Who’s Foisting Who?

Certain things I can’t just leave alone.

On July 31st, there was an article posted on WoodlandsOnline.com by Margie Taylor with the headline, “Quadvest Sets Record Straight With Truth,” which can be found here: https://bit.ly/2YHeeIz. A quick read of the article reveals very typical ‘SJRA is a monopolist and profiteering off of water’ talking points. Ordinarily I can ignore an article like this but in this case, the posting is trying to come off as a news article but note it was penned by a PR professional (https://taylorizedpr.com/). Ms. Taylor has represented the Lone Star Groundwater Conservation District and I suppose now works for Mr. Sequeira for the purpose of creating this article. In addition, the article was referenced by at least three LSGCD board members on their Facebook pages as ‘good information’ (Directors Prykryl, Hardman and Bouche at https://bit.ly/2MBq30h, https://bit.ly/2Kl0BcO, https://bit.ly/2GKAon3, respectively).

The article starts off with a curious point. Taylor wrote, “Simon Sequeira, President of Quadvest Water and Sewer Utility, is tired of being in the middle of accusations and half-truths between both SJRA and LSGCD.” Recall that at least $236,000 was contributed to elect the current directors sitting on the Lonestar Groundwater Conservation District board. The dollars were provided by Restore Affordable Water (Simon Sequeira, president), Quadvest (Simon Sequeira, president), Mr. Sequeira himself, and several private water utility owners (see our post from October 2018 @ https://bit.ly/2MEVLdl).

Simon was literally a ring leader in the drive to transform this board. He’s certainly achieved many of his objectives, like dropping the lawsuit between Conroe and LSGCD, removing groundwater limits from the district management plan, and getting Quadvest-friendly hydrologists hired by the board for the purpose of informing and guiding their water management policies (recall Bob Harden spoke to the new LSGCD board on November 20, 2018, on “behalf of Quadvest” and Mike Thornhill was the resident Hydrologist for all Restore Affordable Water radio shows, both of whom are now contracted by LSGCD). The last thing Simon should be complaining about is being in the middle of all of this. He put himself there, after all.

But giving the author the benefit of the doubt, we will analyze the comment to mean that he’s tired of “half-truths” from the SJRA.

The article later quotes Mr. Sequeira as saying, “the cost of water in Montgomery County has skyrocketed because of the SJRA scheme to foist surface water onto its residents. Quadvest just wants what is right and fair for our customers!”

What the heck is foisting? The new buzzword in MoCo politics, it seems. Webster’s dictionary defines it as follows: “a) to introduce or insert surreptitiously or without warrant, b) to force another to accept especially by stealth or deceit.” Foisting sounds pretty bad – evil even. So let’s take a look at the claims of the article to test them for foistyness (I’m pretty sure I made up that variant of the word).

The Claims I’ll deal with here:

  • The SJRA is profiteering: “Water consumers were told by SJRA that they would offer fees of their groundwater at a lower rate than surface water fees. However, groundwater pumping fees were set at a much higher rate than should have been charged resulting in a profit for SJRA.”
  • The SJRA is overcharging groundwater users: “Under those contracts [GRP contracts with the SJRA] LVGUs [Large Volume Groundwater Users] were forced to pay millions of dollars in overcharges for surface water…”

First, by way of background, the following is my very quick summary of the origin of the GRP (Groundwater Reduction Plan) that is the target of this article.

The SJRA set up the GRP program as a response to the LSGCD requirements set originally in 2003. That plan declared that the “amount of useable groundwater available from the Gulf Coast aquifer is estimated to be 64,000 acre-feet per year.” It was based on an aquifer recharge rate of 1.1 inches per year. The plan said the “District shall seek to limit production of groundwater from the resources within its boundaries to a sustainable level so that the groundwater resources of Montgomery County are not depleted from future generations. [source: Lonestar Groundwater Conservation District, Groundwater Management Plan, Adopted October 14, 2003].

In 2010 the LSGCD refined the plan further. In that year, the board noted that the district was to use 79,654 acre-feet of water (which would use 14,654 more acre-feet than could be refilled – according to the management plan). Based on population water demand projections, the board noted that by 2020, there would be a demand for 47,619 more acre-feet than could be refilled and a 290 percent increase from 2010 to 2060. Thus, the board passed a requirement to reduce groundwater usage to the 64,000 level by 2016 [source: LSGCD Groundwater Management Plan, re-Adopted November 12, 2013]. This was the basis for the requirement for large-volume groundwater users in Montgomery County to reduce their groundwater usage by 30%.

