Mesa Water votes to put merger measure on ballot as sanitary district considers legal action

Mesa Water District board members decided to officially seek public input on the idea of merging with the Costa Mesa Sanitary District — voting Thursday to place an advisory measure on November’s ballot after a study showed combining the two agencies could result in substantial savings for ratepayers.

About an hour later and less than a mile away, sanitary district officials blasted the study as flawed and said the possible savings it calculates are incorrect and would mislead voters.

Sanitary district General Manager Scott Carroll said legal action is a possibility.

“The wording they approved for the measure is not factual and it’s very misleading,” Carroll wrote in an email Friday. “We may ... try to have a judge approve removing some of the language on the measure.”

Thursday’s discussions marked the latest development in a process that began in April, when Mesa Water sent a letter to the sanitary district proposing a joint study looking at whether merging the two government agencies would make financial and operational sense.

The preliminary study from consultant Arcadis U.S. Inc., commissioned by Mesa Water and released publicly last week, says the financial benefits of a merger could be significant — roughly $15.6 million in one-time savings and an additional $2.7 million annually.

With so much money potentially at stake, Mesa Water board members said ratepayers should be able to vote on a nonbinding advisory measure to indicate whether they support the idea of merging the two agencies.

“As elected officials, we have tremendous influence and impact on our community, and our community deserves politicians that aren’t in it for themselves, that are in it to save the ratepayers money and to deliver services in the most economical manner possible,” board member James Fisler said Thursday.

The Mesa Water board voted 4-0 to place the measure on the ballot. Board member Ethan Temianka was absent.

In a letter to Mesa Water responding to the vote, sanitary district board President Mike Scheafer called the advisory measure “extremely premature, as well as ill-informed, hastily prepared and largely inaccurate.”

“In the best interests of the citizens of our community, we urge you to reconsider placing such a measure on the ballot,” he wrote.

Sanitary district officials strongly objected to the figures in the study.

“It seems to me that it would be very inappropriate to deceive the citizenry by putting these incorrect numbers on a ballot measure and ask them to give you advice as to combining a district, when the facts you relied upon were flawed,” said sanitary district treasurer Marc Davis.

For example, Davis said, the study says there’s about $15.3 million in cash in what it calls the “Wastewater Fund.”

About $9.7 million of that is characterized in the study as excess cash that a unified agency would have in its reserves. The study classifies that money as a “one-time saving” that could be used for things such as customer rebates or rate stabilization.

Davis said that what the study calls the Wastewater Fund is actually three different pools of money — the Wastewater Fund, the Facilities Revolving Fund and the Asset Management Fund.

The actual cash balance of the Wastewater Fund is about $6.5 million, Davis said. Using the study’s methodology, the one-time savings available from that fund would be more like $1.8 million, not $9.7 million.

“How can you save $9.7 million in cash when you’ve only got $6 million in the bank?” he said. “It doesn’t make a lot of sense.”

Calculations of potential savings in other areas, such as real estate, also are flawed, he added.

Davis and sanitary district board members also said the study relies on old financial data.

“All the information they’re basing their results on is on financial activity more than a year ago and does not accurately reflect the current financial position of this district,” Davis said. “It just doesn’t make sense to use outdated information when you’re trying to do a study of this magnitude.”

Mesa Water’s general manager, Paul Shoenberger, said in a statement Friday that “Mesa Water District believes the study results are true and valid.”

According to Mesa Water External Affairs Manager Stacy Taylor, “the Arcadis study used the most recent publicly available documents as posted on both CMSD’s and Mesa Water’s websites.”.

The sanitary district declined to officially participate in the effort, raising concerns with the level of input it had in shaping the study and how fast the process was moving.

“Mesa Water welcomes CMSD to share their evaluation of the study with us,” Taylor wrote in an email Friday.

Some sanitary district board members also criticized Mesa Water over behavior they considered disrespectful and disappointing.

Despite the sanitary district’s misgivings, the advisory ballot measure that will be put to voters on Nov. 8 cites the potential savings outlined in the study.

The measure isn’t binding, so even if it is approved, consolidation won’t be a given. However, Mesa Water officials say it will provide a clear indication of how much support there is for the concept.

The Mesa Water District provides service to about 110,000 people in Costa Mesa, parts of Newport Beach and sections of unincorporated Orange County, including John Wayne Airport.

The Costa Mesa Sanitary District provides sewer and curbside trash collection services to about 116,700 ratepayers in an area that is similar, though not identical, to Mesa Water’s.

Placing the measure on the ballot will cost Mesa Water an estimated $66,628. Mesa Water board members approved up to an additional $88,000 for educational outreach efforts between now and Election Day.

Sanitary district officials Thursday discussed ways to make their objections known to the public as well as to Mesa Water.

“I don’t want to get down in the dirt and roll around with them, but we’ve got to at least educate the people as to what went down,” said board member James Ferryman.

Board members voted unanimously to create an ad hoc committee consisting of Scheafer and board member Bob Ooten to address the study.

Newport Beach resident Jim Mosher, who regularly attends sanitary district board meetings, called Mesa Water’s ballot measure “a political stunt” because it’s presented in a way that asks voters whether they want to save themselves money.

“I think that’s the overwhelming response in the community — that this is a political stunt,” Scheafer agreed.

The Arcadis study can be viewed online at MesaWater.org/SDSE. To view the sanitary district’s response, visit cmsdca.gov.