Report 2005-113 Summary - March 2006

State Water Resources Control Board:

Its Division of Water Rights Uses Erroneous Data to Calculate Some Annual Fees and Lacks Effective Management Techniques to Ensure That It Processes Water Rights Promptly

HIGHLIGHTS

Our review of the operations of the State Water Resources Control Board's Division of Water Rights (division) revealed the following:

  • Because the division's database does not always contain the correct amount of annual diversion authorized, some of the annual fees the division charged over the past two fiscal years were wrong.
  • The division's method of charging annual fees may disproportionately affect holders of multiple water rights that authorize them to divert small amounts of water.
  • Because the division does not factor in certain limitations on permits and licenses, it charges some fee payers based on more water than they are authorized to divert.
  • The number of permits and licenses the division has issued over the past five fiscal years has significantly decreased.
  • Although the process of approving a water right is complex and can be legitimately time-consuming, the division may cause unnecessary delays because it has a poor process for tracking its pending workload and is sometimes slow to approve documents to be sent to applicants.
  • The data in the division's electronic tracking systems related to applications and petitions are unreliable for the purpose of tracking the progress and status of those files.
  • The electronic bar-code system the division uses to track the location of its files has limited usefulness as a management tool because more than 5,200 of its permit and license files are not present in the system.

RESULTS IN BRIEF

The mission of the Division of Water Rights (division) of the State Water Resources Control Board (water board) is to maintain a stable system of water rights in California that best develops, conserves, and uses in the public interest the water resources in the State, while protecting vested rights, water quality, and the environment. Water rights are legal entitlements that authorize an individual or entity to "divert," that is take water from a specific source, such as a lake, stream, or pond, for beneficial use. Generally speaking, the division administers these rights by issuing permits and licenses for new water rights, processing petitions to change existing water rights (petitions), and monitoring water rights to ensure that holders of water rights adhere to their terms and conditions.

The California Water Code (Water Code), Section 1525, requires the division to develop and implement a fee structure to replace the funding it previously received from the State's General Fund. The statute requires that the division collect each year, via these fees, the amount necessary to support its operations. After considering a variety of methods for charging fees, the division chose to implement a fee structure generally composed of annual fees for water rights permits, licenses, and certain pending applications, and one-time filing fees for new permit applications, petitions, and other filings. The division's annual fees, which make up most of its funding, consist of a $100 minimum fee plus a small amount per acre-foot, which is about 326,000 gallons of water, for authorized diversions exceeding 10 acre-feet per year. The division assesses other annual fees for petitions, water leases, and certain hydroelectric projects. The Water Code requires the water board to review and revise the fees each year to conform to the revenue levels set forth in the annual budget act and to make up for undercollection or overcollection of revenues from the previous fiscal year.

However, the division does not accurately assess some annual fees using its Water Rights Information Management System (WRIMS), causing it to overcharge some fee payers and undercharge others. Some errors occur because the data the division uses to calculate the annual fees does not include the amount of storage authorized by the water right or because the division did not update its system to reflect the maximum annual diversion and relevant seasons and rates of diversion authorized by a fee payer's water right. The division also uses WRIMS to calculate the total fees that it needs to charge fee payers when revising its fees each year; however, because the system does not contain all the necessary data, it is unreliable for this purpose. For example, we found that the system did not capture a net of 7.3 million acre-feet that were authorized for a sample of 80 permits and licenses. However, we could not conclude from our sample whether the net effect of the total errors in the system resulted in an underreporting of authorized diversion. Nevertheless, it is clear that the system has errors that should be fixed.

The division is seeking to replace its current management information system with a new system that purportedly will deliver a variety of enhanced features currently unavailable in its existing system. However, the division must ensure that its current system contains all relevant information before it converts to a new system. If it fails to do this, the division will continue to use erroneous data to calculate annual fees for water rights holders.

