Sewer rates may rise precipitously on the Coastside. That news comes amid increased scrutiny over the financial procedures of Sewer Authority Mid-Coastside, a joint powers authority that’s provided wastewater treatment services to its three member agencies since 1976.
If increases are approved, Montara Water and Sanitary District residents could see their rates bumped up by more than 47 percent by 2019. Rates would increase from $14.31 per hundred cubic feet to $17.41 on July 1 this year, and then to $21.07 by July 1 2019.
Residents in Granada Community Services District could see their flat rates increase from $402 to $460 by the next fiscal year, and then climb to $520 in the next — a more than 29 percent change over that period.
Half Moon Bay Mayor and SAM board member Deborah Penrose said the city isn’t discussing raising rates, but doesn’t rule it out.
“Expenses have gone way up,” Penrose said. “A rate increase is probably on the horizon.”
The rate increases are in part needed to pay for replacing failing infrastructure and an ongoing lawsuit that’s pitted the city against the other sewer authority members.
However, funds are also being sunk into covering SAM expenses, some of which can be readily identified and some of which are harder to find. This raises red flags for some agency leaders.
In fact, Granada and Montara authorities have withheld certain payments.
“I think something is terribly wrong over there,” Granada Community Services District Assistant General Manager Delia Comito said in a phone interview. “I’m frustrated by the fact that the truth is not being heard. I think the finger needs to be pointed at SAM.”
Granada board member Leonard Woren said his district has withheld tens of thousands of dollars in payments to SAM.
Montara Water and Sanitary District General Manager Clemens Heldmaier said his district withheld about $700,000 as it waited for information to substantiate invoice amounts, which the district’s SAM representative was eventually able to procure. Now, the board intends to seek approval to pay during Thursday’s meeting.
“We needed to understand where these erroneous bills and numbers were coming from,” Heldmaier said. He added that Montara is also withholding about $46,000 until more clarity can be provided on associated charges. He said the board will discuss SAM’s request for payment from previous years that he said surfaced in March.
“We don’t understand why we were not billed before for pass-through expenses from previous years,” Heldmaier said. “We’re now finally wrapping our heads around what this really means.”
Insufficient documentation with billing is part of the problem.
“The invoices from SAM to member agencies, I look at that and it makes my head hurt trying to understand what I’m looking at,” Woren said.
Heldmaier said he would expect to see comprehensive explanations for charges, but doesn’t in the SAM bills. Officials have instead had to request information after the SAM invoices were issued.
“I don’t think we’re getting the detail where we can understand what every dollar is for. For a public agency, it’s definitely not typical,” he said.
There’s been a perfect storm of events that has led to these misunderstandings, Marshall said. These include major infrastructure projects, staff turnover, new software programs and steep learning curves.
“I think, in all fairness, everyone can agree that it was a highly unusual year,” Marshall said. “Most years, (member agencies) get a check back. I believe because this year it was the other direction, it was unexpected … It hasn’t been as clean from a financial perspective like we normally see.”
Marshall said her agency is working hard. Growing pains from transitioning to a new financial software since 2016 have been resolved, and resulting accounting errors have been corrected, Marshall said.
As a result of the upheaval, SAM failed to adopt a 2017-2018 budget. It continues to operate without one. The agency has not yet completed an annual audit, which SAM’s joint power authority agreement says should have been completed by the end of December.
Marshall said the auditor was unable to schedule time to begin work on-site until Tuesday, barely a month before the next fiscal year begins. SAM board member and City Councilwoman Debbie Ruddock said scheduling conflicts also led to the SAM finance subcommittee arranging a pre-call with the auditor to be held on Saturday, during a holiday weekend. The appointment wasn’t confirmed until Friday, she said. Work for the outstanding audit is expected to be completed by June, and then immediately begin for the next fiscal year.
The agency has tapped into emergency funds to continue operations until member agencies have paid up. The board’s May 21 agenda says that, “If payments are not received, SAM will have to draw down … reserve funds to pay payroll and related benefit expenses for the period ending May 18, 2018. No vendor invoices will be processed until the member agencies’ payments are received.”
Meanwhile, Comito said she takes issue with pay for managers.
“I think the three managers are paid too much,” Comito wrote in an email. The SAM general manager’s total pay and benefits in 2016 was valued at $295,651.15, according to public pay database Transparent California.
“(T)he additional benefits last given to the unrepresented employees were unnecessary, and the twice per year salary increases averaging 7 percent (total) needs to be brought in-line with the average cost of living percentage,” Comito wrote.
Ruddock initially said that at last week’s meeting the board agreed to hire a forensic accountant to review data, but corrected her statement based on a subsequent conversation with Marshall. Instead, Marshall told her that direction she’d been given was to move forward with hiring a consultant to review the agency’s financial procedures and processes.
“The auditor’s already digging into the nitty-gritty of invoices and payments,” Marshall said.
“What we see is dealing with a lot of complexities, and we’re taking a ‘wait and see approach’ rather than going off the deep end about managing or accounting practices,” Ruddock said.
In the meantime, Penrose said the Coastside’s sewer system is fundamentally broken.
“We need to overhaul the system. We need to make a special district out of the sewers. The JPA which we’ve been operating under is not one that works well. There’s no way to break a tie vote. It has member agencies competing with one another, fighting with one another and doesn’t do best by our rate payers for that reason.”