any of its member or submember agencies. The notion here is that while the
characteristics of a proposed transfer might not fit with MWD’s needs (because of cost,
quantity, timing, etc.) it might fit well within a local agency’s needs. By using MWD as
the gatekeeper, it prevents potential marketers from playing one agency off another to get
better terms and/or higher profits. Any transfer requiring MWD’s facilities to transport
the water would require a separate agreement with MWD. This suggests revisiting
MWD’s wheeling policy to ensure consistency.
Whose Interests Should
MWD Serve?
Interest Groups
0 Member Agencies
0 All Wholesale
Cl All Retail
0 All Ratepayers
0 So. Calif. Population
0 All Calif. Population
•i Other Gov. & NGOs
Some or All
Cl All
0 Super Majority 0 Simple Majority
Timeframe Reference
0 Prior Ratepayer
0 Current Ratepayers
0 Future Ratepayers
Key:
Cl Does not apply
Efl Might or might not apply
El Definitely Applies
Finely Focus d Status Quo
What Is hIWD’s Role?
Functions
0 Simple Supply/Delivery
17 Bold Supply/Delivery
Cl Regional Facilitator
0 Regional Planner
El Regional Manager
Types of Water
0 Imported
0 Local Groundwater
El Local Surface
0 Reclaimed
q Conserved Water Ki Desalinated Water
Sole Supplier of
Supplemental Water
0 Local Sources
El Imported Sources
Place In Hierarchy
0 Chief Policy-maker
Or, Subservient To:
0 Member Agencies
0 Legislature
Cl DWR
Cl Local/Regional Govt.‘s
Cl General Population
Mix of Services
0 All Services
Cl Cafeteria
Customers of MWD
0 Member Agencies
0 Submember Agencies
cl Public Water Agencies
0 Private Water C0.s
0 Other Local Governments
&NGOs
Services 0 Ave Yr Supply - SWPKR
0 Ave Yr Supply -Other
0 Dry Yr Supply - SWPKR
0 Dry Yr Supply -Other
0 Transport - MWD &l Transportation - Wheeling
0 Future Capacity/ Supplies
0 Water Treatment - MWD
0 Water Treatment - Other
q Water Conservation Cop
Cl Transfers Broker
0 Financial Assistance
0 Reclaimed Water-Owner
0 GW Cleanup-Claimant
0 Desalination - Technology
Kl Desalination-Supplies
0 Regional Water Planner
0 R&D - Water Treat Tech
IZI Expert Consulting
0 Property Mgt. 0 Advocacy
Voting Rules 0 Weighted Voting
0 One Person -- One Vote
1
Who Is Best Suited
Make & Oversee Policy? Who Selects
0 Each MA Appoints
0 Each MA Has Say
0 Governor and/or
Legislature Appoints
0 General Population 0 Director of DWR
Conditions of Appointment
q Full Time
0 Part Time
Cl Salaried Cl Per Diem
0 Volunteer
@ Fixed Term q At Pleasure
Special Oualifications
d Professional Background
0 Special Interest Group
How Many?
0 More Than 27 027 0 -13 q 7-9
32 California Research Bureau, California State Library
MWD, while remaining the principal focus for Southern California water issues, would
be subservient to the policies of a majority of its member agencies (through the MWD
board) and the state legislature. This means that MWD would make policies, and
member agencies would be free to take any actions not contrary to board policies.
MWD’s customers would remain its member agencies and services would remain
bundled - notwithstanding Proposition 218. MWD’s current mix of services would also
remain the same, with two possible exceptions. Dry years’ supplies would be distributed
based on the board’s new drought policy. This assumes that upon adoption of the new
policy the board would seek legislation to eliminate the preferential water rights. The
other possible change affects wheeling. If, under a first right of refusal policy, the
potential for an active transfers market developed, the board might revisit its water
wheeling policies to facilitate such transfers.
Member agencies would continue to appoint their own board members. Each member
agency would have at least one board member. The threshold for additional board
. members would be 5 percent of assessed value as established by SB 1885. Each member
agency would be able to establish many of their own conditions of appointment, such as
fixed term versus at pleasure appointments. Each member agency would also determine
whether their appointees needed to possess any special characteristics. Finally, the board
would continue to use a weighted voting system based on assessed value.
Sign#cance To The Proponents Of Change
As might be expected, this structure does little to satisfy those interested in changing
MWD. The suggested changes in transfers and drought water allocation policies would
have lessened some of the problems in the past. However, until MWD eliminates
preferential water rights and changes its wheeling policy to facilitate water transfers,
these problems could reoccur.
Moreover, this structure does little to prepare MWD for future challenges. It does not
move toward better matching individual member agency’s needs to the services MWD
provides. MWD will continue to take actions that disproportionately benefit some
member agencies, yet are paid equally by all. In addition, the current structure will
continue to have diffrcuhies avoiding or resolving disputes. MWD does not have an
effective dispute resolution process. That does not mean it could not develop one - it just
means that its current approach does not seem to work all the time.
Finally, this structure does nothing for those that prefer alternate governance structures.
On the other hand, some of those who prefer status quo - and there are many - may find
even my simple suggested changes troubling as well. For them, MWD ought to be the
sole supplier of all supplemental water to Southern California. From their perspective, if
MWD did fail over the last 2-3 years, it was because MWD failed in its mission to
provide sufficient water to meet all its member agencies needs. They believe that if you
fix that problem, you have fixed most of MWD’s problems.
-
California Research Bureau, California State Library 33
4
SUPPLY & DELIVERY JOINT AUTHORI‘IT
This option significantly reduces the breadth of MWD actions. Instead of MWD acting
as a regional water planning authority, it becomes a simple supply and delivery agency.
Its focus would be delivering SW and Colorado River water to its member agencies.
The agency would deliver water from other sources only if ALL member agencies agreed.
