sdcwa sdcta controversy

8/4/2019 Sdcwa Sdcta Controversy

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San Diego TaxpayersEducational Foundation

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August 3, 2011Ms. Maureen A. StapletonGeneral ManagerSan Diego County 'Water AuthorityRe: SDTEF report on labor costs at CWADear Ms. Stapleton:

Attached is a document containing the findings of the San Diego Taxpayers EducationalFoundation's study analyzing labor costs for the San Diego County Water Authority between FY 1999and FY 2009. It includes an explanation of the study's methodology, and the raw data on which theanalysis was based. We would like to extend to you the opportunity to review the study and respondbefore making the findings public. We ask that you please provide any comments within seven businessdays (August 12).

Any questions or responses may be sent to [email protected]. If you have any questions orcomments that cannot be addressed bye-mail, or if you think a meeting may be the best forum in whichto address these issues completely, please feel free to call me at 619-234-6423.Sincerely,

J - S _ S ' 1 f -Joe SheffoPolicy Analystcc: Mr. Eric Sandler, Director, Finance Department

Ms. Angela Tomayko, Finance Department

Federal Tax Identification Number: 33-0354443

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NiEM BER AGENCIES

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San Diego County Water Authority4677 Overland Avenue San Diego. California 92123-1233(858) 522-6600 FAX(858) 522-6568 www.sdcwa.orgAug. 12.2011

Lani LutarExecutive DirectorSan Diego County Taxpayers Association707 Broadway, Suite 905San Diego, CA 92101Dear Lani:We received from the San Diego Taxpayers Educational Foundation on Aug. 5 a letterfrom Policy Analyst Joe Sheffo requesting our review of the findings of the ExecutiveSummary of a study on the Water Authority's labor costs. We appreciate theopportunity to review and comment on the document, and will also respond directly toMr. Sheffo, as requested. However, I want to bring to your immediate attention the factthat the study contains numerous errors, miscalculations and erroneous data. As aconsequence, the majority of the "Key Findings" and table data points in the report areincorrect. and in some cases. grossly misleading.The inaccurate findings and errors have shaped the content, tone and tenor of theExecutive Summary and provide a wholly distorted overview of the Water Authority'slabor and benefits. We do not know if there is a broader report that has been written forpublic release (it appears we have been provided only an "Executive Summary").Accordingly, we request that you postpone any public release until after yourorganization has had the opportunity to regroup. correct the fundamental errors andmethodologies used, and produce an accurate report. This would be especiallyimportant if you would otherwise plan to proceed using similar methods and calculationsto produce reports on other water agencies, as the introduction to the ExecutiveSummary states (e.g. Metropolitan Water District of Southern California and local wateragencies and cities).As you know, we have been provided only a few days of review before our responsewas requested (by today). We welcome the opportunity to sit down with you and yourstaff to review the study and discuss the problems outlined above. If you would like tohave such a meeting, please contact my office.Sincerely,

Maureen A. StapletonGeneral ManagerCc: Joe Sheffo, policy analyst, San Diego Taxpayers Educational FoundationA public agency Droviding a safe and reliabte water supplv )'0 the San Diego region


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'A tMBE R AGENCIES

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OTHER:J,EPRESENTATIV E

San Diego County Water Authority4677 Overland Avenue 0San Diego, California 92123-1233(858) 522-6600 FAX(858) 522-6568 www.sdcwa.orgAug. 12,2011

