SANTA BARBARA COUNTY GRAND JURY 1995-96

THE CITY OF SOLVANG AND STATE WATER

Released: June 17, 1996

FINDINGS AND RECOMMENDATIONS

ISSUES RELATING TO THE SOLVANG CITY GOVERNMENT

FINDING 1: The question in 1991 of whether or not to take State water was the largest decision faced by the city in its six years as a city. According to the City of Solvang figures, State water payments will total at least $84 million through 2035. This figure does not include the more than $3 million that must be spent by the City of Solvang to improve its existing delivery system; in addition, the city must spend $745,000 to be able to receive State water.

In July 1991, the Mayor and the Director of Public Works acted as city "negotiators" in a meeting with ID #1 and decided to take 1,500 AF. There was no written authorization to do so from the City Council. Information was available to show that because of its well supplies, Solvang did not need to take that amount of water. The 1991 City Council and staff failed to perform the necessary study to make an informed decision on taking state water. They did not hire an independent analyst to assist in making that decision. As a result, they were not prepared at the August 26 City Council meeting when the council voted in favor of taking 1,500 acre-feet per year.

Solvang Resolution No. 95-348, asking for a Grand Jury investigation, stated, "Members of the public have made accusations against City Council Members and City Staff." Who should be a member of the City Council is a political question. It is the voters who are the judges of the duty and the performance of their Council members and staff, not the Grand Jury.

FINDING 2: A basis for the 1991 decision to purchase 1,500 AF of State water was the 1989 General Plan's buildout projection of water consumption of 5,418 AF by the year 2015. The 1996 Boyle Engineering Draft Master Plan now shows a projected buildout use of 3,295 AF. No in depth financial analysis was done in 1991 by the City of Solvang to determine the projected costs of State water to determine whether or not the city and its ratepayers could afford to pay for the water. The City Council did not ask the Administrative Services Director or an independent consultant to prepare a financial analysis. The 1990 rate study that was used did not take into consideration the cost of State water. FINDING 3: Solvang's legal counsel did not prepare a written analysis of the August 1, 1991 contract for the City Council. FINDING 4: The City Council appoints two of its members to act as a Finance Committee. This dual role can cause financial decisions to be made without financial background, study or accountability. IMPROVEMENT DISTRICT NO. 1 ISSUES

FINDING 5: There are five members on the ID #1 Board and usually they run unopposed in elections. Two members of the ID #1 Board of Trustees are elected as Trustees from the geographic base of Solvang. Those Trustees did not and do not consult with Solvang officials as to water decisions contemplated by ID #1. There is no mechanism in place for the two ID #1 Trustees elected from Solvang for such consultations. Interests of the seller of water, ID #1, and Solvang, the largest customer of the water, are not necessarily identical. Because of the long association of the city with the water district, Solvang City Council and staff relied on ID # 1 to inform them of all facts relating to the taking of state water, including the total costs projected into 1996 and beyond. ID #1 and its General Counsel expected Solvang to do its own research.

WATER AND BUDGET ISSUES

FINDING 6: Solvang uses more water per capita than the average urban area. In part, this is because of the heavy demands of tourism. Water rates will have to rise substantially with the arrival of state water. Solvang prepares its budgets on an annual basis with no three or five year projections. Solvang has had no recent water rate study to recommend how to allocate those increases. The City Council has held no public meetings devoted only to the water rate issue. The absence of public input has created an atmosphere of suspicion and disenfranchisement.

BALLOT ISSUES

FINDING 7: Santa Barbara County has a strong interest in an informed electorate and in providing complete and accurate information on ballots and in all other voter materials. Ballot measures and accompanying Analyses should be written so that a layman can understand them. The K91 ballot, one sentence of 232 words, and the Impartial Analysis required the reading understanding of a high school graduate. Both the K91 ballot measure and the Impartial Analysis failed to inform fully the voters what, exactly, they were voting for.

FINDING 8: The process for placing a ballot measure for a County or Special District election starts with the Board of Supervisors. Impartial arguments for county measures are written by the County Counsel. Impartial Arguments for Special District elections are written by the attorney for that Special District. This creates an appearence of conflict of interest. There is no single county division that has the responsibility in the busy election time of overseeing ballot measures for accuracy, impartiality and readability in conformity with state measures described in the legislative analysis for Election Code Section 9087. FINDING 9: According to the legal ad published in the Santa Ynez Valley News, the "reasonable" time allowed by the County Clerk-Recorder-Assessor for submission of opposing arguments was from the publication date of March 21, 1991 to 5 PM March 22. No direct opposing or rebuttal arguments were submitted. Allowing but one day after the publication of the Legal Notice is not sufficient time for residents to develop an Argument to a ballot measure. FINDING 10: K91 referred to both Ordinance No. 91-1 and the 1963 Water Supply Retention Agreement. The Ordinance in its entirety was not part of the K91 ballot measure. The Water Supply Retention Agreement was not reasonably obtainable by the average voter. Even if the Agreement had been obtained, it is unlikely that it would have been understood by anyone other than a lawyer. FINDING 11: Ballot measure K91 did not disclose the fact that the revenue bond measure would trigger an additional DWR indebtedness that is more than one half of the total annual amount due by Solvang ratepayers. Including management and operating costs with the rising DWR costs means that the voters incurred a debt that is much more then what was described by a Solvang official to be "all-inclusive" costs of $13.8 million, seventy-five percent of $18.4 million, the revenue bond number stated in K91. FINDING 12: It is wrong to submit the question of the issuance of bonds "not to exceed" a certain sum and then later reveal that the measure effectively obligated the voters to an additional obligation and a much greater sum. There was no information sheet from the water District detailing the pro and cons of the ballot measure, such as was supplied by the County of Santa Barbara in the 1979 water election. Because of the absence of newspaper and other media reporting and official information about the long range costs, it is highly unlikely that the average voter understood the financial implications of his or her vote. SOLVANG'S FINANCIAL FUTURE

FINDING 13: Solvang has raised its water rates since 1991 to meet the expected arrival of State water in 1996, but the increases are not sufficient to meet the payments that will soon begin. Solvang has a large number of retired people who will be hurt by escalating water rates. Raising water rates alone is not a good solution to making the presently estimated $2.4 million annual bond payments in addition to the maintenance, management, operating costs plus the capital costs of the Solvang Water Department. Raising water rates to the level required for those costs will result in a further drop in consumption. As homeowners conserve to save money, there will need to be additional rate increases.

Solvang has not explored fully the range of possible revenue-enhancing ideas. The City Council's attitude seems to be "we will muddle-along." There are no business license fees. Domestic water connection fees are $5,000 and will not adequately recoup the costs of the State Water Project as it will impact Solvang. Because of city beautification projects, public safety considerations, water consumption and the use of the wastewater treatment plant, tourism is a large expenditure drain. Except for the Transient Occupancy Tax, there are no special assessments on tourists, the major revenue producer.

Solvang has a choice to become a city in name only with few, if any, services for residents or to look at possible revenue enhancements associated with its tourism industry.

California Penal 925a states that "the Grand Jury ... may investigate and report ... and make such recommendations as it may deem proper and fit."

AFFECTED AGENCIES (California Penal Code Section 933c requires that comments to Grand Jury Findings and Recommendations be made in writing within 60 days by all affected agencies except governing bodies, which are allowed 90 days. The Grand Jury requires that responses be submitted on a computer disk along with the printed responses.)

Report Continued


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