Vanguard Analysis: Is the Future of Surface Water Project Murky?

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Yolo County Judge Dan Maguire dealt at least a procedural blow to the city’s efforts to build its surface water project when he denied the city’s motion formally on Wednesday and implemented his tentative ruling.  The city had attempted to bifurcate the portion of the lawsuit filed by the Yolo Ratepayers for Affordable Public Utility Services (YRAPUS) that dealt with the city’s water rates.

Judge Maguire ruled that the city “fails to show that bifurcation, as proposed, would promote judicial economy or convenience.”  Furthermore, he ruled that the city, “was aware of the current lawsuit when it entered into the joint powers agreement with the City of Woodland on February 26, 2013.”

While the city lost the procedural fight, they took heart in the expedited calendar process with the bench trial set on the entire complaint for December 16, 2013.  That said, the city needs to recognize that it is Michael Harrington’s intention to drag out this process for a considerable length of time, and he may now have all of the procedural processes to do so.

The city argued that, by allowing them to proceed on the rate portion of the lawsuit, it would produce “a more efficient resolution of this litigation, preserve judicial resources, and minimize undue prejudice to the City.”  The real reason for bifurcation, though, is financial, as the city is now in a tremendous bind with regard to selling bonds when they do not have a clear revenue stream to pay them back.

Measure I passed on March 5, 2013 and the city proceeded to adopt the necessary water rates to fund the project.

The filing by the city noted, “The City committed in the JPA to a ‘firm schedule’ to commence construction of the Project by late 2013.”  But as Judge Maguire ruled, the city did so knowing that the lawsuit had been filed.

The city now needs to authorize the issuance and sale of bonds or certificates of participation to fund its share of surface water project capital costs by August 15, 2013, with the JPA Board awarding a contract to design and commence construction by September 30, 2013.

The city attorney notes, “The bonds or certificates of participation will be secured by the City’s water rates. If the City misses its deadlines under the JPA or is required to revisit its new rates as a result of this litigation, the City will be liable to Woodland for costs incurred and will also have to reimburse Woodland for its reasonable costs for having to redesign the Project.”

The city argues, “This lawsuit impacts and will impair or delay Project financing and the construction of the Project and subject the City to additional costs under the JPA if the validity of the City’s water rates is not resolved in the next few months. In addition, economy and efficiency will be promoted by bifurcating the Petition for Writ of Mandate concerning the water rates from the other causes of action.”

While the city has not provided the Vanguard with requested documentation on the cost here, the city believes it is roughly $50 to $60 million, due to the lawsuit and its impact on the city producing bonds.

Mr. Harrington contends that the city continued to not pay its water bills even after the 2010 ruling against the city of Sacramento.  He said that is money owed to the ratepayers that needs to be paid back in some way.

When pressed on the question of where that money is to come from, Mr. Harrington argued that he did not care, that this was a procedural issue and that the city is obligated to make the ratepayers whole.  While the Vanguard is certainly the first one to argue on a procedural basis, we have to question this one.

Requiring the general fund, which Mr. Harrington correctly notes is a separate entity from the enterprise fund, to pay back for its water use means that the taxpayers will either have to be taxed for that money or city services will be cut.

It is worth noting that the city of Sacramento was only ordered to start accounting for their water use, something that the city of Davis has moved toward – albeit slowly.

Mr. Harrington notes that the taxpayer’s association let the city of Sacramento off the hook in that regard, and seems firm in his intention that a fund be set up to reimburse ratepayers.

The current rate hikes took effect on May 1, and right now they remain in place.  However, Mr. Harrington is adamant that the city will never be able to build the project as currently designed.

He seems inclined to seek an injunction, either through an amended complaint or a separate action, to stop the city from collecting on the rate hikes, arguing that these current rates will never take place.

Bolstering that belief is the current initiative.  The initiative remains a huge obstacle for the city because, unlike a referendum, the initiative’s threshold to get on the ballot is extremely low – five percent of those who voted in the last governor’s election.  That comes out to 1165.

Needing only 1165 signatures, we will see this measure easily qualify for the ballot.

The key question is whether it will then pass, and that is an open question.  Unlike the surface water project, this is almost directly a referendum on CBFR and the rate structure.  Now, I am skeptical as to whether they can muster a majority when they fell significantly short of that back in March.

However, there are several reasons to at least consider the possibility.  First, as we noted as the time, the momentum was on their side but the process worked against the no side in March.  The supporters of Measure I were better financed, better organized, and controlled a lot of the advantages – that will all be gone in a new vote.

However, given that the project has already been approved will give the city a sizable advantage going forward.