Joe SheffoPolicy AnalystSan Diego Taxpayers Educational Foundation707 Broadway, Suite 905San Diego, CA 92101Dear Mr. Sheffo:We appreciate the opportunity to review and comment on the San Diego TaxpayersEducational Foundation's summary of a study on the Water Authority's labor costs. Thestudy contains numerous errors, miscalculations and erroneous data. As aconsequence, the majoritv of the "Key Findings" and table data points in the report areincorrect. and in some cases, grossly misleading. Attached is a letter sent today to LaniLutar, executive director of the San Diego County Taxpayers Association, discussingthese errors.We have suggested to Ms. Lutar that a meeting be held between Taxpayers' staff andWater Authority staff to discuss the study and the errors we uncovered. In themeantime, and in response to your request that we review the study and respond to youby today, the following table corrects errors in the "Key Findings" section of the study."Key Findina" Study's Data Fact DifferenceTotal Annual Labor Labor Cost for CWA, Kover $52 $42 million $10 millionas of Fiscal Year 2009 million" Increase 1999-2009 "270%" 85% 185% Increase per employee 1999- "148%" 24% 124%2009Annual salarv cost increase 1999-2009 "quadruoled" 91% 209%Benefit cost increase 1999-2009 "nearlv trioled" 74% 126% lotal labor related liability increase 2002- "1900%" 1227% 673%2009"Pick-up" increase 1999-2009 "251%" 78% 173% iIn addition, the study contained four tables that, combined, contained 209 separate datapoints. Of the 209 data points, 169 (nearly 81%) are incorrect. These errors appear tobe the result of miscalculations and/or incorrect assumptions. Considering the briefreview period we have been afforded, and because these errors are too numerous toaddress in this letter, we would be happy to discuss necessary corrections in themeeting suggested in our letter to Ms. Lutar.

cl pubh~agency providing a safe ana reliable water suppiy to the San Diego reqton


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Mr. Joe SheffoAug. 12,2011Page 2

Finally, we are unable to verify the calculation in the fourth "Key Finding" on the firstpage of the document concerning the "typical pension and retiree healthcare benefitpaid out to a CWA employee who retires at age 55.... nThank you again for the opportunity to comment on the Executive Summary of theTaxpayers Educational Foundation's study.Sincerely,

Maureen A. StapletonGeneral ManagerAttachmentCc: Lani Lutar, executive director, San Diego County Taxpayers Association


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August 17,2011Ms. Maureen A. StapletonGeneral ManagerSan Diego County Water Authority4677 Overland Ave.San Diego, CA 92123Re: Response to labor cost numbersDear Ms. Stapleton:

Thank you so much for your replies to our letter of August 3 in which we shared with you thefindings of our study of labor costs at the San Diego County Water Authority between FY 1999 and FY2009.

As your letters made clear, CWA believes the study's conclusions, and the data on which theyare based, are flawed. In order to ensure the soundness of our study, we are providing the numbers, innominal dollars, which were used to calculate the figures you are disputing. The sources of these dataare also provided. A spreadsheet with that information is attached, as is all relevant correspondencebetween your organization and ours since April of this year.

As to the dollar amount given for the lifetime pension benefit of a typical CWA employee, thatfigure was based on the following assumptions:

A 2.5% at 55 benefit formula 20 years of service A final compensation of $95,593 (Based on Average Annual Salaries by Age and Service

Table. CalPERS Actuarial Valuation. June 30, 2009. Page 24) An EPMC earned compensation of7%, or $6,691. An annual cost-of-living adjustment of 3%. A life expectancy of 84 years of age (CaIPERS Actuarial Office. "CaIPERS ExperienceStudy: 1997 to 2007. Apr 2010. P.27-29. Life expectancy used for calculations is roundedaverage for men, 82.3, and women, 85.3)An annual OPEB benefit for retiree and eligible dependent of$3,840 for ten years (ages 55 to65).Both retiree and dependent are the same age and die the same year.

The San Diego Taxpayers Educational Foundation strives for accuracy. We hope that thisadditional information will help clarify any uncertainties you may have about the study. For its part, theFoundation will consider any changes that provide a more complete and accurate picture of labor costsat the Authority. If, after examining the attached data, you still have outstanding questions about thestudy, its methodology, or its ultimate findings, please let us know by August 24th.