MWD would become a joint powers authority - composed of each of its 27 member
agencies. Through a series of interlocking contracts and/or memoranda of understanding,
virtually all of MWD’s specific powers would be delineated. This would include:
l Rules for allocating water during both average drought years,
l Rate schedules for water supplies and water deliveries,
l Scope and limitations on authority to develop new supplies,
l Voting rules and rules for resolving disputes on the board, and
l Rules and rates for wheeling water.
These interlocking contracts are the source of both the strength and weakness of the joint
authority. Its strength comes from the duties and responsibilities of each party being
explicitly spelled out. In a well-designed joint authority, there are few areas of
ambiguity. However, the fact that interlocking contracts define the relationships means
that relatively simple changes in governance require amending 27 separate contracts.
This can mean that one party can veto the wishes of all the others.
Supply & Delive
Whose Interests Should
MWD Serve?
Interest Groups
What Is MWD’s Role?
Functions
0 Simple Supply/Delivery
El Member Agencies 0 Bold Supply/Delivery q All Wholesale q Regional Facilitator
0 All Retail D Regional Planner
0 All Ratepayers q Regional Manager
q So. Calif Population Types of Water
0 All Calif. Population a imported
0 Other Gov. & NGOs 0 Local Groundwater
Some or All 0 Local Surface
L’l All 0 Reclaimed
0 Super Majority 0 Conserved Water 0 Simple Majority
Timeframe Reference
0 Prior Ratepayer
l?l Current Ratepavers
1 0 Desalinated Water
1 Sole Supplier of
Supplemental Water q Local Sources
0 Future Ratepayers 1 0 Imported Sources
1 Place In Hierarchv
Key:
0 Does not apply
IEI Might or might not apply
q Definitely Applies
0 Chief Policy-maker
Or, Subservient To:
IZl Member Agencies
0 Legislature
0 DWR
q Local/Regional Govt.‘s
Cl General Population
Mix of Services 0 All Services
0 Cafeteria
y Joint Authority
Customers of MWD Who Is Best Suited
0 Member Agencies
IISubmember Agencies
0 Public Water Agencies q Private Water C0.s
0 Other Local Governments
&NGOs
Services
Make & Oversee Policy?
Who Selects
IZl Each MA Appoints
0 Each MA Has Say
0 Governor and/or
Legislature Appoints
0 General Population
El Ave Yr Supply - SWPKR 0 Director oiDWR
El Ave Yr Supply - Other Conditions of Appointment
El Dry Yr Su&; - SWPKR . 0 Full Time
El Dry Yr Supply -Other El Part Time q Transport - MWD 0 Salaried
q Transportation - Wheeling 0 Per Diem
0 Future Capacity/ Supplies RI Volunteer
n Water Treatment - MWD 0 Fixed Term
0 Water Treatment - Other 0 At Pleasure
0 Water Conservation Cop Special Qualifications
0 Transfers Broker 0 Professional Background
0 Financial Assistance 0 Special Interest Group
0 Reclaimed Water-Owner How Many?
0 GW Cleanup-Claimant 0 More Than 27
0 Desalination -Technology 0 27
0 Desalination - Supplies O-13
Cl Regional Water Planner 0 7-9
0 R&D-Water Treat Tech 0 I
0 Expert Consulting Voting Rules
0 Property Mgt. 0 Weighted Voting
0 Advocacy 0 One Person -- One Vote
34 California Research Bureau, California State Library
The joint authority would no longer be the sole supplier of supplemental water in
Southern California, either from sources within or outside of its service area. Indeed, it
would be the local agency’s responsibility to close any supply/demand gaps. This means
that member agencies would be free to transfer water either into the region or within the
region. In this diminished role, MWD would make few policies. However, it would still
have clout as the largest SWP contractor.
The joint authority would provide water supply, water delivery, and possibly water
treatment. Responsibility for the other activities that MWD currently performs would fall
back upon the member agencies or possibly DWR, such as in the case of regional water
planning.
The joint authority would have a 27-member board composed of the general managers of
the member agencies. The board would meet periodically, but an executive director
would make most of the day to day policy decisions (of which there would be few).
Significance To The Proponents Of Change
This model has features attractive to many interested in changing MWD. The joint
authority would have clearly defined rules for allocating water during drought AND
member agencies would be clearly responsible for closing any supply/demand gaps. In
addition, the rules for wheeling would be set in the contracts. Because all parties would
know precisely what was and was not allowed, most of the problems associated with the
SDCWAAID deal would be avoided.
This structure is appealing to some concerned about MWD’s future challenges also.
Because the joint authority would provide few services, there would be few services to
unbundle. When negotiating the contracts, each agency would detail the services they
need and determine how to pay for them. If an agency’s needs changed, it could fill the
need outside of the joint authority. Moreover, because the contracts describe each
agency’s rights and responsibilities, many conflicts due to different interpretations could
be avoided.
Some of those who prefer alternate governance structures prefer joint authorities. The
certainty that interlocking contracts can give is appealing to many. However, this
particular structure is probably more appealing to those who prefer smaller and less
costly government. Under the joint authority described here, MWD would no longer do
many of its current activities. Moreover, this structure would be conducive to greater
water marketing opportunities. This is because the joint authority would not hold a
monopoly on providing supplemental water. Since member agencies would be
responsible for closing any supply/demand gaps, one option for closing the gap would be
water transfers.
California Research Bureau, California State Library 35
r
CORPORATEMODEL
Under this model, MWD is reorganized along business lines. The current member
agencies would act as stockholders. Each agency would receive shares comparable to the
net pre,sent value of their contributions to capital (equity). At the annual shareholders
meeting, the agencies would vote their shares to elect directors to a 9-member board. No
more than four MWD directors could be directors of member agencies, employees of
MWD or member agencies, or otherwise associated with MWD or its member agencies.
MWD would pay all MWD directors for the time they serve on the board.