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 cut off 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.

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).”

Some yesterday argued that language put the rates on the ballot, but they are mistaken.  All one has to do to understand that fallacy is to understand that Measure I would have stood even if Prop 218 had failed.  The council could simply have instituted a second Prop 218 process and Measure I would still have prevailed.

The rates were not set by the voters, they were set in the convoluted and undemocratic Prop 218 process.  The voters could only vote on the entire project, not the rates.

Now the voters will get to vote on the rates most likely, and, given the amount of water the CBFR took on back in February and into early March, it is hard to know the outcome.

So we now have a multipronged approach to stop the rate hikes, which would effectively stop the process.  We will have to see if these efforts can be successful.

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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57 thoughts on “Vanguard Analysis: Is the Future of Surface Water Project Murky?”

  1. Mr.Toad

    “So we now have a multipronged approach to stop the rate hikes, which would effectively stop the process.”

    Or more likely simply end up costing the citizens of Davis a bunch of money. The vote to go forward passed so all they can do is put up roadblocks on the funding the result of which will be to turn our greenbelts into brown belts and add to the cost of financing the project over all through court costs, penalties to Woodland and higher interest rates. Despite their actions the council is not going to back away from building the project. That ship has sailed; there is too much water that has passed under the bridge.

  2. David M. Greenwald

    Mr. Toad: He pointedly did not care about how much money this would cost.

    “Despite their actions the council is not going to back away from building the project. That ship has sailed; there is too much water that has passed under the bridge. “

    The council is going to have to deal within the parameters set forth by the courts and also now an initiative, so it’s no longer entirely in their hands.

  3. Don Shor

    But the project will go forward. There is too much at stake for both Davis and Woodland for it not to. Thus, the only question is how much more the actions of Harrington, Munn, Price, Nieberg, and Head will cost the ratepayers and taxpayers of Davis, and which ones will end up paying more or less due to their actions.

  4. Mark West

    “[i]The council is going to have to deal within the parameters set forth by the courts and also now an initiative, so it’s no longer entirely in their hands.[/i]”

    It is entirely in their hands. The project was approved by the voters and will have to be paid for in some manner. If the approved rates are overturned, they will just be replaced with another set of (most likely higher) rates that will pass muster. Much like in the past, you give the Harrington cabal much more credit then they ever earned. Their lawsuit would have to prevail to change the rates, just as the initiative must pass (and the referendum before that). Simply starting the process as they have does not equate to success, especially since the one time the public voted, the say no to everything crowd lost.

    As I said yesterday, this whole process is nothing more that an act of selfishness on the part of Harrington [i]et al.[/i] They will delay some of the funding, and will certainly increase all of our costs, but in the end they will fail to derail the project.

  5. Growth Izzue

    You’re all talking like the vote was a landslide. 55% to 45% could easily go the other way in an initiative. Like David said, the ‘NO’ side had all the momentum at the end as more and more facts were coming out.

  6. David M. Greenwald

    “Much like in the past, you give the Harrington cabal much more credit then they ever earned. Their lawsuit would have to prevail to change the rates, just as the initiative must pass (and the referendum before that).”

    I’m not giving them any credit, I’m simply laying out how the process could unfold.

    You’re correct that the lawsuit would have to prevail to change the rates, in the interim, he could enjoin the city from implementing those rates which would make it much more expensive to sell bonds (which is playing out right now).

  7. David M. Greenwald

    “Then it will cost the city millions of dollars more.”

    It already is. I’m trying to get the figures from the city, but they are telling me $50 to $60 more just on the bonds.

  8. David M. Greenwald

    “You’re all talking like the vote was a landslide. 55% to 45% could easily go the other way in an initiative. Like David said, the ‘NO’ side had all the momentum at the end as more and more facts were coming out.”

    All I’m suggesting is that you can’t discount the possibility that a new vote focused only on the rates will yield a different outcome.

  9. Growth Izzue

    [quote]All I’m suggesting is that you can’t discount the possibility that a new vote focused only on the rates will yield a different outcome. [/quote]

    That’s all I’m saying too

  10. Mark West

    But what’s the time frame for that Don?

    It doesn’t matter what the time frame is. The project will continue and we will have to come up with the money somehow. In order to enjoin the City from implementing the rates, the Judge will have to be convinced that the plaintiffs will likely prevail in their effort. That is doubtful at best, but again, the only consequence will be that we pay more in the end. Any idea that these folks are acting to benefit the residents of the City of Davis is a complete fallacy. They are acting on behalf of their own over-sized egos.

