Vanguard Analysis: Could Legal Challenge Undo Measure I?

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water-rate-iconAs we await Judge Maguire’s ruling on the constitutionality of the water rates, one of the big questions moving forward is whether the overturning of the water rates is simply a nuisance that can quickly be corrected, or whether it could actually force the city into a new vote.

The key to this question is language within the ballot measure itself.  The ballot asked, “Shall Ordinance No. 2399 – be adopted, which grants permission to the City of Davis to proceed with the Davis Woodland Water Supply Project, to provide surface water as an additional supply of water, subject to the adoption of water rates in accordance with the California Constitution (Proposition 218)?”

The key language here is “subject to the adoption of water rates…”

Michael Harrington has been arguing that this process is not over until the courts ratify the water rates.  He argued back in July, “The Measure has a clause making an affirmative vote for the Measure also ‘subject to’ the adoption of rates conforming to Prop 218.  Since the rates litigation has not been decided, the rates are not final.  Measure I is not final.”

It is a view that was shared by CBFR (consumption-based fixed-rate) developer Matt Williams in a July post, “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).’”

He added, “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 [Yolo Ratepayers for Affordable Public Utility Services] case are resolved by Judge (Maguire), 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.”

While it is unlikely a court would put an injunction on the financing of the project now, if Judge Maguire invalidates the rates, that becomes another matter.

Some have speculated that the city’s best option might be to concede the loss and simply attempt to pass new rates.  But that might be problematic itself.  For one thing, a large number of municipalities rely on water rates similar to the Bartle Wells rates.  For another, there is a reasonable question as to how much time the city would have after Measure I was passed to approve the water rates.

The legal bind is in part due to belief by City Attorney Harriet Steiner that the water rates themselves could not be put on the ballot and, in an effort to link the ballot measure to the water rates, they inserted a subject clause.

In November 2012, Ms. Steiner wrote, “Staff has concluded that in order for the measure to be binding, the limitations of the language must not render the project infeasible, impede desirable procurement methods, preclude advantageous financing options and recognize that final design, final costs and final rates (approved by the rate customers) are not yet available.”

All of this speculation hinges on whether Judge Maguire rules that the rates violate the constitution.  That is a tough call, but as we have argued a number of times, it is quite clear that Bartle Wells is heavily disproportionate, with low end users paying far more on a per gallon basis than high end users.

This is a point that came up during the arguments a few weeks ago where the plaintiffs argued that this amounted to a subsidy by low end users.

The plaintiffs would argue that the meter size, in effect, forces low end users, most of which they claim are seniors, to subsidize the costs for water use by larger users.    As Michael Harrington argued, “That’s just not fair, not proportional.”

But one of the key questions here is what exactly is the proportionality requirement under the law.  As Judge Maguire noted, there are three potential levels of generality in which we could (a) compare costs user by user, (b) compare costs parcel by parcel, or (c) compare costs class by class.

John Morse would argue that the effective per CCF rates for the low end users, which were at times double or triple those of high end users, took this out of the realm of reasonableness.

On the other hand, the city very clearly argued that, in their view, this was a class by class comparison.  Ms. Steiner argued that this is what the case law states.

Judge Maguire, however, noted that the case law actually seems at odds with the actual language of Prop 218, which defines proportionality: “The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel.”

Ms. Steiner argued that the system charges the same across user classes and noted that the city builds to capacity, to peak usage during the summer, so that when a customer turns on the water, they are guaranteed that water will flow.  The meter is therefore not based on the usage of CCF but rather on the ability to use the water.

The city argued in its response brief, saying, “The City is not, as Plaintiffs contend, required to, nor reasonably able to set, a rate for each individual customer based on the customer’s then current use pattern. Indeed, by setting water rates that account for peak demand and peak use, the City is harmonizing its dual constitutional obligations to promote water conservation (Article X, §2) while not charging users more than their proportional cost of service under Proposition 218.”

In our view, if the plaintiffs had simply argued that the Bartle Wells rates were disproportionate and showed how the Loge-Williams rates fixed those problems, they would have a pretty strong case.

The Loge-Williams rates, as we have shown, do not completely fix the problem, but they strongly mitigate it.

However, had the plaintiffs used that argument, they would likely not be able to invalidate the whole of Measure I by cutting out the “subject to” plank that is required for passage.

This analysis necessarily depends on how Judge Maguire views the whole of the rates and, if he invalidates the rates, whether the city at this late point can satisfy the “subject to” clause by simply approving rates that meet the constitutional threshold.

—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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18 thoughts on “Vanguard Analysis: Could Legal Challenge Undo Measure I?”

