Metropolitan Water District Unfunded Liability Exceeds $600M

A new story of mine at the North County Times gives the deets:

Metropolitan Water District, Southern California’s biggest water wholesaler has accumulated more than $600 million in unfunded liability for retirees since 1999.

The analysis comes from a new report issued Tuesday by a local taxpayers’ group, San Diego Taxpayers Educational Foundation.

Customers of Metropolitan, or taxpayers, will ultimately be responsible for paying these unfunded costs, according to the report. Metropolitan supplies about half the water used in San Diego County and much of the water used in Southwest Riverside County.

 Get the report in PDF by clicking on this sentence.

And for the SDCTA’s press release, read on:

Water Agency Labor Cost Study Reveals Pension Costs and Liabilities Skyrocketing

Study of Metropolitan Water District of Southern California first in a series of reports on strategic water needs and costs
(San Diego) – The San Diego Taxpayers Educational Foundation (SDTEF) released the first phase of its study on labor costs at the county’s various water districts and regional wholesalers. The study is part of a multi-year, comprehensive effort to better understand the region’s long-term, strategic water needs, inform ratepayers about water costs, and provide much needed oversight of local water districts.
With this project, SDTEF seeks to identify the major components that contribute to total employee costs, immediate and long-term, funded and unfunded. This first report focuses solely on labor costs at the Metropolitan Water District of Southern California (MWD), the larger of two regional water wholesalers.
For decades, San Diego County’s water fate has been controlled, in large part, by decisions made at the Metropolitan Water District of Southern California. The San Diego County Water Authority, MWD’s largest customer, has been working to increase its independence from MWD in part with a $3 billion capital improvement program that includes a new reservoir and upgrades to existing storage infrastructure.
Meanwhile, water rates are rising. MWD itself admits that the cost of treated water has increased 50% since 2007.

Among the key findings:
– MWD’s total annual labor costs have increased 33% between Fiscal Year (FY) 1999 and FY 2009.
– The value of a typical pension benefit received by a MWD employee who retires at age 55, with 20 years of service, amounts to nearly $1.1 million over his/her retirement.
– For most of the period covered, MWD paid all of its employees’ pension costs, meaning that employees did not contribute anything toward their own pensions. In FY 2001, it began counting this payment as compensated salary, thereby increasing its pension costs even more. This cost increased by 434% between FY 1999 and FY 2009.
– The total labor-related unfunded liability for MWD as of FY 2009 was over $600 million. Between FY 2003 and FY 2009 its total unfunded liability increased by over $570 million. This is primarily due to an unfunded retiree healthcare liability, which totaled $409 million in FY 2009 and made up nearly 68% of the MWD’s unfunded liability for that fiscal year.
“While there are several factors that have contributed to recent rate hikes, labor and pension costs at water agencies deserve just as much scrutiny as labor costs at cities,” points out Lani Lutar, SDCTA President and CEO. “Pension costs at water agencies have skyrocketed over the past decade and must be brought under control.”
“The Metropolitan Water District is based in Los Angeles, so it’s a remote agency unfamiliar to many San Diego County residents,” said Lutar. “This study is valuable in calling attention to the Met’s role in our local water supply costs.”

The report suggests several actions to curb MWD’s labor costs, including:
– Require employees to finance a fair share of their own retirements.
– Stop treating retirement contributions as increased compensation, which contributes to long-term pension liabilities by increasing how final pay is calculated for retirement packages.
– Reduce the percentage paid toward premiums on retiree health plans and require current employees to pay a greater portion of their post-employment healthcare costs.
– MWD’s financial reporting fails to provide specific details about its labor costs, necessitating reports such as this one. While not required by law, such reporting would allow ratepayers to better understand the public institutions that serve them and hold them accountable.
Subsequent analyses will examine labor costs at the San Diego County Water Authority, the county‘s other water wholesaler, and the numerous independent water agencies and city-managed water departments that provide water directly to ratepayers.