The Rainbow Municipal Water District, which is the focus of a takeover bid by the larger Fallbrook Public Utilities District (FPUD), has filed a claim against FPUD saying its attempt to absorb Rainbow constitutes a breach of contract.
The claim — the first step needed before a lawsuit can be filed against a governmental agency — was sent to the Fallbrook district on June 25. If Fallbrook rejects it or takes no action within 45 days of receiving the claim, Rainbow will be free to file a lawsuit.
Fallbrook’s General Manager Brian Brady said Monday that attorneys for his district feel the claim has no merit and that no action will be taken on it.
The claim marks a further deterioration in the relationship between the two agencies that roughly a year ago had formed a partnership to share administrative staff and operations. Rainbow withdrew from the partnership earlier this year, saying it could better represent its ratepayers by remaining autonomous.
Fallbrook reacted by asking the county’s Local Agency Formation Commission to dissolve the Rainbow district and allow Fallbrook to absorb its territory.
The claim states that Brady — on behalf of the Fallbrook agency and without telling the directors of Rainbow — essentially went behind Rainbow’s back by approaching LAFCO about annexation.
“FPUD, and (it’s general manager Brian) Brady on behalf of FPUD, failed to act fairly and in good faith toward (Rainbow),” the claim reads.
Brady said he did no such thing and was acting for the betterment of both districts in his dealings with the county agency.
The claim asks for damages to be determined by the court and reimbursement of funds paid to Brady for some of the time when he was acting as general manager of both districts.
In March, the Fallbrook district announced that it wanted to annex Rainbow into its territory.
Fallbrook calls the move a consolidation, while Rainbow officials refer to it as a hostile takeover.
In early 2013, the two districts had agreed to form a joint powers authority that enabled them to consolidate jobs and share equipment and personnel. The idea was to see how the arrangement worked and then decide after a year whether a full merger of the districts would be best for all.
But in February the Rainbow board of directors voted to end the authority after months of negotiations failed to yield an agreement on how a merged district’s elections would be handled.
Rainbow officials feared that each election model proposed by Fallbrook would favor the more populous district and leave Rainbow’s mostly agricultural water users with less clout and a weaker voice.
Both districts agree that the arrangement saved the districts about $1 million and the consolidation proposal projects saving of $2.5 million annually in the future. The Fallbrook directors cited that savings when they voted to pursue annexation.
Authored by attorney Adriana R. Sanchez of Procopio, Cory, Hargreaves and Savitch LLP, the claim states that on Feb. 19, while Brady was still employed as Rainbow’s general manager, he met with Local Agency Formation Executive Officer Michael Ott to discuss a scenario where a proposal for reorganization was submitted by Fallbrook without concurrence of Rainbow.
A short time later Brady submitted a draft application to begin the annexation process but made no mention of his actions to the Rainbow directors when they met on Feb. 25 even though the board meeting included a lengthy discussion regarding consolidation, according to the claim.
“Brady, as general manager, was required to communicate this pertinent information regarding his discussions with LAFCO to the (Rainbow) board,” the claim states.
Ott said on Monday that the process of considering whether a consolidation should be approved is still in the early stages. Comments from the public on the proposal are being accepted until Aug. 1, then LAFCO will consider all comments and eventually schedule a hearing.
Ott said the claim has no bearing on how LAFCO will proceed.
Brady on Monday said he did meet with Ott to discuss a mutual merging of the districts and posed a question to him about the possibility of one district trying to force a merger without the consent of the other. He said he asked the question at the behest of the joint powers board of directors.
“(Ott) said if one goes in separately then the mechanics change and he marked up my joint application. And they are jumping on that as somehow predetermining that it was going to be a single applicant.”
Brady said the claim is just one thing Rainbow is doing to try to stop the LAFCO process.
“They’ve hired a lobbyist at $10,000 per month and a public relations firm at $5,000 per month all to do this kind of stuff,” he said.