You could comply with the rule by reducing your consumption by 30% or finding an alternative source of water (or both). The SJRA came in with a proposal to offer surface water within Montgomery County. Users close to Lake Conroe could accept a pipeline connection to a surface water conversion plant to augment their groundwater supply with converted lake water. Communities, where that sort of connection was impractical like those served by private utilities like Quadvest, could join the same group of users who would then collectively reduce their groundwater by 30%. For example, The Woodlands could go down in groundwater consumption by a value greater than 30% so that outlying areas could continue to consume only groundwater, but the net effect is a reduction in line with the mandates.

In this process, the SJRA raised the money to pay for the plant through the issuance of $500M of bonds (bonds that MUST be repaid). This debt is paid by the collection of fees (surface water conversion fees) from each member of the GRP.

So back to the claims above.

Claim: The SJRA is Profiteering

The SJRA is a non-profit entity (its founding documents are here: https://www.hcfcd.org/media/2426/sjra-master-plan-report-1957.pdf). To suggest it is making a profit is contrary to its established operational model.

I have interviewed Jace Houston, SJRA General Manager, several times. He put it very simply in a discussion with me in October of 2018 when he said that the SJRA is a government entity like a school board or a city. The goal, he said, is simply to offer the necessary services at the lowest possible cost.

Additionally, the SJRA GRP budget for FY19 can be found here: https://www.sjra.net/wp-content/uploads/2018/04/Fiscal-Year-2019-Budget.pdf. In FY18 expected revenues were $52,970M and expected expenses were $52,529M. When revenues exceed expenses, the SJRA GRP division builds its Operating Fund, R&R Reserve and Capital Reserve (pages 8 & 10). In FY18 this was projected to $340k. In FY19 it is projected to be $465k. Currently the Capital and R&R reserves are at $0 (page 13).

Claim: The SJRA is overcharging groundwater users.

The SJRA knows what it needs for debt service and operation and management on an annual basis. It then makes assumptions about total water demand, surface and groundwater mix, its operating costs for the coming year and sets a rate for surface and groundwater users to generate the required revenues (this is vastly oversimplified).

To articulate this, see the GRP fees for 2020 [source: https://bit.ly/2Zw2s4S]:

  • Groundwater: $2.73 / 1000 gallons
  • Surface Water: $3.15 / 1000 gallons

If you are an entity (like The Woodlands) that consumes water at a 35% groundwater and 65% surface water mix, your blended GRP fee is $2.88 / 1000 gallons. If you are an entity like Quadvest, however, with no surface water consumption, you pay $2.73 / 1000 gallons. Thus The Woodlands, for taking on a connection to the surface water plant, pays 5% more in fees toward the conversion plant.

To put this in perspective, according to the SJRA (same source as above), the total water usage in 2019 is expected to be 52.72 million gallons of water per day of which 12 million gallons is surface water. The SJRA budgeted $53.2M for revenues from surface water conversion fees for the year. If you set the fee only against surface water users consuming 12 million gallons a day that would translate into a fee of $12.10 to raise the required revenue. This would, of course, be entirely unfair to anyone in such a community. So the rates must be balanced between the groundwater-only users in the GRP and the surface/groundwater users so the burden is distributed.

Back to the article. To say that, “groundwater pumping fees were set at a much higher rate than should have been charged resulting in a profit for SJRA,” is just not grounded in any sort of fact that I’m aware of. Groundwater fees and surface water fees seem to be set under a standard of fairness to the GRP users as a whole: set a discount for groundwater while not unfairly burdening the surface water users simply because they have proximity and scale suited to a connection to the surface water plant.

Was there anything that isn’t debatable in the article? Sure. Mr. Sequeira does say the following about a planned increase in retail water rates for Quadvest customers, “Rates are increased due to SJRA increasing water fees. These increases are the result of actions taken by the SJRA and the old LSGCD, not anything Quadvest has done.”  This, I *think*, was the point of the article as a PR piece for its customers (giving it the benefit of the doubt).

I don’t think the above convicts the SJRA of foisting anything. I do think that this article was a poor attempt for a PR piece to look like a news article and I’m very surprised that sitting directors would read it and conclude that it was worth sharing. To each his own, I suppose.