March 1, 2000
Members of the Board
Laguna Irrigation District
VIA FACSIMILE: (559) 867-3062
Dear Board Member:
I understand that at a recent hearing, a letter supporting your efforts to create an electric utility was read into the public record. It is important for your constituents to hear another point of view, and I respectfully request that you read into the record this letter at your March 8 hearing on this subject.
The California Taxpayers’ Association opposes the formation of an electric utility and condemnation of utility facilities by Laguna Irrigation District.
Entering the electric utility business is a risky move for the district and for the district’s taxpayers. As we understand the proposal, the district proposes condemning PG&E’s electric system properties within district boundaries and, after purchasing that property, would put it to the same use under district ownership.
The financial risk of such a move is significant. Your documents show the debt required for such a takeover is more than $12 million for 25 years. Legal, consulting, and regulatory costs would be substantial. If the district does not meet financial projections, taxpayers and ratepayers will be on the hook for this debt.
In addition to the financial risk, public takeover of a private business harms other government agencies – Kings County, Fresno County, local cities, school districts and other districts will lose significant amounts of property tax and franchise fees that would have been collected from the private utility.
Additionally, statewide taxpayers lose because subsidies and tax exemptions provided to the district’s electric utility would cost money. Subsidies for government-owned utilities annually cost California taxpayers more than $1 billion.
District projections show that the new utility would not be able to lower rates for at least five years, and after that, the projected rate reductions are very small. Why is the district attempting this if it’s not to reduce rates? The district would operate as a tax-exempt business, so where are the tax savings going if not to lower rates? It appears that much of the money would go to pay for lawyers and consultants -- $600,000 to get the district through the takeover process and three-quarters of a million dollars for money already spent by the district on developing this proposal.
Taking business away from the private sector is simply bad public policy. To be competitive, California’s government agencies need to focus on core competencies and become leaner and more efficient – not to attempt new business ventures that put taxpayers and ratepayers at risk and confiscate valuable private-sector property.
Please reject this proposal.
Sincerely,
Stephen Kroes
Vice President
California Taxpayers’ Association