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