  11. David M. Greenwald

    Let me try this again. This matter is not set to be heard until December. The city has deadlines for selling bonds. If they have no revenue in place, how do you propose they meet those deadlines?

  12. David M. Greenwald

    He’s suggesting that because the courts invalidated Prop 8, the same could happen here. I’m not sure that’s the case, but we’ll see.

  13. Mark West

    DG: “[i]He’s suggesting that because the courts invalidated Prop 8, the same could happen here. I’m not sure that’s the case, but we’ll see.[/i]”

    Why will we have to wait to see? Does the lawsuit challenge the validity of the electorate’s approval of the project, or simply the rates that were established to pay for it? If the latter, then the Court has no opportunity to overturn the project.

  14. Michael Harrington

    Let me see if I get this right: the Davis CC and project proponents are rushing into a deal with a sole source contract, with a recently convicted felon that falsified documents and many millions of billings sent to government agencies? Is this really the best we can do?

    We want valid rates, and we want them on the ballot.

  15. Mark West

    DP: “[i]is there a project without rates?[/i]”

    Yes. If this set of rates is invalidated, they will simply be replaced with a new set. This isn’t rocket science as this method of using enterprise funds to financing public projects is firmly established in California. The only possible outcome is that the new rates will have to be greater for all in order to pay for the cost of delay, including the greater financing charges and our court costs. More money from everyone solely to assuage the damaged egos of a group of poor losers. Truly pathetic.

  16. Davis Progressive

    so if the rates are invalidated, we have to pay more because the city put invalidated rates on the ballot and it’s harrington’s fault? look i don’t like the guy either, but your animus seems misplaced here.

  17. Practical

    [quote]It is not murky at all. We voted to approve it and gave the City Council direction to move forward on it. Nothing changes that fact.[/quote]

    That my not be the case because of a legal technicality that Matt Williams and Don Shor talked about yesterday. The Measure I vote did produce a 54-46 margin, but that vote did not give the Council an unfettered ability to move forward on the surface water project. The language of Measure I has this problematic “subject to” clause that Matt pointed out to Don as follows:

    [quote]However, (as a non-lawyer) I’m not sure that the City has actually completed (satisfied) the conditions set out by the words you quoted from Measure I, “subject to the adoption of water rates in accordance with the California Constitution (Proposition 218).” 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 the rates never being fully adopted. [/quote]

    Matt’s clear disclaimer that he is not a lawyer is one that has to be taken into account, but perhaps one of the lawyers who read the Vanguard can weigh in with their professional opinion about just how problematic the measure I “subject to” clause actually is.

  18. Davis Progressive

    good point one of the questions at the time was what happened if measure i passed but the prop 218 failed. invalidating the prop 218, would be tantamount to it failing.

  19. Practical

    [quote]why are the rates invalid?[/quote]

    The legal argument put forth in the YRAPUS case is that the rates we just came off of do not comply with the proportionality provisions of Prop 218, and the May 1, 2013 thru December 31, 2014 Traditional Structure rates approved in the Prop 218 do not comply with the proportionality provisions of Prop 218, and the January 1, 2015 thru December 31, 2018 do not comply with the proportionality provisions of Prop 218.

    If that legal argument prevails in the eyes of Judge McGuire, then he will declare that the rates are officially invalid.

  20. davisite2

    “The Measure I vote did produce a 54-46 margin, but that vote did not give the Council an unfettered ability to move forward on the surface water project.”

    I only caught the Enterprise headline but it looked like the CC was considering putting the rate to a vote by the citizens of Davis. Let’s not forget the fluoridation issue which is still “hanging out there”. My anecdotal experience with voter comments on this issue indicates that there would have been a much stronger NO I vote if the fluoridation issue had been in play at that time.
    A no vote on the rate issue may appear to be a way for those against flouridation to express their frustration(and anger)at the way that they may feel at having been manipulated.

  21. Mark West

    Practical: “T[i]he Measure I vote did produce a 54-46 margin, but that vote did not give the Council an unfettered ability to move forward on the surface water project. The language of Measure I has this problematic “subject to” clause that Matt pointed out to Don as follows:[/i]”

    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.

    Davis Progressive: “[i]so if the rates are invalidated, we have to pay more because the city put invalidated rates on the ballot and it’s harrington’s fault? look i don’t like the guy either, but your animus seems misplaced here.[/i]”

    It is unlikely that the rates will be invalidated outright. Even if they are, we will need to find some method of charging for water that will cover the costs of the project and our future water needs. Those costs will only become greater with further delay so there is no way that this lawsuit will reduce the ultimate costs of this project for the citizens of Davis. What it will certainly do is raise the costs for everyone, and potentially put money in Mr. Harrington’s pocket. In other words, no potential upside for the public and a potential windfall for him. I think the animus is well placed.