The board would manage MWD as a corporation. Its mission would be something like,
“To meet the needs of all of today’s ratepayers by anticipating the needs of tomorrow’s
ratepayers. By doing so, MWD will also meet the needs of its member agencies.”
The board would make all major policy decisions. It could not prevent competition for
any service it provides. All would be free to compete against MWD. Consequently, it
would determine which services it would and would not provide based on MWD’s
competitiveness. If MWD can provide the service cheaper than its competition, it will. If
it cannot, it will not. To assess its competitiveness, MWD would develop a management
plan that might or might not become the de facto regional water plan. Member agencies
would be free to follow the plan or not. The board would also hire and fire the general
manager and other senior staff.
Whose Interests Should
MWD Serve?
Interest Groups
iZl Member Agencies
0 All Wholesale
0 All Retail q All Ratepayers
0 So. Calif. Population
0 All Calif. Population
0 Other Gov. & NGOs
Some or All
0 All
0 Suoer Maioritv
El SiAple Mijorfty
Timeframe Reference
0 Prior Ratepayer
q Current Ratepayers
IKI Future Ratepayers
Key:
0 Does not apply
El Might or might not apply
i?i Definitely Applies
Cornora
What Is MWD’s Role?
Functions
IZI Simple Supply/Delivery
0 Bold Supply/Delivery
I?3 Regional Facilitator
l4 Regional Planner
0 Reeional Manager
Types of Water
0 imported
IZJ Local Groundwater
I3 Local Surface
&I Reclaimed
Kl Conserved Water
IZl Desalinated Water
Sole Suoolier of
Suppiemental Water
0 Local Sources
0 Imported Sources
Place In Hierarchy
0 Chief Policy-maker
Or, Subservient To: q Member Agencies
El Legislature
0 DWR
0 Local/Regional Govt.‘s
El General Population
Mix of Services
0 All Services El Cafeteria
e Model
Customers of MWD
Ei Member Agencies
Q Submember Agencies
!Zl Public Water Agencies q Private Water C0.s
El Other Local Governments
&NGOs
Services
El Ave Yr Supply - SWPICR
IZI Ave Yr Supply -Other
El Dry Yr Supply - SWP/CR
El Dry Yr Supply -Other
El Transport - MWD
El Transportation-Wheeling
•l Future Capacity/ Supplies q Water Treatment - MWD
R Water Treatment - Other
lZl Water Conservation Cop
IKI Transfers Broker
El Financial Assistance
El Reclaimed Water - Owner
B GW Cleanup-Claimant
l%l Desalination -Technology
IZ Desalination-Supplies q Regional Water Planner
B R&D - Water Treat Tech
El Expert Consulting
El Property Mgt.
El Advocacy
1
Who Is Best Suited
Make & Oversee Policy?
Who Selects q Each MA Appoints
El Each MA Has Say
0 Governor and/or
Legislature Appoints
0 General Population
0 Director oiDWR
Conditions of Appointment
0 Full Time
IZl Part Time
81 Salaried
0 Per Diem
0 Volunteer
El Fixed Term
0 At Pleasure
Special Qualifications
l%i Professional Background
E4 Special Interest Group
How Many?
0 More Than 27
027
El-13
0 7-9
01
Voting Rules
0 Weighted Voting
El One Person -- One Vote
36 California Research Bureau, California State Library
It is difficult to predict precisely which services a corporate MWD might provide or to
whom. It would likely offer its services cafeteria style and more closely tie the cost of
providing services to the services provided. It would probably continue to provide water
supply to the member agencies from the Colorado River and SNP. It might provide
water from other sources to member agencies or possibly other water agencies. The
board would probably consider expanding capacity to fast growing areas - though the
new service areas would likely carry all the costs to expand. It quite possibly would
move into the water wheeling business. The local programs might continue, though the
board might impose strings such as claiming or otherwise controlling a portion of the
newly developed water.
-.
A corporate MWD might just as easily sell or lease some of its assets. For example, it
might spin off the water quality laboratory. The board also might form a collaborative
relation with a private company, for instance to develop desalination technologies. The
board might consider contracting out some of its activities; for example, the asset
management program.
Significance To The Proponents Of Change
While this structure is most appealing to some of those preferring alternate forms of
governments, it also has some appealing aspects to others interested in change.
It is difficult to tell precisely how well this structure would have prevented the conflicts
of the last few years. While a corporate MWD would be interested in transporting
SDCWA-IID transfer water “if the price was right,” one could say the same for the
current structure. ‘The difference would be that a corporate MWD would have already
unbundled its services. Therefore, it might have used a different cost accounting system
to determine the break-even price for wheeling. It is impossible to know if this price
would have been significantly different than that set under current MWD policies.
Still, it is possible that a corporate MWD would be desirable to those interested in
meeting the challenges of the future. A corporate MWD, in its quest to meet the needs of
all ratepayers, would likely tie the costs of providing a service closely to the price of the
service. This way, if someone wanted MWD to provide an additional service, it would
not affect the prices others pay for other services. This would also help MWD avoid
conflicts. This is because a corporate MWD would have the flexibility to accommodate
the different needs of different customers, so long as it was cost-effective. Still, conflicts
could arise if someone wanted to force MWD to provide a service it chose not to provide.
A corporate MWD has great appeal for some of those who prefer alternate forms of
government, especially those who prefer smaller and more streamlined governments.
This structure incorporates virtually all the tools privatization advocates promote. It does
fall short of simply selling MWD. This is because it is probably not feasible for a private
MWD to remain a SWP contractor.32 Still, for privatization advocates, it is probably the
next best thing.
California Research Bureau, California State Library 37
REPRESENTATIVE GOVERNMENT
.-
_I_
In this option, an elected board governs MWD. MWD’s service area would be
apportioned into seven districts based on population. The populace of each district would
directly elect their representative to the MWD board. The board members would be
salaried, work full time, and serve staggered four-year terms. Term limits are clearly an
option. Under a representative MWD, member agencies would have no special status or
rights. Instead, the board would be responsible only to the electorate.