We also found that the division's method for calculating annual fees may disproportionately affect some fee payers who divert small amounts of water under multiple water rights. The division's approach is to generally distribute the fees among its fee payers in proportion to their overall authorized diversion of water. However, because the division charges a $100 minimum fee for each individual water right, fee payers who have multiple water rights with small authorized diversion amounts pay proportionately more than those holding a single water right with the same, or in some cases an even greater, amount of diversion. Although we agree that assessing a minimum fee is reasonable, the division could address this issue by charging a single minimum fee for each fee payer rather than for each water right. We believe this approach would more precisely distribute the fees in proportion to the authorized diversion of water.

Further, the division does not factor in combined limitations placed on permits or licenses—those that affect other permits or licenses—held by the same fee payer, so it charges some fee payers based on more water than they are authorized to divert. For example, the sum of the acre-feet for one fee payer's water rights totaled 3.9 million more than the water diversion authorized when factoring in the combined limitation. When comparing the actual fee calculation in fiscal year 2005-06 with the calculation it could have been if the combined limitation was used, the difference was a reduction in fees of $116,400. We recognize that within the framework of what constitutes a legally valid regulatory fee there may be a variety of ways to structure that fee. The changes we are suggesting are not required in order for this fee to retain its validity as a regulatory fee.

Moreover, the division does not effectively track its pending applications, petitions, and the locations of its files to ensure that it processes water rights promptly. For the sample of 15 permits and licenses we reviewed, it took the division an average of 3.3 years to issue the permits and 38.2 years to issue the licenses after permitting. In addition, the number of permits and licenses the division issued during the past five fiscal years has decreased significantly. Although the process of approving a water right is complex and can be legitimately time-consuming, the division may cause unnecessary delays because it has a poor process for tracking its pending workload and is sometimes slow to approve documents it needs to send to applicants. External factors also contribute to the amount of time it takes to process a water right application, such as requests from the applicant to extend the time needed to complete a water project, protests from other affected entities, environmental review requirements, and the need for coordination with other state agencies that have responsibilities in this area. Finally, the division does not effectively track water rights files, so its staff may spend valuable time searching for files when they could be involved in more productive activities.

RECOMMENDATIONS

To ensure that its WRIMS contains all the necessary information needed to calculate annual fees accurately for the next billing cycle, the division should review all the water rights files for those that pay annual fees and update WRIMS to reflect all the necessary details specified on a permit or license, such as the maximum authorized diversion and storage and the applicable seasons and rates of diversion. This should be completed before the division's conversion to any new database system, so that the data are accurate and complete.

To more precisely distribute the fees in proportion to the annual fee payers' authorized diversion, the division should consider revising its emergency regulations to:

  • Assess each fee payer a single minimum annual fee plus an amount per acre-foot for the total amount of authorized diversion exceeding 10 acre-feet, or other specified threshold.
  • Assess annual fees consistently to all fee payers with diversion limitations, including those with combined limitations, so that fee payers are not assessed based on more water than they are authorized to divert.

To ensure that it is able to process water rights promptly and maintain accurate and effective water rights records, the division should:

  • Consider establishing more realistic goals that are measurable in days between the various stages of processing an application and implement procedures to ensure that staff adhere to these goals.
  • Develop procedures for improving the timeliness of management review and issuance of documents.

To ensure that its tracking systems for pending applications and petitions are complete and accurate, the division should review its pending workload and update the systems to reflect current information. The division also should strengthen its procedures to ensure that staff maintain the accuracy of the data in the systems.

AGENCY COMMENTS

The water board stated that it is seeking funds to upgrade its computer system, which it believes will enhance the division's operations by ensuring that the new system contains improved and relevant information both with respect to water right data and tracking data. The water board also stated that it is in the process of correcting errors we identified and that it will bring our recommendations for fee program improvements to the water right stakeholders as part of the water board's next revision of the fee regulations. The water board stated that it will work with those stakeholders toward agreement on our recommendations.


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