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Politics & Government

Carlsbad Withholds Desal Plant Approval

Officials want guarantees that the city won't suffer a loss of tax revenue.

Carlsbad is the lone holdout in the regional quest to construct a desalination plant projected to meet 8 percent of the region's water needs by 2020, according to county water officials.

The city seeks financial assurances resulting from the quest to construct the $530 million plant in its city limits, a project that has been in the works since 1998. Carlsbad's holdout status surfaced in advance of Thursday's meeting of the San Diego County Water Authority.

The city's concerns are a sticking point for a region that sorely needs to generate additional sources for its future water supply. Rainfall was well below average in three of the last four years, creating much uncertainty for the supply for 2011 and beyond.

Among other requests, Carlsbad seeks assurances it would be made whole for
more than $2 million annually in lost tax revenue if the water authority
one day purchases the plant from the developer, Poseidon Resources.

Carlsbad's quest to replace anticipated lost tax revenue was first
reported in Tuesday's edition of the North County Times.

Eight other agencies involved have either passed necessary board or
council resolutions, or have scheduled their consideration. Carlsbad has
told the agency it currently has no plans to do so "until certain concerns
affecting its jurisdiction are addressed."

In an interview with Patch.com, Carlsbad Mayor Bud Lewis said the city's
foot-dragging isn't just about the potential loss of tax revenue.

"It's also about the city's investment [in the project]," he said, noting
that Carlsbad has spearheaded the drive to develop the plant.

"We've been the leading element trying to get Poseidon in here," he said.
"We've been the ones that have been able to establish that there's a large
group from the public concerned about this project. We've chartered three
buses at times to make sure citizens get to these Coastal Commission
meetings, for example, to make sure they understand the feelings of the
public."

City officials told the N0rth County Times that Carlsbad also hopes tax funds
generated by the plant will help pay for redevelopment projects such as
improvements to Palomar Airport Road and Carlsbad Boulevard.

Lewis is a member of the water board for the moment but is retiring as
mayor this year. The incoming mayor, to be elected Nov. 2, has the
authority to appoint Carlsbad's representative to the board. Lewis has
let it be known he's willing to continue serving.

He estimates the city has invested "more than $2 million" from its general
fund in the effort to bring a desalination plant to North County.

The water authority has offered to guarantee it won't buy the plant for
at least a decade. The agency is exempt from property taxes, while
Poseidon, a private entity, enjoys no such tax-free status.

"It doesn't mean Poseidon will not occur," Lewis said. "It's nothing
personal.  It's all economics and it deals with making the most of it for
our citizens and the region."

While the authority has no specific plans to purchase the plant, "we
believe it's prudent to reserve the right to do that," said Ken Weinberg,
the authority's director of water resources.

The authority is also willing to work with the city on any "nonmonetary
needs," he said. These include ensuring that Carlsbad has access to the
water the plant generates at the "same cost everyone else is paying and that
the water authority is paying," Weinberg said.

The status report is scheduled for presentation as part of the water authority's
meeting Thursday in San Diego.

Carlsbad's approval is needed following the collapse of a previous
agreement between it, Poseidon and eight other agencies that had agreed to
purchase water from the plant.

When Poseidon failed to obtain financing in the spring, the water
authority stepped in to assist in creating a new deal.

However, that agreement still relies upon Poseidon securing an investor in
the project. As of the Oct. 20 drafting of the status report, Poseidon had
yet to provide such a commitment.

Such an investor is "very close" to being named, according to Weinberg.

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