The representative MWD would be regional water manger for Southern California. It
would control MWD’s imported supplies, would likely move heavily into water
reclamation, and could conceivably seek control over the Southland’s groundwater
basins. It would be the sole supplier of supplemental water, both from imported and local
sources. And given that each director would initially represent over 2 million people, the
board would clearly be the chief water policy maker as well.
The populace, through the elections process, would largely determine the board’s
philosophy. Consequently, it is difficult to predict precisely which services a
representative MWD might provide or to whom. For example, the board could adopt the
philosophy of “one Southern California.” In this case, the board would allocate water
supplies during droughts using a “common pool” concept. This is where the board would
conceptually commingle all available water into a common pool, and then redistribute the
water to all on an equal basis. Similarly, the board could instead focus on reducing costs,
ending cross-subsidies, and more closely tying the cost of providing services to the
services provided.
Whose Interests Should
MWD Serve?
interest Grow6
0 Member Agencies q All Wholesale
0 All Retail
0 All Ratepayers
B So. Calif. Population
0 All Calif. Population
0 Other Gov. & NGOs
Some or All 0 All
0 Super Majority
0 Simple Majority
Timeframe Reference
0 Prior Ratepayer
iZl Current Ratepayers
0 Future Ratepayers
Key:
Cl Does not apply
El Might or might not apply
q Definitely Applies
Representath Government
What Is MWD’s Role?
Functions
0 Simple Supply/Delivery
0 Bold Supply/Delivery
0 Regional Facilitator
•J Regional Planner
El Regional Manager
Types of Water
0 Imported
19 Local Groundwater
FJ Local Surface lXl Reclaimed
iZJ Conserved Water
0 Desalinated Water
Sole Supplier of
Supplemental Water
EZl Local Sources
lZ! Imported Sources
Place In Hierarchy
0 Chief Policy-maker
Or, Subservient To:
IJ Member Agencies
Cl Legislature q DWR
Cl Local/Regional Govt.‘s
0 General Population
Mix of Services
R All Services
El Cafeteria
Customers of MWD
lgl Member Agencies
@ Submember Agencies
El Public Water Agencies
lgl Private Water C0.s
El Other Local Governments
&NGOs
Services
0 Ave Yr Supply - SWPKR
El Ave Yr Supply -Other
0 Dry Yr Supply - SWP/CR
0 Dry Yr Supply - Other
0 Transport - MWD
iZl Transportation - Wheeling
lX6l Future Capacity/ Supplies
0 Water Treatment - MWD
@ Water Treatment - Other
El Water Conservation Cop
El Transfers Broker
0 Financial Assistance
R Reclaimed Water-Owner
Kl GW Cleanup-Claimant
Bl Desalination-Technology q Desalination - Supplies
B Regional Water Planner
l8l R&D - Water Treat Tech
El Expert Consulting
El Property Mgt.
El Advocacy
Who Is Best Suited
Make & Oversee Policy?
Who Selects
0 Each MA Appoints
Cl Each MA Has Say
0 Governor and/or
Legislature Appoints
0 General Population
0 Director of DWR
Conditions of Appointment
@l Full Time
0 Part Time
B Salaried
0 Per Diem
0 Volunteer
0 Fixed Term
El At Pleasure
Special Qualifications
Cl Professional Background
El Special interest Group
How Many?
Cl More Than 27
027
o-13
la 7-9
01
0 Weighted Voting
38 California Research Bureau, California State Library
Nonetheless, a representative MWD would most likely continue to provide water supply
to the member agencies from the Colorado River and SWP as well as from other sources.
The board would probably expand capacity and supply water to fast growing areas. It is
uncertain whether a representative MWD would facilitate water transfers and wheeling.
The local programs would likely continue, and the board might decide to move heavily
into water reclamation and water conservation itself. Indeed, the Legislature could give a
representative MWD the power to establish and impose water conservation standards
upon all Southern Californians.
Significance To The Proponents Of Change
Again, this structure is most appealing to some of those preferring alternate forms of
governments. It might also have some appealing aspects to others interested in change.
For those interested in preventing a repeat of the past, the advantages of this option are
uncertain. Clearly, to a representative MWD, the preferential rights concept would have
little if any relevance. However, it is not clear precisely how a representative MWD
would allocate water during droughts. Similarly, it is not clear whether or not a
representative MWD would maintain a monopoly on supplemental water supplies. While
it is hard to imagine the conflicts of the last few years being any more hostile, it is also
difficult to assess how much better it would have been under a representative structure.
For example, instead of SDCWA disagreeing with the City of Los Angeles under the
current structure, the disagreement could be between the board members representing the
San Diego region and the Downtown Los Angeles region.
The advantages are similarly uncertain for those wanting to prepare MWD for future
challenges. Presumably, a representative MWD would be open to meeting local area
needs. However, individual board members interested in protecting the interests of their
district might oppose programs that benefit a limited region. Similarly, it is unclear how
well prepared an elected board would be to meeting the challenges of the future. It might
be great. Or, it might fail miserably. It depends largely upon who all are elected and
why.
This structure has greatest appeal to those who want to democratize MWD. This option
takes water policy out of the hands of the water establishment and places it into the hands
of the general populace. Over 95 percent of all public water districts in California have
elected boards. Consequently, this would make MWD’s governance more consistent
with the rest of California. Moreover, to the extent board members made unpopular
decisions, the electorate could simply elect someone else. In theory at least, this means
that the populace would have whatever type of MWD they want.
-.
California Research Bureau, California State Library 39
- STATE BOARD
The principal purpose of this option is to ensure all those affected by MWD policies and
programs would have a voice on the board. Consequently, the MWD board would be
composed of a specified mix of MWD member agencies, sub-member agencies, public
and private retail water agencies, representatives from water using industries, NGOs, and
the public. The Governor would appoint the members subject to Senate confirmation.