  1. Michael Harrington

    The City is violating its own Measure I: the rates are not final ; therefore the City should not be funding the JPA with the new rate increases. Its a breach of a legal and political promise to the voters.

  2. Frankly

    “Indeed, by setting water rates that account for peak demand and peak use, the City is harmonizing its dual constitutional obligations to promote water conservation (Article X, §2) while not charging users more than their proportional cost of service under Proposition 218.”

    This comment gets to the heart of my inflamed libertarian senses.

    While I am generally in favor of financial incentives to promote conservation, there are a couple of glaring problems when it comes to water.

    1. Water is a life necessity, and the use of water is not discretionary enough to pass the fairness test for tiered pricing.

    For example, it is not fair nor constitutional to penalize larger families, people with larger yards, people that grow more of their own food, etc. These are not lifestyle choices. Or if you want to make the case that they are lifestyle choices, they are protected lifestyle choices. The rates as designed are biased against some lifestyle choices and for others.

    2. The only other common product with tiered pricing is energy. However, there are alternatives to give you the freedom to mitigate the impact of tiered rates. For electricity or natural gas, you can switch to kerosene, wood, pellets or propane to heat your home. But, there are no alternatives for water. You can certainly make choices to conserve your consumption of water, but you cannot live without it.

    It seems to me that a fixed rate for meter size to cover the fixed infrastructure costs, plus a common price per gallon fee to cover the variable operational costs, is exactly the rate design we should adopt. That rate design would make rational sense to everyone. We have to pay for the plant and plumbing and we should all share in a proportionate cost of it. Paying a tiered rate based on meter size makes sense… you would be paying for capacity. This is analogous to paying more for greater broadband bandwidth. Everyone gets that.

    Then you should pay a common price per gallon… everyone. No matter how many gallons you use, the price per gallon should remain the same for all customers.

    The argument that this design penalizes lower water consumption households to subsidize higher water consumption households is bunk. We don’t pay tiered rates for gasoline, yet we are all still motivated to conserve. Those that purchase a hybrid or bike to and from work or the store are rewarded with a smaller gasoline expense and the good feeling of knowing they helped reduce fossil fuel consumption. The commuter in a big truck is not being subsidized by the driver of the Prius.

    With respect to the Loge-Williams water rate plan, we guilty of over-thinking with our social and environmental justice dinosaur brains. We should have honored the KISS principle and implemented a rate plan that was easy to understand and matched our general sense of fair pricing based on other common models. Had we done that I think we would not be at this juncture of legal challenges by Mr. Harrington and his cohorts.

    1. growth issue

      I agree Frankly, charging more per gallon for large families is unfair. How much would these same liberals scream if Obamacare had a tiered system where each extra family member’s rates went higher and higher the more you added on?

  3. Matt Williams

    David Greenwald said . . .

    “This analysis necessarily depends on how Judge Maguire views the whole of the rates”

    Throughout her argument before Judge McGuire on December 16th, Harriet Steiner built her case on the premise that Davis doesn’t have a single rate structure, but rather two different and separate rate structures . . . the first one (the Bartle Wells rate) that lasts from May 1, 2013 through December 31, 2014 and the second one (the CBFR rate) that lasts from January 1, 2015 through December 31, 2018.

    The legal question that I (as a layman) believe Judge McGuire will be wrestling with is whether the Steiner premise is accurate given the fact that the City presented the ratepayers a single Prop 218 for their approval or protest.

    The reason that I (again speaking as a layman) find this to be such an important question is that in addition to there only being a single Prop 218 Notice, there is also only a single Cost of Service Study that establishes the proportionality of costs for both the Bartle Wells rate and the CBFR rate . . . and it is easy to wonder how the single cost proportionality established in that single Cost of Service study can simultaneously support two markedly different rates proportionalities.

    The graphic below is a modified version of Figure 5 in the Cost of Service study. The column to the left is the proportionality of the Bartle Wells rates and the column to the right is the proportionality of the CBFR rates. The area marked as No Man’s Land is the area that the Bartle Wells rate says is proportional based on non-volume/consumption factors (meter size) and the CBFR rate says is proportional based on user volume/consumption factors. It is hard to imagine how the cost proportionality can be both volumetric and non-volumetric at the same time.


     photo CostofServiceProportionalityNoMansLand_zpseb539a28.jpg


    Here is the graphic from the Cost of Service study that establishes the cost proportionality.


     photo CostofServiceCostProportionalities_zpsdf46d8f4.jpg


    If Judge McGuire sees the rate structure as one rather than two, there is no way that there is proportionality in both rates in the No Man’s Land area. The Cost of Service Study can’t serve two masters simultaneously.

