Wednesday, April 23, 2014

Prada seeks rate delay


JUDGE Daniel Proud swears in new EID directors Greg Prada, left, and Dr. Dale Coco before the meeting Monday. Democrat photo by Michael Raffety

From page A1 | December 11, 2013 | 9 Comments

Filing an agenda item on the Wednesday before being sworn in Monday, Dec. 9, newly elected El Dorado Irrigation District Director Greg Prada sought a four-month delay in the 5 percent rate hike scheduled Jan. 1.

He lost that motion on a 3-2 vote, attracting only Director Alan Day, who was given the president’s gavel earlier in the meeting.

Newly installed Director Dr. Dale Coco voted against Prada’s motion, though he said his goal was to freeze rate hikes or at least confine them to inflation adjustments. But Coco said a rate freeze “cannot be done retrospectively,” but must be done “prospectively.”

Coco was also concerned that stopping the Jan. 1 water 5 percent rate hike would prevent the district from refinancing its debt at a lower interest rate. “We have to sign documents under penalty of perjury that the budget will not change.”

That budget for 2014 was adopted in October.

General Manager Jim Abercrombie said he would have the documents for the refinancing prepared for the Jan. 13 meeting. Refinancing $130 million of the debt at a lower rate would provide the district a savings of $300,000 in 2014 and $1 million each year thereafter.

“This is going to be a harsh, harsh blow,” Prada said.

Dave Houston of Citi Bank, who has handled EID’s bonds and Certificates of Participation since 2001 praised the district for being “proactive in managing its cost strategies.”

“EID’s name in the capital markets is very well respected,” Houston said, adding that the district’s recent endeavors to pay for capital improvement projects out of existing revenues has “enhanced its creditworthiness.”

Abercrombie, in a memo in response to Prada’s agenda item, wrote, “A mutual goal of the board and the staff is the ability to fund smaller capital projects in the future on a pay-as-you-go basis. Maintaining the 5 percent increases scheduled for 2014 is a critical part of the goal.”

“A1/A+ is the strongest rating since the district was incorporated,” Houston said. “Prepaying debt shows credit strength.”

“In 2012 a refinancing by the district attracted 2 1/2 times the available bonds and allowed a lower rate,” Houston said.

Keying off an audience comment that EID “should be run like a business,” Houston said EID operates like a business. It has improved in 12 years. “I work with 750 utilities from Puerto Rico to Guam.”

Asked by Director George Osborne about the possibility of getting a higher credit rating, Houston said AA credit ratings generally go to districts with “bigger demographics — 400,000-500,000 customers, whereas EID has 100,000 customers.”

“I can tell you they will burn this building down if we have more rate increases,” Coco said to Houston. “I think development is going to be tamped down” by the El Dorado County Board of Supervisors. Prada, noting the district’s debt goes through 2039, asked if the refinancing would extend it.

Houston said the refinancing would lower the interest rate but not extend the term of the debt.

Prada also expressed concern about amount of variable debt. “Sometime rates will go up.”

Houston said if variable rates go up the district’s $85 million in reserves would compensate by earning more interest. “The only thing I would be concerned about is if you reduce the reserves,” Houston said.

“We need to know what ticking time bombs we have,” Prada said. “Clearly it’s worked out well. At some time it won’t. We need a five-year plan.”

Houston listed two key exposures the district has to variable bond rates: 1. spending reserves, and, 2. if tax rates do go down at the federal level.

“What about pension obligations?” asked El Dorado Hills resident Bob Lucca.

“These are all included in the disclosure documents. EID is at the pinnacle of bond rating for a district this size,” Houston said.

Among the subscribers to EID bonds are names like Vanguard, Lord Abbott, Black Rock, BNY Mellon, PIMCO, Wells Capital Management, Northern Trust, Western Asset and Oppenheimer.

Regarding his request for a four-month rate freeze, Prada said, “There are multiple ways to call a timeout. Noting the debt refinancing cost reduction of $300,000, he also said “property tax revenue (to EID) is going to be more happy. All these create an opportunity to step in front of rate hikes. What I am proposing is a deferment for a four-month period. There is a mandate from the election. That’s why I pushed to put it on the agenda.”

“Mobile home park residents teared up, teared up” about the rate increases,” Prada said.