Each board member would have one vote. The board members would work part time, be
paid a per diem, and serve staggered four-year terms. Under a state board MWD, the
concept of member agencies would no longer have any meaning. Instead, member
* agencies would simply be the wholesale -customer of MWD.
The state board MWD would function as a regional water facilitator. Individual water
agencies would have primary responsibility for meeting local water needs. MWD would
assist by providing services on an as needed basis. It would continue to supply and
transport water from the SWP, the Colorado River, and other sources. However, its main
purpose would be to facilitate regional cooperation and mediate regional disputes. For
example, it would likely develop a regional water resources plan through a consensus
decision making process.* Similarly, it could recommend non-binding solutions to
regional conflicts between, for example, users of a non-regulated groundwater basin.
Whose Interests Should
MWD Serve?
Interest Groups
te Board
le? Customers of MWD Who Is Best Suited
-1 q Simple Supplv/Deliverv
0 Member Agencies Make & Oversee Policy?
0 Submember Agencies Who Selects
stat
What Is MWD’s Rol
Functions
IZi Member Agencies
IZl All Wholesale
&I All Retail
I?! All Ratepayers
El So. Calif. Population
0 All Calif. Population
q Other Gov. & NGOs
Some or All 0 All
@ Super Majority
Ki Simple Majority
Timeframe Reference
0 Prior Rateoaver
0 Current Ratepayers
@I Future Ratepayers
q Bolh Supp&&livery -
El Regional Facilitator
Cl Regional Planner
q Regional Manager
Types of Water
IZI Imported
0 Local Groundwater
0 Local Surface
cl Reclaimed q Conserved Water
Cl Desalinated Water
Sole Supplier of
Suoolemental Water
0 Public Water Agencies Cl Each MA Appoints
Ei Private Water C0.s q Each MA Has Say
0 Other Local Governments El Governor and/or &NGOs Legislature Appoints
Services Cl General Population
0 Ave Yr Supply - SWP/CR 0 Director of DWR
0 Ave Yr Supply - Other Conditions of Appointment
0 Dry Yr Supply - SWPKR 0 Full Time
0 Dry Yr Supply - Other El Part Time
El Transport - MWD 0 Salaried
Ei Transportation-Wheeling 0 Per Diem
IZI Future Capacity/ Supplies 0 Volunteer
El Water Treatment - MWD El Fixed Term
Key:
q Does not apply
IZI Might or might not apply
El Definitely Applies
q Local Sources
0 Imported Sources
Place In Hierarchv
Cl Chief Policy-r&er
Or, Subservient To:
Ki Member Agencies
IZi Legislature q DWR
IZI Water Treatment - Other
Cl Water Conservation Cop
0 Transfers Broker
IZI Financial Assistance El Special Interest Grlup
IJ Reclaimed Water - Owner How Manv?
I3 GW Cleanup-Claimant q More T&I 27 •i Desalination -Technology Cl 27 q Desalination - Supplies El-13
0 All Services
El Cafeteria
Kl Property Mgt. -
IZI Advocacy
Cl Weighted Voting
El One Person -- One Vote
* Probably similar to the process MWD used in developing its Integrated Resources Plan (IRP).
40 California Research Bureau, California State Library
A state board MWD would provide its services cafeteria style to all water users. Most
services would be on a fee for service basis. The member agencies would become mere
wholesale customers of MWD. Conceivably, MWD could also provide water directly to
state and federal agencies, such as Caltrans or the U.S. military bases. A state board
MWD would likely wheel non-MWD supplies. In addition, it might act as a broker for
water transfers, provide funds for local water programs, or conduct research and
development studies for advanced water treatment technologies.
It is difficult to tell precisely where a state board MWD would fit in the water policy
hierarchy. It would definitely be subservient to the Legislature. However, if it truly
acted as a regional facilitator, it would probably be the equal of the other water policy
makers.
Significance To The Proponents Of Change
This structure appeals to many of those pondering change. For those interested in
preventing a repeat of the past, this option has certain attractive features. Preferential
rights would have little if any relevance to a state board MWD. While it is not clear
precisely how it would allocate water during droughts, some sort of “share the pain”
approach seems most likely. However, the proposed state board MWD would not
maintain a monopoly on supplemental water supplies.
The state board MWD is also attractive to those wanting to prepare MWD for future
challenges. It provides cafeteria style services, so agencies would pay for only those
services they receive. In its role as regional facilitator, one of its mandates would be to
resolve local disputes. This suggests a state board MWD would have policies designed
to:
1. Identify potential conflicts before they became problems, and
2. Resolve conflicts once they became problems.
This structure has greatest appeal to those who want to ensure that someone represents
their perspective on the board. Each position of the board would be assigned to
representatives of specific interest groups. Consequently, ensuring that all relevant
interests are represented on the board will be the biggest challenge when designing the
state board MWD.
-
California Research Bureau, California State Library 41
/- No MWD - DWR OPERATES
This option eliminates MWD as an independent body and makes it an extension of the
DWR. Each member agency would become a SWP contractor. This would require
quantifying each member agency’s entitlements to SWP water. Similarly, DWR would
likely develop SWP like contracts with each member agency to repay Colorado River
Aqueduct costs. This too would require quantifying water entitlements. Most member
agencies would have two contracts with DWR, one for SWP water and one for Colorado
River water. Those member agencies that can only receive water from one or the other
source because of physical constraints would have only one contract with DWR.
The Director of DWR would become the administrator of the former MWD. MWD
would become a simple supply and delivery system. Consequently, the former member
agencies would be responsible for meeting local water needs. In operating the two
systems, the Director would attempt to balance the interests of all $alifornians with those
of the MWD contractors, subject to specific contract requirements.
