My sense is that people in City Hall and some of the posters on this site are underestimating the severity of the threat posed by the litigation, and now the initiative, that Michael Harrington has filed with the help of Ernie Head and Pam Nieberg.
This is going to be the first of a two-part commentary that lays out, in the best way I can, the potential danger here. For its part, the city seems to believe that the litigation will not stop the water project, and that it will only make it far more expensive. Unfortunately, we still have not seen the figures but the city’s current estimate of the impact on the bond ratings is about $50 to $60 million.
Under fire from people like Davis Enterprise Bob Dunning, the council made the very political decision to move forward with a Prop 218 that had two separate rate structures on it. The council felt there was a fairness issue in charging people retroactively for water that they used in the previous summer, so decided to delay the implementation of CBFR until 2015.
In the interim, they chose to use the rate structure that Bartle Wells devised using the traditional fixed-cost rate based on meter size. This was a result of a sequence of events back in December when the city council overruled city staff’s recommendation to use the CBFR rate structure and sent the matter back to the WAC.
Mayor Pro Tem Dan Wolk pushed through the motion that moved the Consumption Based Fixed Rate (CBFR) structure of Loge-Williams off the table, due to concerns that the new proposal might be confusing to voters.
When Councilmember Brett Lee offered a compromise that would allow the WAC to at least reconsider CBFR, Mayor Pro Tem Wolk was firm and refused. Two days later, however, the WAC reiterated their support for Loge-Williams on a 6-3 vote.
A compromise put forward by Mayor Pro Tem Wolk and Councilmember Rochelle Swanson allows for “a grace period or phase-in of the CBFR rate structure.”
In a joint statement they wrote, “For the first two years, we will continue with a rate structure very similar to the one we currently use. Starting in year three, after our community has been sufficiently prepared for CBFR, we transition to that structure.”
The problem that we now face is that, while the CBFR was scrutinized in extraordinary measures by legal staff, the Bartle Wells system is vulnerable because as our numeric comparison showed, it is extremely disproportional. Those who use little water pay more than twice the rate per gallon as those who used a great deal more.
The problem now that the city faces is that if the court rules that Bartle Wells violates the constitution, the entire Prop 218 goes, not just that portion of the Prop 218.
That leads us to the second problem. The language of Measure I itself. The language read: “Shall Ordinance … be adopted which grants permission to the City of Davis to proceed with the Davis Woodland Water Supply Project, to provide surface water to Davis water customers subject to the adoption of water rates in accordance with the California Constitution (Prop 218).”
The key language is “subject to…” The problem, as Matt Williams pointed out earlier this week, is that the city has to complete and adopt the water rates in order for permission to be granted to proceed on the Water Supply Project.
Mr. Williams, who helped design the Loge-Williams rate structure, writes, “I have no trouble arguing that there is a conditional adoption of the water rates, but until the water causes of action of the YRAPUS case are resolved by Judge McGuire, then the legality of both the rates and their adoption is subject to conditions, and those conditions could indeed result in the rates never being fully adopted.”
If that is the case, then Measure I has not been implemented and the city does not have the permission of the voters to go forward.
There are those who believe that the project will continue no matter what and that the city will have to come up with the money, somehow, and that monetary figure will likely increase.
But the case I lay out here suggests it is entirely possible that the rates can be enjoined, because Mr. Harrington will have a very plausible case that Bartle Wells is unconstitutional, and if those rates get enjoined, the city will not be able to meet timelines to purchase the bonds.
Some have argued, as Mark West did, “The City Council never needed the electorate’s approval. They asked for it through Measure I, but there was never any legal reason to do so and in any event, the results were not binding upon the Council. The wording you refer to now is of no legal consequence,” referring to the “subject to” language.
The problem with that argument is that once the council agreed to a binding vote, they are bound by the language they put on the ballot.
The bottom line here is, I think, as a non-lawyer who has talked with a few lawyers off the record, that the city has put itself into a predicament that started when it bowed to pressure from Bob Dunning and compromised on CBFR.
If the Prop 218 process is invalidated either through lawsuit or initiative, Measure I is not in effect based on the “subject to” clause.
The city has some options and one of those is to start a new rate setting process in August or September, where they implement a rate structure that will pass constitutional muster. The problem there, of course, is it will take time, it will require approval by the voters, and all of a sudden the No on Measure I side is emboldened and no longer demoralized.
Of course, the city cannot perpetually avoid an initiative. Mr. Harrington, Mr. Head and Ms. Nieberg can re-write the initiative to counter any new rate.
Ultimately, Mr. Harrington wants a Measure J for utility rates that would essentially force a vote on a water rate (or other utility) increase in addition to a Prop 218.
While it is perhaps easy to pin the blame on Mr. Harrington along with Ernie Head and Pam Nieberg, in a way this falls to the city. The city made the decision to go forward with the rates separated from the ballot.
In our view, that was always problematic and not only because the citizens and critics like Bob Dunning could argue that the rates were not on the ballot, but because it basically invited someone filing an initiative to put the rates on the ballot.
Finally, there is another miscalculation by the city here. Michael Harrington, whatever you think of him, is a very strong litigator. Look at his record in the aviation field. You can argue that he is outside of the bounds of his field, but that is where people like Tim Biddle from the Howard Jarvis Taxpayers Association come into play.
The point is that the issue of proportionality under Prop 218 for the Bartle Wells rate will come down to whose side has the better litigator, and the city will bank on Harriet Steiner’s ability to defend the city’s rates with help from Kelly Salt and others, against Michael Harrington’s ability to litigate with the help of Tim Biddle and others.
People who want to underestimate Mr. Harrington may do so at their own risk. My assessment is that he has a strong enough case to get an injunction against the rates and potentially prevail in December. Then what does the city do?
Tomorrow I will make the argument that if the surface water project ends up going up for vote now – in whole or in part – it will, more likely than not, lose.
—David M. Greenwald reporting