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January 16, 2012

  Lani Lutar
                    619-234-6423 or lani@sdcta.org
                    Gayle Lynn Falkenthal, APR
                    619-997-2495 or Email Gayle

Study Shows Massive Increases in Labor Costs/Pension Liabilities
At San Diego County Water Authority
Growth Driven by Hiring Spree, Benefit Increases

(San Diego) — A study of labor costs at the San Diego County Water Authority (SDCWA) over the past ten years finds double-digit percentage increases in labor costs and a growth in pension and other post-employment liabilities in the tens of millions of dollars. The report is the result of a nine-month analysis by the San Diego Taxpayers Educational Foundation, the research arm of the San Diego County Taxpayers Association.

Among the study’s findings are the following:
  • As of Fiscal Year (FY) 2009, the estimated labor cost per employee was $147,000, or an increase of 24% since FY 1999.
  • Annual salary and benefit costs both nearly doubled between FY 1999 and FY 2009. For the period covered, the number of employees at the Water Authority increased by nearly 50%.
  • The Water Authority had no labor-related liability between FY 1999 and FY 2002. Between FY 2003 and FY 2009, however, the Water Authority’s total unfunded liability (which includes pensions and retiree healthcare) increased by over $35 million to a total of $43 million.
  • The value of a typical pension and retiree healthcare benefit paid out to a SDCWA employee who retires at age 55 amounts to nearly $1.4 million over his/her retirement.
  • The Water Authority voluntarily increased its own pension costs by paying most of its employees’ pension retirement contribution and including that benefit as compensation for the purposes of calculating the retirement benefit.
  • Between FY 2004 and FY 2009, Water Authority labor cost increases outpaced growth in the amount of water sold to its member agencies.

The full report is available at www.sdcta.org.

“While many factors contribute to labor costs, it is clear that over the past decade the Water Authority took deliberate action that led to large increases in those costs, particularly its pension liabilities,” said Lani Lutar, President and CEO of the San Diego County Taxpayers Association. “Although recent attempts to curb some of the excesses of the 2000s are welcome, the fact remains that the Water Authority was very generous to its employees. Obviously, labor cost increases weren’t caused solely by temporary increases to the workforce.”

The San Diego County Water Authority is a water wholesaler. It does not provide water services directly to consumers but to its member agencies, which are water retailers. These include six cities, five water districts, three irrigation districts, eight municipal water districts, one public utility district, and one federal agency within the county. The Water Authority gets most of its water from the Metropolitan Water District of Southern California. Beginning in the late 1980s it launched an aggressive capital improvements program in an effort to become more independent and diversify the county’s sources of water.

The study also finds that on several counts the Water Authority compares unfavorably to the Metropolitan Water District. For instance, its retirement benefit formula is 25% larger and its annual labor costs grew by 85% between FY 1999 and FY 2009, as opposed to only 33% for the Met.

The Water Authority raised rates by 11.3% in June 2010 and 7.7% in June 2011.

The report issued today is a part of a multi-year effort to better understand the region’s long-term, strategic water needs, inform ratepayers about water costs, and provide much-needed oversight of local water districts. The first phase of this effort is a study of labor costs at the county’s various water districts covering fiscal years 1999 to 2009.

The first report on labor costs released on November 1, 2011 focused solely on the Metropolitan Water District of Southern California, the county’s other water wholesaler. A future report will concentrate on the numerous independent water agencies within the county that provide water directly to ratepayers.

The San Diego Taxpayers Educational Foundation is a nonprofit public benefit corporation created to research government revenue and expenditure policies affecting taxpayers in San Diego County as well as other public policy issues having a direct bearing on county residents and businesses.

The San Diego County Taxpayers Association
is a non-profit, non-partisan organization, dedicated to promoting accountable, cost-effective and efficient government and opposing unnecessary new taxes and fees. Founded in 1945, SDCTA has spent the past 66 years saving the region’s taxpayers millions of dollars, as well as generating information to help educate the public.