The former MWD’s clout in the water policy hierarchy would be greatly diminished.
The former member agencies would have no more or less influence on state water policy
than any other SWP contractor. However, the Director of DWR, having gained
responsibility for the Colorado Aqueduct, would see his or her prestige rise.
Whose Interests Should MWD Serve?
Interest Groups
Cl Member Agencies q All Wholesale
Cl All Retail
13 All Ratepayers
0 So. Calif. Population
0 All Calif. Population q Other Gov. & NGOs
Some or All q All
Cl Super Majority Cl Simple Majority
Timeframe Reference
13 Prior Ratepayer
El Current Ratepayers
Cl Future Ratepayers
Key:
q Does not apply
IXI Might or might not apply
S!l Definitely Applies
NoMWD-I
What Is MWD’s Role?
Functions
@I Simple Supply/Delivery
Cl Bold Supply/Delivery
Cl Regional Facilitator
0 Regional Planner
0 Regional Manager
Types of Water
El Imported
Cl Local Groundwater
0 Local Surface
Cl Reclaimed
Cl Conserved Water 0 Desalinated Water
Sole Supplier of
Supplemental Water
0 Local Sources
0 Imported Sources
PI ace In Hierarchy
Cl Chief Policy-maker
Or, Subservient To:
q Member Agencies
0 Legislature
El DWR
0 Local/Regional Govt.‘s
Cl General Population
Mix of Services
El All Services
0 Cafeteria
YR Operates
Customers of MWD
0 Member Agencies
Cl Submember Agencies
Cl Public Water Agencies q Private Water C0.s
0 Other Local Governments
&NGOs
Services
El Ave Yr Supply - SWPKR
0 Ave Yr Supply - Other
81 Dry Yr Supply - SWP/CR
0 Dry Yr Supply -Other
0 Transport - MWD &I Transportation - Wheeling
0 Future Capacity/ Supplies
IZI Water Treatment - MWD
Cl Water Treatment-Other
Cl Water Conservation Cop
Cl Transfers Broker
0 Financial Assistance
0 Reclaimed Water - Owner
El GW Cleanup-Claimant
0 Desalination -Technology
Cl Desalination - Supplies
0 Regional Water Planner
Cl R&D - Water Treat Tech
0 Expert Consulting
Cl Property Mgt.
0 Advocacy
* This is how the Director of DWR traditionally operates the SWP.
Who Is Best Suited
Make & Oversee Policy?
Who Selects
0 Each MA Appoints
I7 Each MA Has Sav
Cl Governor and/or
Legislature Appoints
Cl General Population
RI Director of DWR
Conditions of Appointment
El Full Time q Part Time q Salaried
0 Per Diem
Cl Volunteer
0 Fixed Term
0 At Pleasure
Special Qualifications
0 Professional Background
0 Special Interest Group
How Many?
Cl More Than 27
U 27
o-13 q 7-9
El1
Voting Rules
Cl Weighted Voting q One Person -- One Vote
1
42 California Research Bureau, California State Library
Each agency’s contract with DWR would define:
l The agency’s entitlement to water
l The costs allocated to the agency
l The method of allocating water during periods of shortage.
DWR would not provide any service to member agencies that are not specifically
identified in the contracts. This likely limits DWR services to simple supply and delivery
of whatever water is available from the SWP and Colorado River. It is not clear whether
DWR would continue MWD’s current water treatment services. However, DWR would
likely provide wheeling services for both former member agencies and others. DWR
might provide financial or consultative services to the former member agencies.
However, this would be through one of DWR’s other statewide programs.
Significance To The Proponents Of Change
For those interested in preventing a repeat of the past, this option has some attractive
features. Specific delivery rules defined in the contracts would replace preferential
rights. These rules would likely be to reduce each contractor’s deliveries in proportion to
their contract entitlements.* Moreover, the former MWD would not maintain a monopoly
on supplemental water supplies and it would have clear rules on wheeling water.
Consequently, many if not all of the MWD-SDCWA conflicts would be avoided.
The no MWD option is perhaps less attractive to those wanting to prepare MWD for
future challenges. The contracts between agencies and DWR would clearly limit services
to the former member agencies. This would force the agencies to find alternative sources
for many services they currently receive. On the other hand, this also means a former
member agency would be free to not replace any services it felt it did not need. Dispute
resolution, however, remains a problem. Currently, the Director of DWR has sole
authority to interpret and implement the SWP contracts - the contractors’ only
mechanism to force DWR to change is via the courts.
As this option eliminates a level of government, it has greatest appeal to those who want
to streamline government and reduce costs. DWR already has contracts with 29 SWP
contractors. While there would be some initial cost to establish contracts with 27 new
member agencies, beyond that there should be little additional overhead.+ In addition,
with the elimination of MWD, the former member agencies would have to assume
additional responsibilities. This suggests there could be a number of opportunities for
contracting out for services or otherwise privatizing services.
l This is how SWP contracts operate.
’ There is no reason to believe DWR’s costs of running the MWD distribution system would be
significantly more than MWD’s costs.
California Research Bureau, California State Library 43
ENDNOTES
’ Ruben S. Ayala, Chairman, Conference Committee on SB 1885. Letter to Dean Miczynski, Director, California Research Bureau, California State Library. August 24, 1998.
’ Section 135 (The Metropolitan Water District Act is not codified)
3 O’Connor (1998), Table 10, p. 22.
4 O’Connor (199X), Table 11, p. 23.
’ Debra C. Man. Memo to Board of Directors. Board Letter 8-10, Attachment A, August 25, 1998
6 Metropolitan Water District Administrative Code $4202.
’ The Senate Select Committee on Southern California Water Districts’ Expenditures & Governance
attempted to document some of more egregious claims - at least from the Legislature’s perspective. See
Senate Select Committee on Southern California Water Districts’ Expenditures & Governance, Senator
Ruben S. Ayala, Chairman, “Report of Findings and Legal Analysis” [May 19, 1998J.and “Supplement To Report of Findings and Legal Analysis” June 24, 1998.
