Released: July 17, 1996

[Due to the length of this report, it has been divided into separate pages:
Introduction (below), Observations, Findings, and End Notes.]


On June 4, 1991, elections were held throughout Santa Barbara County. The main ballot issue asked each of the 13 water districts whether it would pass a bond measure authorizing the importation of State water. The acre-feet (AF)1 and dollar amounts varied from district to district and all but three voted in favor.2 Seventy-four percent of those voting in the Santa Ynez River Water Conservation District, Improvement District No.1 (ID #1, also referred to as District), consisting of the unincorporated areas of the Santa Ynez Valley and the City of Solvang, voted "yes," authorizing an $18.4 million bond issue.

After the June 4, 1991 vote authorizing participation in the State Water Project "under an existing Water Supply Retention Agreement," the Solvang City Council decided in a 4-1 vote at an open meeting to purchase 1,500 acre-feet from its long-time water supplier, ID #1. The District had reserved an allotment of 2,000 AF, and with its majority vote the Solvang City Council agreed to sign the "take-or-pay" contract for three-quarters of that amount. That contract was dated August 1, 1991. It was signed by the President of ID #1 and the Mayor of Solvang.

Although a transcript and a tape recording of that meeting reveal little discussion of the cost of the water, the figure of $970/AF was stated by the attorney for ID #1. Starting in 1997, that cost is estimated to be $1,550 AF to be spread among the city's water ratepayers, for an estimated total payment of $84 million, including interest. The more than $2.4 million annual payments are to begin in 1997 and will last until 2022 before they decrease. That figure does not include all operating costs, which are as yet uncertain.3

On March 27, 1995, the Solvang City Council passed unanimously Resolution No. 95-348 requesting that the Grand Jury "conduct an independent investigation of the State water matter for the City of Solvang."4 Because of the large amount of time required for such a complicated investigation, that request for an "informational report to the City Council and the citizens of Solvang" was passed on to this year's Grand Jury.

The Grand Jury received a letter and a petition, dated July 1, 1995, signed by 67 Solvang residents, asking for relief from the Department of Water Resources (DWR) costs. The Grand Jury also received photocopies of postcards, signed by 402 residents of ID #1, 350 of whom were from Solvang.5 Individual Solvang residents contacted the Grand Jury urging an investigation to clarify the issues in the 1991 election and the decision by the City Council to sign a contract with ID #1. There were also requests to study how the City of Solvang intends to meet the financial challenge ahead and how it will allocate the costs of State water among the ratepayers. City Council members, other officials and individuals expressed the hope that such an impartial investigation would mend the divisions in the Santa Ynez Valley resulting from the decision to import State water.

On August 24, 1995, one day before the expiration of the statute of limitations, the Solvang City Council voted unanimously to file a lawsuit against ID #1.6 The Grand Jury consulted the Santa Barbara County Counsel and was advised that the lawsuit would not prevent an investigation of the Solvang water issue under Penal Code 925a.7 However, the existence of the lawsuit limited the Grand Jury in its inquiry. Strong efforts were made to keep away from the substance of the Complaint and the Cross-Complaint. Even so, the issues of the lawsuit and the issues investigated by the Grand Jury inevitably do overlap. The Grand Jury made every effort not to favor one side or the other and to approach the controversial Solvang water matter with an open-mind, with fairness to all.

The Grand Jury kept its focus on Solvang and did not accept requests to broaden its investigation to other water districts or to other State water-related issues, including possible issues relating to the revenue bonds. It is the duty of the Grand Jury to be impartial. Three members recused themselves from taking part in the investigation: one was because of her connection to one side of the lawsuit; the others recused themselves because of personal conflicts. None on the investigating committee had any prior knowledge or involvement with the Solvang water matter.



Report Continued

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