THE CITY OF SOLVANG AND STATE WATER
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.
2 A two-thirds vote was required and achieved everywhere except in Lompoc, Mission Hills and Vandenberg Village. Only Measure T1 in Santa Barbara "direct(ed) participation in the Coastal Aqueduct Project and issuance and sale of revenue bonds to finance construction of local facilities."
3 Solvang's water costs fluctuate and are not firm as of the date of writing this report, May 15, 1996. $1,550/AF for 1997, $1,560/AF for 1998 were the numbers provided by CCWA in the February 5, 1996 proposed bond refinancing, p N-2-12. There was no projected cost number provided in the April 8, 1996 bond proposal. The Grand Jury was informed in April that refinancing of the bonds has been put on hold for a favorable interest rate. Operating and maintenance costs are uncertain. In addition, DWR costs have been increasing over the original 1992 bond prospectus estimates.
4 The Resolution stated the facts of the decision to take State water and added: "On October 21, 1992, the revenue bonds for the Central Coast Water Authority to execute the construction of a water treatment plant and transmission system to deliver water to the various participating water purveyors were issued. ...Since that time, the City of Solvang has been working on the appurtenant increases in water rates for payment of the city's portion of the bond obligation. ...The financial projections which now include the Department of Water Resources charges for the project were not presented until October 1992...The city has now been informed that the Department of Water Resources charges are, in fact, "variable' and if inadequate water revenues are collected to pay Department of Water Resources costs, a property assessment may be levied which would be considered a tax. ...The increase in water rates have caused a significant amount of controversy among some residents of the City which has caused certain individuals to prepare their own analysis of future increases in rates. ...The media has chosen to publicize these numbers and reference to these numbers as factual representation of the matter. ...Members of the public have made accusations against City Council Members and City Staff. ...Members of the public have also questioned whether officials and advisors of the Santa Ynez River Water Conservation District Improvement District No. 1 (SYRWCD) have a conflict of interest in this matter in that legal counsel for the SYRWCD is also the same for the Central Coast Water Authority and as legal counsel for the SYRWCD also represents the City of Solvang as the City is part of the SYRWCD...." The 1995-1996 Grand Jury finds that it is outside of its competence and jurisdiction to investigate the allegation of conflict of interest.
5 "I/we agree that the 1991 Ballot Measure material led voters of Improvement District No. 1 to believe that their only construction costs for State water facilities would be represented by a Bond Issue not to exceed $18.4 million to help build the SY Extension. They did not vote to assume and should not be charged for any DWR costs of constructing pipeline facilities North of Santa Barbara County. Please record me/us as supporting a petition to that effect before the Santa Barbara Civil Grand Jury."
6 City of Solvang v. Santa Ynez River Water Conservation District, Improvement District No. 1, Case No. SM 093289, filed in the Santa Maria Superior Court; it was subsequently moved to the Santa Barbara Superior Court. The Complaint asks for an injunction, an accounting, and rescission or reformation of the contract on various grounds, and a declaratory judgment. The Cross-Complaint asks for a finding of breach of contract - refinancing of revenue bonds, failure to provide a delivery schedule, breach of the covenant of good faith and fair dealing, and a declaratory judgment. CCWA voted on September 28, 1995 to intervene in the action on behalf of the other water districts; that intervention was filed on March 28, 1996. No trial date has been set.
7 California Penal Code §925a states: "The grand jury may at any time examine the books and records of any incorporated city or joint powers agency located in the county. In addition to any other investigatory powers granted by this chapter, the grand jury may investigate and report upon the operations, accounts, and records of the officers, departments, functions, and the method or system of performing the duties of any such city or joint powers agency and make such recommendations as it may deem proper and fit."
Back to Menu