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Are San Marcos water bills subsidizing new construction costs?

SAN MARCOS — Are residents in San Marcos paying more for their water to fund area development projects? Tom Scaglione, former Vallecitos Water District chief financial officer and current adjunct Palomar College accounting professor, posed the question while leading a discussion Oct. 23 at Palomar College titled “San Marcos Water and Politics: The Price We Paid.” He says new construction costs are being subsidized by San Marcos residents’ water and sewage bills.

For example, since 2013, figures he compiled show that residents paid $98.5 million in fees while the separate developer fund was in debt by $13.7 million dollars. He estimates customer fees increased by 16% to help offset the cost of developer obligations.

Vallecitos Water District General Manager Glenn Pruim says water and sewage prices for residential customers have gone up but only to pay for improvements to existing infrastructure.  Those increases are based on a cost service study.

“These are monies that we need to pay for future costs that aren’t incurring right now and a lot of those are for replacements,” Pruim said. “So, for example we have pipes in the road that need to be replaced but they may not need to be replaced for 20 years from now. So, we start accumulating funds that we call our reserves.”

Donna Nickel was at the lecture and similar to Scaglione, worked at the district until a new board was elected. “The Vallecitos customers are not aware of what is going on and basically they are getting shafted and they are paying for what developers should be paying for and when I was there, the developers were paying for the fee,” Nickel said. “So, this has come as a reversal. I just know from the meeting I went to it will be really hard to follow exactly what is going on if you are not familiar with the rates and capital facility fees and all the things like that.”

Beyond his previous work experience at the district, Scaglione has been following the district closely since he left last year. He’s filed public record requests, listened to board meetings and tracked campaign contributions from developers. He took a look at building permits from 2006 to 2018. He says after 2009’s recession there should have been a surplus, instead the deficit to the development fund continued to increase while the number of building permits skyrocketed.  In fact, the Vallecitos Water District is the only one with a deficit in San Diego County.

“There is no agency that has accumulated that much revenue from rate payers’ fees,” Scaglione said. “By 2024 there will be a $49.4 million deficit and there is no prevision to pay it back.  There is no plan for the adoption of a reimbursement resolution.”

Pruim agrees that there is a deficit; however, these past two months a study assessed what developers will owe and what they will need to pay in the future.

“There is $13 million in deficit,” he said. “That was added to the fee that each developer will pay, going forward. For developers it went up by about 20%, so that is an increase that is starting to pay for the future costs and to recover the costs.”

An increase in the capital facility fee, which impacts developers, will go into effect by next January.

“You have to have the rate payer focus, that’s very important, and adopt the rates that are needed,” Scaglione said. He encourages people to visit his website

Nickel has already joined and hopes more people will become aware of what is going on. “I am a rate payer in San Marcos,” she said. “I want it to stop and I actually am — I’m really hoping that we will find somebody that will run for the board.”

Vallecitos Water District board meetings are held on the first and third Wednesday of every month at 5 p.m. They are also aired on San Marcos TV (SMTV). Plus, recordings and minutes are available on their website at  Pruim said they aim to be “very transparent.”


luke v August 11, 2020 at 12:59 am

Elect Tiffany Boyd-Hodgson for Vallecitos Water Board Division 5. Ready to fight for the rate payer!

Tom Scaglione, Former Vallecitos CFO November 1, 2019 at 9:33 am

“Very transparent”? In February, Vallecitos started negotiating the Cap Fee rate with developers in private meetings at $8,944 for water and $18,523 for sewer. They didn’t make proposed rates public until 6 months later. They adopted rates last month at $7,986 for water and $12,986 for sewer. How was the rate reduced? That has not been made public.
A Vallecitos staff report notes “… the determined Cap Fees should have no fiscal impact to ratepayers.” In their adopted budget they project the current developer deficit (subsidy) of $13.7 million will be reduced to $7.6 million in five years. They assumed Cap Fees of $10,165 for water and $19,265 for sewer in their projection. If they would correct the projection for the adopted Cap Fees, the subsidy grows to $21.4 million in five years. They also added debt proceeds to the projection, even though they will not be issuing bonds. Take out the phantom debt proceeds and, per their numbers, the developer subsidy paid by ratepayers will be $49.4 million in 5 years.

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