* Board members posted 21 comments critical of the current system - six comments were favorable. PricewaterhouseCoopers and Rand Corporation. Metropolitan Water District Strategic Visioning
Project: Summary of Comments and Discussion Notes from Board Workshop One. 09124198, pp.28-3 1
9 PricewaterhouseCoopers and Rand Corporation. Metropolitan Water District Strategic Visioning
Project: Summary of Comments and Discussion Notes from Board Workshop Two. 10/22/98, p. 9.
lo PricewaterhouseCoopers and Rand Corporation. 09124198, pp.28
’ ’ William D. Eggers, Rightsizing Government: Lessons from America ‘s Public-Sector Innovations. How To Guide # 11, (Los Angeles: The Reason Foundation), January 1994. p. 2
‘* William D. Eggers, Privatization Opportunities for States. Policy Study # 154, (Los Angeles: The
Reason Foundation), January, 1993. p. 5
I3 For a fairly complete list of options, see: William D. Eggers, ed. Cutting Local Government Costs
Through Competition and Privatization. (Sacramento, CA: California Chamber of Commerce,
California Taxpayers Association, Howard Jarvis Taxpayers Foundation, and the Reason Public Policy
Institute). 1997.
I4 The MWD board of directors has hired John Carver to help it refocus its internal governance. In their
book Reinventing Your Board, John Carver and Miriam Mayhew Carver, refer to those whose interests a board serves as the recipients of the results. Recipients, results, and costs are the three essential
components of what Carver refers to as ends statements. Carver, John and Miriam Mayhew Carver.
Reinventing Your Board: A Step-by-Step Guide to Implementing Policy Governance. (San Francisco:
Jossey-Bass Inc. 1997). Chapter 7.
I5 PricewaterhouseCoopers and Rand Corporation. 09/24/98, p. 3 1.
I6 PricewaterhouseCoopers and Rand Corporation. 10/22/98, p. 8.
” PricewaterhouseCoopers and Rand Corporation. 10/22/98, p. 9.
I8 PricewaterhouseCoopers and Rand Corporation. 10/22/98; p. 5 1.
I9 Metropolitan Water District. Strategic Plan. Preliminary Plan. July 1, 1993. p. 8.
” This is somewhat analogous to the Carvers’ notion of “Level One Ends Statements.” See Carver & Carver, op. cit.
*’ PricewaterhouseCoopers and Rand Corporation. 09/24/98, p. 32.
44 California Research Bureau, California State Library
** Metropolitan Water District of Southern California, Integrated Resources Plan Assembly, Assembly
Statement, San Pedro, Calif.: MWD, March 29-31, 1995, p. 13.
23 PricewaterhouseCoopers and Rand Corporation. 10122198, p. 18.
24 Statutes of 1927, Chapter 429.
25 California Water Code, $10005
26 See Dean Misczynski. Proposition 218 After Two Years. CRB-98-016, (Sacramento: California Research
Bureau). October 1998
*’ PricewaterhouseCoopers and Rand Corporation. 10/22/98, pp. 7-13
*’ See, for example, The Conference Board, Corporate Boar& and Corporate Governance, Report
Number 1036, 1993.
29 National Association of Corporate Directors. 1997 Corporate Governance Survey. (Washington, DC:
NACD), November 1997.
3o G. Ross Stephens and Nelson Wikstrom. “Trends in Special Districts.” State and Local Government
Review. Vol. 30, No. 2 (Spring 1998): 129-138
3’ As amended 4116198
32 See Dennis O’Connor, Financing the State Water Project, (Sacramento: California Research Bureau, California State Library, June 1994)
California Research Bureau, California State Library 45
C
MIND% Strategic
Vision Process *-a -“.zw’m 4, ?vs”-rdl-,i(
Presentation to Carlsbad
City Council
March z&1999
What is a Strategic Vision for
MWD? ,.~“,_<~~,~~_ ,::* ,.,, :’ :I 3,
A vision addresses the question:
“What is the role of MWD in meeting
water supply needs in its service
area?”
C
Why Reassess the Vision Now?
, ‘“--“--=Pe. ,I? .“‘el i*tq
I Shift in revenue from property tax to water
sales but no shift in Board representation
I Pressure from member agencies to allow for
greater choice of supplemental suppliers
I Bundled rate structure despite diverse customer
needs
I Increasing competitive pressure from private
industry
I Political pressure for water marketing
Cc
Activities to date -- MWD _>$*” __ <>raerrix ^.x ,e/
I Consultant team hired for Phase I
I II alternatives strategic visions
I Reflect “diversity of perspectives”
I Stake out range of potential future roles
I Stakeholder input
Activities to date -- outside MWD
I SB 1885 signed into law
I Senate Select Committee hearings
I CRB reports
I August 1998 and December 1998
MWD’s visions of its future ,*,^ -‘-*fi;~g~gg ._ ,_,
I II alternative visions
I 2 categories
I Relationship between MWD and member
agencies
I status quo
I Supplier and customer or supplier and shareholder
I Packaging of products and services
I Bundled
I Unbundled
6 s-“DlrccuI-yrs
.-
California Research Bureau reports * ?, ,.‘I*“s.+q$ i-ua’bA-
I Form follows function
I Who interests should MWD serve?
I What should be MWD’s role in meeting
Southern California’s water needs?
I Who is best suited to make and oversee
these policies?
I Status quo option “does little to prepare
MWD for future challenges”
42 SmDgr---
Authority comments on visions - ‘a”*’ ‘y -,~gv ‘:?-l+~~y~;* ,w,, .(
I Alternative visions focus on
implementation, not goals
I Fundamental question not addressed
I What should MWD’s role be?