Federal Tax Identification Number: 33-0354443


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Ms. Lani LutarAugust 22, 2011Page 2

erroneous information in the Taxpayers' study, it would seem counter-intuitive for apublic agency being reviewed by a taxpayer advocacy group to produce such work. It isthe Taxpayers' responsibility as a respected and important voice in the community toensure the accurate portrayal of information on which it bases its study findings,conclusions and policy recommendations. To that end, I would encourage theTaxpayers Educational Foundation to obtain the services of a qualified CPA toindependently review the formulas and calculations its staff used to produce the data inthe study. This could help avoid potential embarrassment of having a Taxpayers studyin public circulation that is so fundamentally flawed.Sincerely,

~~Maureen A. StapletonGeneral ManagerAttachment

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Examples of Errors in San Diego Taxpayers Educational Foundation Study ofSan Diego County Water Authority Labor Costs

Example of SDTEF's CPI adjustment computational error:FY1999 EPMC: $786,584 (baseline data provided by the Water Authority)Factor to convert June 1999 to June 2010 dollars: 1.42 or approximately 70.3% $786,584 x 1.42 = $1,118,910$786,584/70.3% = $1,118,896In Appendix A, SDTEF miscalculated the EPMC figure for FY 98/99 as $553,733.81.SDTEF miscalculated the CPI adjustment because it multiplied by 70% instead of dividing. Thisresulted in deflating the FY 98/99 figure rather than inflating it to 2010 dollars. This caused thenumber in Appendix A to understate - by $565,162.19 - the adjusted value of the EPMC in FY98/99. This understatement then created a much greater difference between the FY 98/99figure and the corresponding FY 08/09 figure (which is also incorrect). Because of this error,SDTEF then concluded, incorrectly, that the growth in EMPC from FY 98/99 to FY 08/09 was251% when, in fact, the growth was 78%. In this case, SDTEF overstated the figure by173%. These errors were repeated for all data points in the EPMC column in Appendix A.

Correct % increase calculation:1999 EPMC in 2010 dollars: $1,118,9102009 EPMC in 2010 dollars: $1,995,149.46Increase from 1999 to 2009: $1,995,149.46 - $1,118,910 = $876,239.46% increase from 1999 to 2009: $876,239.46/$1,118,910 = 78%

Example of how SDTEF's CPI adjustment computational error resulted in errors in theBenefit Cost Increase calculations. The correct information is:1999 Benefits in 2010 dollars: $7,511,282.191999 Number of Employees: 1931999 Benefits per Employee: $7,511,282.19/193 = $38,918.562009 Benefits in 2010 dollars: $13,053,838.332009 Number of Employees: 2882009 Benefits per Employee: $13,053,838.33/288 = $45,325.83Increase in Benefits per employee: $45,325.83 - $38,918.56 = $6,407.27% increase in Benefits per employee from 1999 to 2009: $6,407.27/$38,918.56 = 16%Increase in Benefits from 1999 to 2009: $13,053,838.33 - $7,511,282.19 = $5,542,556.13% increase in Benefits from 1999 to 2009: $5,542,556.13/$7,511,282.19 = 74%SDTEF's "Key Findings" stated that "benefit costs nearly tripled." However, SDTEFmiscalculated the CPI adjustment because it multiplied by 70% instead of dividing.Accordingly, SDTEF overstated the growth in benefit costs by approximately 226%.

In addition to the CPI miscalculations that led to numerous errors throughout the SDTEFstudy, the study contains other errors in calculation and in the application of the baselinedata provided by the Water Authority.

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August 23, 2011Ms. Maureen A. StapletonGeneral ManagerSan Diego County Water Authority4677 Overland Ave.San Diego, CA 92123

Re: Labor cost studyDear Ms. Stapleton:

We are in receipt of your letter of August 22. We have since reviewed our data against theinformation you supplied and made appropriate corrections. Your feedback is the reason we provide thesubjects of our studies the opportunity to review pertinent data, as well as self review for any errors,prior to the release of our reports.Understanding you have concerns about additional data we have provided you, we look forwardto meeting with you as early as possible. In fact, you may recall that we first raised the possibility of ameeting in a May 2 letter to the San Diego County Water Authority (attached). At the time of ourmeeting we will provide you with updated data and key findings for our mutual review.We will be contacting your office within the next few days to schedule a meeting. If you haveany questions, please-contact me at 619-234-6423.

Sincerely,

Lani LutarDirectorcc: Mr. Eric Sandler, Director, Finance DepartmentMs. Angela Tomayko, Finance Department

Federal Tax Identification Number: 33-0354443.. :


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