    1. hpierce

      ok matt… you were part of the confusion re: possible rates… fine… but at the bottom om your two last postings, there is a link to ‘adsonar.com’… now I get a sense of the polution of my windows laptop from your Apple machine.

      1. Matt Williams

        Hortense, I have no idea what adsonar.com is. I’ve never encountered it on my Mac. Sounds like you have malware on your machine that you need to have cleaned off. Probably came from an e-mail you opened. Based on my Google search it appears that it is associated with aol.com. Have you opened an e-mail from an aol address lately?

        “What is adsonar

        adsonar.com is a domain used by Quigo which is an advertising company that is part of a network of sites, cookies, and other technologies used to track you, what you do and what you click on, as you go from site to site, surfing the Web. Over time, sites like adsonar.com can help make an online profile of you usually including the sites you visit, your searches, purchases, and other behavior. Your profile can then be exchanged and sold between various companies like adsonar.com as well as being sold to other advertisers and marketers.

        More about Quigo

        Bought by AOL. Advertising.com is the technology, data and insights arm of AOL Advertising. At the heart of Ad.com’s technology is AdLearn, the most advanced optimization and bid management system in the business. AdLearn has processed up to ten billion transactions per day for the past ten years and consistently provides unmatched results for the world’s largest advertisers..”

      2. Matt Williams

        With the above said, your comment “you were part of the confusion re: possible rates” is interesting, and somewhat obtuse. Could you sharpen it up for me and make it more transparent?

  4. SouthofDavis

    Frankly wrote:

    > Then you should pay a common price per gallon… everyone.
    > No matter how many gallons you use, the price per gallon should
    > remain the same for all customers.

    That will happen after we get a flat tax rate (never)…

    For most people having a guy that makes $10,000 pay $2,500 in taxes and a guy that makes $100,000 pay $25,000 in taxes is fair, but without super complex hard to understand tax and water rates the government can’t give deals to people they like and make people they don’t like pay more.

    P.S. To be fair water rates are harder to set than gasoline prices since laws in place don’t let them change prices every day (like a gas station) as expenses change…

  5. B. Nice

    “Or if you want to make the case that they are lifestyle choices, they are protected lifestyle choices.”

    I’m cherry picking to make a point. The fundamental idea that lifestyle choices which waste natural resources like water is one our culture needs to start moving from if we actually want there to be enough water in future for use in activities that sustain life, not just water huge unnecessary lawns, for instance.

    ” But, there are no alternatives for water. You can certainly make choices to conserve your consumption of water, but you cannot live without it.”

    My understanding is that the home owners using the most water, thus the ones being most impacted by this pay structure, are using it for purposes that don’t sustain life.

      1. B. Nice

        While dirt can actually be very fun to play in, it and grass are not the only options. We have a tiny strip of grass my kids never play on. They play in the sandbox my husband built, they ride their bike and scooters and rollerblades in the driveway and on the path behind my house. They jump rope, build things, draw with chalk, blow bubbles and swing from tree branches. They also love helping me care for the garden full of native, drought tolerance plants the previous owner of my house landscaped with. They learn about different plants, and how they reproduce, they plant seeds in the garden beds and love watching them grow, they hunt for preying mantis and lady bugs, and build forts.

        Huge lawns are not necessary for play.

  6. Michael@mikeharringtonlaw.com

    Davis Bartle Wells and Woodland rate structures are similar.

    One of the fundamental problems with the Davis 5-year rate package is that the City charges different fixed costs for 3/4 and 1.0 inch meter sizes, without emperical data to support that distinction. That 3/4 versus 1.0 inch meter classification runs through Bartle Wells and CBFR.

  7. Michael@mikeharringtonlaw.com

    Also, the group collecting signatures for the initiative challenge to the 5 year water rate package is nearly ready to file the registered voter signatures. Assuming sufficient signatures are turned in to the City Clerk, the initiative should be on the same ballot as the June 2014 City ballot, with the City Council seats. The CC apparently intends to place a significant raise to the sales tax on the same ballot.

    1. hpierce

      One of the sponsors is Ernie Head who played City staff as a “senior citizen who didn’t understand, and oh, my hearing aid doesn’t work”, and got paid twice for a well in West Davis, by a judge who is anti-Davis. The City paid to construct and develop the well, on property that the City was committed to pay fior, then pled “dumb” and was successful in not only having the City for paying for the well, but in delaying the transaction, he got to treat the well as a tenant improvement, and a YC judge got thr City to pay for it twice. Suspect that MH got a piece of that action.

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