“During the Cost of Service Study I think you were in favor of going to the 50/50 rate,” said Director George Osborne, referring to splitting water rates 50 percent between base rate charges and 50 percent commodity charges,.

At an Oct. 24, 2011, public workshop on the Cost of Service Study in Cameron Park, Prada said he favored the 50/50 plan.

“I was opposed to it,” Osborne said, “because it was a substantial change.”

Osborne favored staying with the 25 percent base charges and 75 percent commodity charge as more beneficial to those living on Social Security. Abercrombie sought the change to 50/50 because of the volatility of the higher commodity charge percentage.

“The primary function of this board is that we have the wherewithal to deliver water and sewer. We brought it down from 11 percent (rate hike) to 5 percent. I look to the general manager to find as much savings as possible. I am in no way going to jeopardize that bond rating.”

Michael Raffety


Discussion | 9 comments

  • GeraldDecember 11, 2013 - 7:14 am

    This is why we elected Greg. He is going to shake things up at EID and of course Dr. Cocco is going to go along with the status quo. Well there's always 2015. Thanks Greg.

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  • Bob LucaDecember 11, 2013 - 7:23 am

    Greg Prada and Alan Day stood up for ratepayers and voted to delay a 5 per cent rate increase set to begin in January. Newly elected Dale Coco who ran on a platform of stoping rate hikes voted against delaying this increase as did the other two members of the board. So when you pay that extra 5% on your water bill next year you can thank Dale Coco for breaking his campaign promise and voting with the old guard to stick it to the ratepayers once again.

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  • Phil VeerkampDecember 11, 2013 - 7:43 am

    Bob Luca - Gerald, Here's a dirty little secret that you ought to be focusing on. The west end of the county is the most expensive to serve and your costs are subsidized by the rest of the district through the Greg Prada supported 50-50 base to usage formula and the socialized gravity equals pumping scheme. Your strategy is to continue shifting costs from the west to the east. Your pumping station at the bottom of Folsom lake is a disaster. You shift your expenses through the 50-50 scheme to low income trailer parks and low cost, gravity customers. The west end's ability to serve itself is crippled via a crippled pump station. Luca, Gerald, Greg - reality check - investigate and solve your water supply (Folsom Lake Pumping) and drop your slimy political side show.

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  • GeraldDecember 11, 2013 - 7:57 am

    Haven't tried decaf yet have ya.

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  • Phil VeerkampDecember 11, 2013 - 8:02 am

    REAITY CHECK - Rates are not going down absent an inexcusably irresponsible realization of Prada, Luca & Day's happy-days-are-here-again delusional policy. The west county needs a third transmission line - hundreds of millions of dollars - rates ARE NOT GOING DOWN.

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  • Phil VeerkampDecember 11, 2013 - 8:22 am

    “Mobile home park residents teared up, teared up” about the rate increases,” Prada siad. How 'bout this, Greg. Visit the mobile home parks, Greg, and knock on doors and explain to those residents how your 50-50 rate scheme is good for them. ~~~ LINK - Cameron Park resident Greg Prada, who had been a member of the Cost of Services committee, said he favors the 50-50 plan. “For any El Dorado Hills ratepayers it clearly is advantageous. It is not in the customers’ interest to go 70-30,” Prada said.

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  • Jack RousseauDecember 11, 2013 - 9:33 am

    The important thing to understand here is Dr. Coco actually appears concerned with doing what's right for EID and its ratepayers. Mr. Luca and Gerald: what's sad is neither of you ((or Prada) understand that knee jerk changes would cost us all more. Please consider the incontrovertible fact of what Coco said: “We have to sign documents under penalty of perjury that the budget will not change.” Hopefully you all start to understand finance a bit better. You too, Mr. Prada. Mr. Coco: thank you for taking the responsibility of being a director seriously.

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  • GeraldDecember 11, 2013 - 8:28 pm

    Yeah the status quo is what is going to work to bring rates down and make water and sewer affordable. Get real and read Greg's positions instead of buying developers and landowners wanting a quick buck talking points. Dr. Cuckoo is a shill for certain developers. Look who funded his campaign. OK move along nothing to see here. Right?

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  • Phil_VeerkampDecember 12, 2013 - 7:30 pm

    Earth to Gerald . . . Pssst! . . . . rates are not coming down . . . get it?

    Reply | Report abusive comment


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