Last year, the Orange County grand jury expressed concern about “excessive” amounts of cash being accumulated by local water districts.
“Future revenues should be reduced to avoid the accumulation of unallocated revenue that does not meet” clear standards, the panel wrote in its report.
The public water agency for Costa Mesa, meanwhile, is doing just the opposite.
Mesa Water District plans to dramatically beef up its reserves — also known as “cash on hand” — doubling them from $22 million to as much as $47 million over the next five years.
Mesa officials said the move is about strengthening its credit rating, already at the top-ranked AAA status, and thus lowering the interest rates its pays on loans. “We are already AAA, and we want to keep that. But we want to become an even stronger AAA,” said Mesa spokeswoman Stacy Taylor.
The planned cash buildup would be equivalent to more than 40 percent of the district’s $112 million in capital assets.
Water districts keep cash reserves as a cushion for when unusually large infrastructure costs crop up.
But such reserves’ sheer size drew the attention of last year’s grand jury, which found more than $860 million in available cash among special districts across Orange County.
“The unrestricted reserves of the special districts are available to the governing boards to spend as they please,” the grand jury declared. “The reason for accumulating these reserves is not documented, nor is the intended use for these funds clearly identified.”
The report received a cool response at Mesa, which rejected many of the grand jury’s findings in its written response.
Of the grand jury’s recommendation that it use reserves to reduce existing debts and avoid building up cash that doesn’t meet clear standards, Mesa replied that it “will not be implemented because it is not warranted.”
“It is unclear what ‘excessive unrestricted reserves’ is considered to be, and it is unclear what the adopted new standards will be,” the district wrote.
The grand jury also complained that districts haven’t published long-range financial plans for their large reserves.
Mesa replied that it was preparing such a plan.
“Currently, Mesa Water is working toward publishing a long-range (five-to-ten year) financial plan,” the district wrote in its July 10 letter.
Nine months later the plan still isn’t available. Taylor said the plan is on hold while a new financial services manager is recruited.
With an operating budget of $30 million and capital budget of $7 million, Mesa Water serves about 110,000 residents in Costa Mesa and part of Newport Beach as well as John Wayne Airport.
The district increased the prices it charges for water in 2009 and now makes around $6 million in yearly income.
Most of Orange County’s massive water and sewage infrastructure is owned and operated by a patchwork of 16 local districts, each a separate government agency.
Together the water and sewer districts own about $5 billion in assets.
Tap water delivery in places like Anaheim, Santa Ana and Fullerton is handled by their city governments.
You can reach Nick Gerda at ngerda@gmail.com, and follow him on Twitter: @nicholasgerda.