1. Southern California Water Dialogue Presentation Proposition 84 and “Integrated Regional Water Management Planning” Susan J. Varty VP Board of Directors OMWD July 26, 2006

2. Susan J. Varty Vice President and Board Member Olivenhain Municipal Water District Elected member of OMWD board for 12 years OMWD serves 60,000 residents in north SD County Appointed to San Diego County Water Authority board for 5 years ACWA Region 10 board of directors OMWD and SDCWA built the first dam in 30 years in SD County –On time, on budget without a single lawsuit and with strong support of environmental community

3. Susan J. Varty MS finance degree 28 year resident of SD County I am making today’s presentation in my individual capacity – unlike initiative sponsors and special interests, elected officials’ hands are tied and voices are constrained in opposing political initiatives, even when the initiative involves the very issues and interests that I have been elected to represent I don’t agree with it but I play by the rules! No public resources have been spent preparing this presentation or in connection with my attendance here today

4. Benefits of Proposition 84 $5.3 billion available funding –Includes many important projects –“A little money better than none” Summarized by Richard Katz –Paid political consultant (I don’t have one, wish I did!) Supported by Metropolitan Water District –And some other large regional agencies who were involved in crafting the measure and whose projects are earmarked or more likely to be funded (“pay to play”) I am David to their Goliath but appear before you today with the power of personal conviction!

5. Concerns About Proposition 84 It’s not good government! Non-legislative ballot measure –Circumvents elected state officials –Indeed, the legislature did not reach agreement on a legislative water and natural resources bond –Many felt that there wasn’t “enough water” in this “water bond” –Some felt there had been too many broken promises over the issues of surface storage – but that is not my issue or the only issue Private negotiations –Circumvents local elected officials No public meetings and no public hearings –Circumvents the public –This is unimaginable in any government or public water supplier setting

6. Concerns About Proposition 84 It Misleads the Public The “Safe Drinking, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006” or The “Water Quality, Safety and Supply. Flood Control. Natural Resource Protection. Park Improvements. Bonds. Initiative Statute”? Says it will provide all Californians with a reliable supply of water when we all know it won’t begin to do that –Neither did Prop 50, which made the same promise –When do our constituents rebel? I believe my constituents will be misled and believe – as many agencies appear to – that that this bond measure will materially improve their drinking water supply reliability and water quality, when it won’t I fear my constituents will believe that these are the top spending priorities to obtain a reliable, high quality supply of water, when I do not believe that they are

7. Financial Concerns About Proposition 84 $800 million overlaps with and duplicates the $4 billion in the legislative bond for flood protection and levee repairs Adds on to the Legislative bonds which already exceed $37 billion – thus reduces likelihood of Legislative bonds passing –I believe there is a practical limit to the State’s bonding capacity –Interest of $5.1 on $5.4 billion measure Lost property tax revenues and cost to maintain land has not been included

8. Most of the “Water” Money is in Integrated Regional Water Management Planning – But, that’s not “Water”! Two-thirds of the $1.5 billion funding ACWA says is for “water supply” is really for IRWMP –IRWMP by definition is much broader than water supply –This doesn’t make it wrong, just different with different implications and consequences for our ratepayers IRWMP never vetted before the Legislature either –While the Legislature passed the Integrated Regional Water Management Planning Act, no one knew that it would be used as the basis of funding California’s water supply –The funding link was established by Prop 50, another non- legislative bond measure!

9. Integrated Regional Water Management Planning – Governance Issues IRWMP administration chaotic in many parts of the state (though many parties are afraid to speak) IRWMP has created a disconnect between agencies and cities on the one hand and decision-making about projects on the other –But local agencies have all of the regulatory responsibilities and must raise rates to pay for programs and projects DWR guidelines for IRWMP were developed before most retail agencies were even aware of the process There are 5 core issues I would like to address which should be addressed by legislation.

10. IRWMP Core Issues (1) Purpose: The purpose of IRWMP should be to develop integrated plans for defined regions of the state, i.e., IRWMP should be a planning function, not a substitute form of government and not a group with authority to decide who should receive state funding that our ratepayers will pay for

11. IRWMP Core Issues (2) Regions: Regions should be defined to track the intent of the IRWMP Act, namely, any 3 or more agencies may work together to develop a plan and then qualify for IRWMP funding Some people say this is how it is working but DWR has required massive consolidations which have been made on a voluntary and involuntary basis

12. IRWMP Core Issues (3) Notice: Any IRWMP group must give notice that it is being formed and provide all affected parties including all public water systems a meaningful opportunity to participate No “grandfathering” of the members who got there first and no second class citizenship for new members

13. IRWMP Core Issues (4) Governance: Model must be developed for the planning process which allows all stakeholders to be heard, and, at the same time, gives each party a voice commensurate with its legal rights and responsibilities. Failure to establish such a governance model is an affront to elected governance and frustrates local control. Stakeholders are important but do not have governmental responsibilities.

14. Core Issues (5) Implementation: Prioritization and implementation of projects should remain the sole responsibility of local government. No matter how many bonds we sell, there won’t be enough state money to fund IRWMP’s – are you willing to commit to raising your water rates to cover the difference? For “plans” you have no control over?

15. Conclusion Prop 84 is bad government. It doesn’t matter which part of the state you live in or which political party you prefer Prop 84 does not address real water priorities or how to pay for them. Indeed, priorities are being established by what we choose to fund through bond measures at the same time we have failed to address or include some of the state’s most challenging water supply problems, e.g., Bay Delta Let’s take the time and do it right, with local government taking the lead, as it should Let’s work together to fix IRWMP We intend to work through the Legislature or local ballot measures to ensure real water bonds are passed which represent our true priorities through good government.