SCVWD chairman says the agency hasn’t pured money down the drain
on Central Valley Water Project
Water District Has Been Prudent with Spending on Central Valley Project
Dear Editor,
A recent letter to the editor claims that the Santa Clara Valley Water District has incorrectly managed its costs for imported water delivered by the United States Bureau of Reclamation through the Central Valley Project.
The letter wrongly alleges (1) that the district incurred “extra” interest costs that must be paid by rate payers; (2) that funds set aside by the district for CVP costs were inappropriately spent on other projects; and (3) that the district has not fully informed rate payers of CVP costs. None of these claims is valid.
When the district negotiated its CVP contract in 1977, it accomplished a unique benefit to help finance the local facilities needed to distribute and treat the new source of water supply. During the first 20 years of CVP water deliveries (1987 to 2006), the district was able to pay a relatively low, fixed water rate that covered part of the annual San Felipe Division capital costs. The district fully expected to pay interest on unpaid capital, just as homeowners pay interest on mortgages. At 3.5 percent, the interest rate is lower than market rates, thus saving the district millions of dollars.
In 1995, the district learned that the USBR was attempting to increase San Felipe Division interest rates retroactively. The district challenged this new policy, and ultimately joined with other CVP contractors in litigation. During this time, the district prudently established a special CVP reserve to prepare for potential settlement, or, if the challenge failed, to cushion a rate adjustment. Finally, in 2005, the federal government agreed to treat the district’s San Felipe Division costs exactly as anticipated 30 years ago – interest on unpaid capital would remain at 3.5 percent.
Additionally, an amendment of the district’s CVP contract locked this agreement in place, allowing the district to reduce its CVP reserve, and freeing up funds for other needed water utility projects. The district’s success in this negotiation will save rate payers at least $90 million.
None of these CVP contract issues and associated financial matters is new or secret. The district has routinely discussed them with its customers, partners and stakeholders, including the Santa Clara Valley Water Commission and the Water Retailers Committee – advisory groups that include representatives from the cities of Morgan Hill and Gilroy.
The district has also routinely discussed these matters for decades at its public board meetings, and documented them in its semi-annual Water Utility Enterprise Reports. The most recent one, dated March 2007, can be found on the district’s website at www.valleywater.org/water.
The district’s careful management of its CVP contract and associated costs has saved rate payers millions. We appreciate the opportunity to respond to these claims, and remain willing to address any questions that water users may have regarding the cost-effective delivery of water to the citizens of Santa Clara County.
Tony Estremera, Chairman,
Santa Clara Valley Water District