  22. Davis Progressive

    “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.”

    you’re completely mark, and you need to stop this.

    first, once the matter was put on the ballot as a binding vote, they were bound to adhere to it.

    second, there was a referendum on the rates. the council chose to rescind the rate hikes as the result of that referendum. however, had they gone forward without a vote, they likely would have faced either another referendum or an initiative like this one. in short, they effectively did have to put it on the ballot, but again once they did they were bound by it and if they have not adhered to the language of it, they could have legal problems.

    i suggest you not try to act like a lawyer.

  23. Davis Progressive

    “It is unlikely that the rates will be invalidated outright”

    look up prop 18, i believe if part of the rates are invalidated, they are all invalidated and the process begins anew.

  24. EastCoastTransplant

    The proportionality argument is complete “he said, she said” – anybody with a basic understanding of the math could slice those rate figures any which way they want and say the new structures do not exceed the proportional cost of service to each parcel. I am hazy, but our new rates seem pretty “grey area” to me – I think some have tiered rate plans have failed the 218 test and some have passed.

    Of course, the City could avoid a lengthy legal battle, penalties owed to Woodland, and the ultimate increase for everyone’s costs by restructuring the rates now. If they unbundle conservation requirements from the rates, they shouldn’t even need a tiered system. That would look something like “everybody pays $prop218max per gallon” combined with rebates or other tax incentives for conserving domestic/muni water.

  25. EastCoastTransplant

    The proportionality argument is complete “he said, she said” – anybody with a basic understanding of the math could slice those rate figures any which way they want and say the new structures do not exceed the proportional cost of service to each parcel. I am hazy, but our new rates seem pretty “grey area” to me – I think some have tiered rate plans have failed the 218 test and some have passed.

    Of course, the City could avoid a lengthy legal battle, penalties owed to Woodland, and the ultimate increase for everyone’s costs by restructuring the rates now. If they unbundle conservation requirements from the rates, they shouldn’t even need a tiered system. That would look something like “everybody pays $prop218max per gallon” combined with rebates or other tax incentives for conserving domestic/muni water.

  26. Michael Harrington

    Davis Progressive: correct. The 5 yr rate package is all or nothing.

    The City’s charging unequal rates based upon an accident of water meter installation using 3/4 inch pipe or 1 inch pipe should.win the case in the first 2 yrs of the rates.

    We want the rates on the ballot.

  27. Michael Harrington

    The City’s best strategy is admit liability on the rates causes of action and enter into a deal with Plaintiffs that would include acceptable rates, a re-analysis of the project, and put the entire package on the ballot.for a proper.citywide vote.

    Oh, and.ditch.the sole source bidder.

    Let Woodland park it. They have no cash for their own project; they will wait.

    Im thinking of.putting an initiative on the ballot requiring a citywide vote on floridation. Anyone up for helping?

  28. B. Nice

    [quote]Im thinking of.putting an initiative on the ballot requiring a citywide vote on floridation. Anyone up for helping?[/quote]

    If you do and the vote doesn’t go your way are you going to file a lawsuit?

  29. hpierce

    [quote]The City’s charging unequal rates based upon an accident of water meter installation using 3/4 inch pipe or 1 inch pipe should.win the case in the first 2 yrs of the rates. [/quote]Mr H, as usual is either: uninformed; careless of facts; intentionally misleading; and/or posturing.

    LINE SIZE has nothing to do with connection charges or rates. METER SIZES have. There are some older LINES that are 3/4 inch, with a 3/4 inch meter. Most SF services installed since the early 70’s are 1″, with a 3/4 inch meter. The new rates are consumption based, and I have to come to the conclusion that Mr H is wrong, or lies.

  30. Practical

    hpierce, you are relying too much on semantics. The difference you describe between the rerm “line size” and the term “meter size” doesn’t eliminate the basic point that Harrington was making . . . that a one time, uninformed decision about the placement of some hunks of metal in the ground in front of a person’s house has nothing to do with the cost of of the water system capacity that is needed to service their personal thirst for water.

    His is a lawyer’s argument. Yours is an engineer’s argument. If you actually are an engineer, I suggest you stick to engineering and leave the lawyering to the lawyers.

  31. Practical

    Mark West said . . .

