State appellate court upholds Metropolitan's water allocation formula in San Diego Authority's appeal

A California appellate court panel has upheld a superior court ruling supporting the Metropolitan Water District of Southern California's interpretation of state law concerning "preferential rights" to water in shortages.

LOS ANGELES, Calif., March 31, 2004 -- A California appellate court panel has upheld a superior court ruling supporting the Metropolitan Water District of Southern California's interpretation of state law concerning "preferential rights" to water in shortages.

The state law in question has never been invoked in Metropolitan's 75-year history, but the San Diego County Water Authority had challenged the district's longstanding interpretation as being illegal.

The First District Court of Appeal in San Francisco rejected the Water Authority's main argument that preferential rights were illegal, and said the Authority's other claims were "basically ... (a) rehash" of its superior court case.

"This has been expensive and needless litigation," said Metropolitan Chairman Phillip J. Pace. "Metropolitan is pleased to have this section of its legislative act validated. These are provisions that have never been activated, even in the face of two severe droughts."

Chief Executive Officer Ronald R. Gastelum said Metropolitan's preparations and ability to deal with water shortages, drought and emergencies have expanded far beyond the challenged section of the 75-year-old legislation.

"The great strides that Metropolitan and its member public agencies have made in water storage, conservation, recycling, transfer and option programs have helped the region through recent periods that otherwise could have been called droughts and have prepared us well for future droughts and emergencies," Gastelum said.

"We anticipate working with all of our member agencies to further strengthen our resources management in both wet times and dry," Gastelum said.

General Counsel Jeffrey Kightlinger said the ruling likely ends the case that began in 2001. "The Water Authority may request the California Supreme Court to rehear the case, but whether to accept the request is within the court's discretion, and it rarely grants requests for these narrow cases."

In its complaint, the Water Authority -- one MWD's 26 member public agencies -- challenged the validity of Metropolitan's interpretation and application of section 135 of the Metropolitan Water District Act. The Water Authority later amended its complaint to name Metropolitan's 25 other member agencies as defendants. The parties all agreed to move the case to a neutral court in San Francisco.

Under section 135 of the enabling charter, each MWD member public agency may have a preferential right to a percentage of Metropolitan's available water supplies based on a legislatively established formula.

That percentage is equal to the ratio of each member agency's total accumulated payments to Metropolitan's capital costs and operating expenses compared to the total of all member agencies' payments toward those costs, specifically excepting payments for water purchases. As a result, a member agency's preferential right roughly equals its pro rata share of all tax assessments and other payments.

In the event of a water supply shortage or drought, any MWD member agency can request that its preferential rights be invoked. However, since the statute was established in the MWD Act in 1931, Metropolitan's board of directors has never exercised it, even in response to statewide droughts in 1976-77 and 1987-92, choosing instead, under other authority, to allocate water according to need.

In its complaint challenging MWD's interpretation of the preferential rights statute, the Water Authority claimed Metropolitan improperly allocates its member agencies' payments for the purpose of the preferential rights calculation. The Water Authority argued that since a significant portion of Metropolitan's water sales revenue goes toward capital costs and operating expenses, section 135 should include that revenue in the allocation formula.

The Metropolitan Water District of Southern California is a cooperative of 26 cities and water agencies serving 18 million people in six counties. The district imports water from the Colorado River and Northern California to supplement local supplies, and helps its members to develop increased water conservation, recycling, storage and other water-management programs.

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