Authority policy principles
I Authority needs from MWD:
I Reliable water supply
I Improved water quality
I Sufficient water delivery capacity
I Established, reasonable financial obligation
commensurate with our needs
I Choice among services provided by suppliers
Authority policy principles ccunt.j ” ^ “.-d’~~~ $&yT ” &>,.# “**- ,, :*;..~
I Based on Authority’s needs, MWD should:
I Offer menu of products and services
I Be one of several imported water suppliers
for Southern California
I Operate major regional facilities
I Advocate regional positions
I Provide leadership in scientific and technical
research related to water quality issues
-
Authority policy principles (mnt.1 .‘c- .Lrr.__L 1 xn~“_.9..~l.~
I To assume this role, MWD should:
I Quantify and allocate water sources and
facilities, based on member agency needs
and commitments to pay
I Provide additional water and other services
through contracts
Next Steps . ..a *-engi3
I MWD developing “hybrid” alternatives
I MWD Board requested discussion of policy
questions
I Several MWD governance bills in
/-
Housing & Neighborhood ServicesMarch 27, 2012Affordable Housing Update and Public Housing Agency Plan
Affordable HousingDebbie FountainDirector
Why?•Required by State Law•Required to receive funding for various infrastructure projects; such as roads•Help reduce traffic on local highways & freeways•Helps the local economy•Helps to reduce homelessness and provide for a diverse community
Success to Date•2082 affordable housing units for low, very low, and extremely low income households have been constructed/acquired to date–1606 apartments (77% of total) –300 town homes (14% of total)–176 2nd dwelling units (9% of total)•50 senior apartments & 9 condos under construction•389 planning process
Where are they?Northwest Quadrant235 dwellings(2% of total units)12,926 existing NW unitsNortheast Quadrant298 dwellings(5% of total units)5,708 existing NE QuadrantSouthwest Quadrant730 dwellings(7% of total units)10,942 existing SW unitsSoutheast Quadrant819 dwellings(5% of total units)15,609 existing SE units
2012 Income LimitsArea Median Income = $75,900 for SD County (HH of 4)Income Group2 PersonHousehold4 Person Household6 PersonHousehold8 Person HouseholdExtremely Low (30%)$19,300 $24,100 $28,000 $31,850Very Low (50%)$32,150 $40,150 $46,600 $53,000Low(70%)$45,000 $56,200 $65,200 $74,200Low(80%)$51,400 $64,250 $74,550 $84,850Moderate(120%)$72,900 $91,100 $105,700 $120,300
1996 Villa Loma Apartments344 Units1, 2, 3 & 4 Bedrooms
1999Cherry Tree Walk Townhomes 42 units 2 & 3 Bedrooms
1999Rancho Carrillo Apartments116 units1, 2 & 3 Bedrooms
2000Calavera Hills –The Cliffs5 Single Family Homes 4 bedrooms
2000Laurel Tree Apartments138 units 2, 3 & 4 Bedrooms
2001Vista Las Flores28 units 1, 2, & 3 Bedrooms
2001Rancho Carrillo 90 Town Homes2 & 3 Bedrooms80% of AMI
2004/05Village‐by‐the Sea11 Condominiums23&4Bedrooms
Coming Early 2013…..Tavarua Senior Apartments
Affordable Housing Programs•Inclusionary Housing/New Development•Special Needs Housing, such as homeless, developmentally disabled, etc.•Acquisition and rehabilitation•Down Payment and Closing Cost Assistance; Minor Home Repair Grants•Social Service Funding Assistance•Rental Assistance
Rental Assistance ProgramandPublic Housing Agency PlanBobbi NunnHousing Program Manager
Rental Assistance Program•Federally‐funded program which assists extremely low and very low‐income families pay their rent•Assisted families pay approximately 30% of their income towards their rent•Administered by the Carlsbad Housing Agency
Who’s Assisted?Average of 615 families assisted each month76% Extremely Low‐Income (under 30% Area Median Income –AMI)18% Very Low‐Income (between 30% and 50% of the AMI)6% Low‐Income (between 50% and 80% of the AMI)
Who’s Assisted?37% of households are elderly (62 and over) 26% of the head of households are male74% of the head of households are female63% of households are families (includes disabled)22% of the head of households are male78% of the head of households are female31% of families have earned incomeAverage family size is 1.88Average annual income per family = $16,166
Who’s Assisted?Ethnicity:23% are Hispanic77% are non‐Hispanic Race:87% White8% Black3% Asian1% Other1% Mixed
Public Housing Agency Plan Federal regulations require a five‐year and Annual Public Housing Agency Plan.Purpose is to provide a basic guide to:Policies and rules; Operations, programs and services; andMission and strategies for serving low and very low‐income needs.
Public Housing Agency PlanAnnual Plan must be adopted by the Housing and Redevelopment Commission; and Copy submitted to the U.S. Department of Housing and Urban Development.
Public ParticipationPublic review and comment period began on February 12thand will end on March 27, 2012;Public hearing on March 27, 2012; andPublic comments will be addressed in the final PHA Plan.Cassia Heights
Annual Public Housing Agency PlanFinancial Resources:CY 2011 annual contributions for Rental Assistance Program ‐$6.235 millionRent Determinations:Payment standards revised October 1, 2011Fiscal Year Audit:Year end June 30, 2011 –no audit findings
Progress of 5‐Year Plan GoalsPublic Housing Agency Goal: Expand housing11 affordable for sale units added – Roosevelt Gardens50 units of affordable senior units, broke ground on February 9thand expected completion early 2013 –Tavarua Affordable Senior Apartments Improve the quality of assisted housing97% reporting rateHigh performer ranking for FY 2008, 2009, 2010, and 2011Maintained and utilized HAP costs within the HUD funding allocation
Any Questions? Staff Contact:Bobbi Nunn Housing Program ManagerHousing & Neighborhood ServicesBobbi.Nunn@carlsbadca.gov760‐434‐2816