    [quote]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.[/quote]

    At one point in time you were probably right Mark, but there came a moment in time where the Council made a willful decision to make the Measure I vote “binding.” When they did that and then passed an ordinance memorializing that willful decision, the game changed. From that point onward they did [u]need[/u] the electorate’s approval. But that set of events isn’t enough to tie the Council’s hands. What ties their hands is the combination of those events with the unfortunate choice of wording in the Measure I ballot language itself. I don’t know who gave Council the legal advice on the wording they chose, but those words “subject to” are very powerful. Would you sign a grape contract with a grape supplier that includes a “subject to” clause? Would you stake the future of a winery on a grape contract with a grape supplier that includes a “subject to” clause?

    The problem is that it appears that from a legal perspective the City has not as yet satisfied the “subject to” clause of Measure I, and that because of the prior decision about “need” they are in a position where they have to satisfy that “subject to” clause.

    Hopefully a lawyer will jump in and share their thoughts about that legal dilemma.

  32. davisite2

    “….but those words “subject to” are very powerful.”

    IMO, the wording of Measure I was very deliberate to offer the Davis voter the idea that they were NOT giving the CC final approval to proceed with the project but rather only tentative approval. IMO, this was a deliberate attempt to capture the large voter block that had serious doubts about supporting this project without having critical outstanding facts.

  33. medwoman

    MH

    [quote]The City’s best strategy is [/quote]

    At the risk of getting into semantics, I see this as a bit of lawyerly semantic sleight of hand. What if we were to look at what “is best for the city” instead of the “best strategy”. Does what is best for the city include an expensive and completely unnecessary law suit brought on simply because someone was dissatisfied with the way the vote went ? Surely paying “x” number of millions more for a legal “hissy fit” is not in the best interests of either “the city” or its rate payers despite claims that this is somehow for the benefit of “the people”.

  34. medwoman

    [quote]If you do and the vote doesn’t go your way are you going to file a lawsuit?[/quote]

    I’d think that this depends entirely on which side of the issue the individual is on. If the opponents of fluoridation win, my bet is no lawsuit. Since most of the proponents are involved in health care in some way,
    we are most likely to go back to the provision of health care. For those of us most involved in direct one on one care, we are most likely to return to providing care for our individual patients. For those of us involved in either provision of health care to the underserved, or public health at the county level, we are most likely to go back to strategizing how best to serve those in our population of concern. For those of us involved in both individual and community care, we will continue to divide our services in the ways that we see as most beneficial.

    If the water fluoridation were to pass, I imagine a much different scenario in which the opponents would most likely seek a law suit to block fluoridation. I would hope that I am wrong and would love to hear from the opponents that they would simply give up if fluoridation were the decision of the majority, but I sincerely doubt this. Please feel free to tell me if I am wrong and I will stand corrected and gain a great deal of respect for your good intentions with regard to our community.

  35. Practical

    [quote]IMO, the wording of Measure I was very deliberate to offer the Davis voter the idea that they were NOT giving the CC final approval to proceed with the project but rather only tentative approval. IMO, this was a deliberate attempt to capture the large voter block that had serious doubts about supporting this project without having critical outstanding facts.[/quote]

    davisite, I’ve followed this process pretty much from start to finish and would certainly characterize myself as having had serious doubts along the way, but when it came time to fill out my Measure I ballot and put it in the mail I felt I had access to all the critical facts. The Water Advisory Committee process put me in that position. What critical facts do you feel that the voting public does not have access to?

  36. Michael Harrington

    I was sitting in Community Chambers at the CC meeting when the members worked on that “subject to …” language. I’d not sure of how that language got started, but during the meeting I believe, if memory serves, that it was mostly Dan Wolk who dictated to the City Clerk the final language, which included the “subject to” condition precedent to Measure I becoming a full authorization for the CC to proceed with the project.

    I about fell out of my chair when the CC approved that second condition.

    This “subject to” language is probably legal as well as political.

    It also is deceptive, and was an attempt to make the voters think their YES vote for Measure I would necessarily include rates “in accordance with … Prop 219” as a condition precedent to going forward with the project.

    I think the Court is going to need to weigh in on this fascinating question.

  37. Baroe

    Mike how can you take care of the city’s water issues when you cannot even take care of your own personal issues. It’s going around town you did the deed again.

  38. Baroe

    I think for a brilliant lawyer like you who likes messing up with the city project, your first order of priority should be your marital issues.

  39. B. Nice

    “If the water fluoridation were to pass, I imagine a much different scenario in which the opponents would most likely seek a law suit to block fluoridation.”

    I agree. Which begs the question, why bother, when the people who don’t get their way will just throw a tax funded temper tantrum anyway?

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