Judge Rules Water Rates Meet Constitutional Standards

lawsuit

In a long-awaited ruling on Wednesday, Yolo County Judge Dan Maguire denied the claims of the Yolo Ratepayers for Affordable Public Utility Services (YRAPUS).  He wrote, “The water and sewer rates adopted by the City of Davis meet the proportionality standards of the California Constitution, and therefore plaintiffs’ claims are denied.”

The ruling is tentative and has been circulating for the parties to comment and make objections.  After receiving and considering the parties’ responses, the Court will enter a final Statement of Decision and Order.

The city of Davis sent out a statement that read: “The City firmly believed the water and sewer rates were legally valid and the lawsuit was without merit. The Surface Water Project and the water rates were determined and approved by the citizen-based Water Advisory Committee. In addition, the citizens of Davis asked for a binding vote on the Surface Water Project. On March 5, 2013, Measure I was approved authorizing the City to move forward on the project. On March 26, 2013, the water rates were approved by the City Council after the legally required Proposition 218 process resulted in less than 11% of the ratepayers protesting.”

Mayor Joe Krovoza stated “Our City Council, acting on the dedicated work of our Water Advisory Committee, took great care to make sure our new rate structures would be in full compliance with the law. The court’s decision affirms our careful work. This means our joint project with Woodland will proceed to bring Davis a clean, environmentally sound, and fiscally responsible long-term surface water supply.”

Michael Harrington, one of the co-counsel for the Plaintiffs, in a statement told the Vanguard, “Plaintiffs are disappointed in the tentative ruling, however, we have a few days to submit additional comments.  We will do so.”

“We hope that the court’s final ruling is for the plaintiffs and the ratepayers of Davis,” he continued.  “We’ll withhold further comment until the court issues its final decision which should be within a month.”

Mayor Pro Tem Dan Wolk added, “I am still reviewing the decision, but I am very happy our City has prevailed in court. It is now time for our community to move past the continued attempts to derail this critical project, and onto the important work of bringing a sustainable supply of clean water to Davis. We will continue to collaborate with our partners on making sure the project is built on time, on budget and with as much outside funding as possible to minimize the impact to ratepayers.”

“The plaintiffs very much appreciate the Yolo County court’s hard work in this case,” Mr. Harrington said.

As Judge Maguire notes, “The present lawsuit was filed on March 22, 2013, and it includes multiple causes of action, but the only causes of actions at issue now are the second cause of action (declaratory relief regarding the Bartle Wells rates), the third cause of action (declaratory relief regarding the CBFR rates), the fourth case action (mandamus for both water rate structures), the eighth cause of action (declaratory relief for sewer rates), and the ninth cause of action (mandamus for sewer rates).”

The remainder of the causes of action will be heard on March 7, 2014 in Department 7.

Judge Maguire cited the portion of Proposition 218 that requires “the amount of 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.”

He noted that at first blush that would require the city to demonstrate, on a per-parcel basis, that the rates are “proportional to the costs for that parcel.”  However, “the Court of Appeal, which this Court must follow, has rejected this interpretation, and found instead that “proportionality is not measured on an individual basis,” but instead is “measured collectively, considering all rate payers.”

Under that test, “Proportionality may be established by ‘grouping similar users together’ and then charging members of the group according to their usage.”  Therefore, “Rates are disproportional if an agency charges groups different amounts for no good reason.”

Here he cited the now-much discussed Palmdale case as a chief example.

Judge Maguire added, “It is important to note that Proposition 218 requires rates to be proportional to the cost of service, not equal to it, and so the fact that one rate structure is proportional to the cost of service (and thus legal) does not mean that all other rate structures are disproportional to the cost of service (and thus illegal).

Judge Maguire noted the differential duties of the court versus those of the city.  He wrote, “The Court’s duty is to determine whether the rates arc constitutional, and it is for the City’s elected policymakers to determine if they are fair and promote good public policy. The increased water rates will undoubtedly burden many Davis residents who are already struggling to pay their bills, but the elected City Council members, not the Court, must balance that burden against the need to address the declining quality of the City’s water supply.”

Judge Maguire noted that under Bartle Wells, the fixed costs are based on the size of the parcel’s meter.  The plaintiffs’ argued that “there is no valid reason to set fixed charges based on meter size,” but Judge Maguire ruled that there are good reasons for this as “a user with a larger meter has the capacity to use more water, and the new system must have the ability to meet potential peak-period demand.”

He also noted that the city has a water rate study that shows, “parcels with bigger meters do in fact tend to use more water.”

The plaintiffs argue that the Bartle Wells rate structure overcharges low-volume water users because they pay more per unit of water than high-volume users.  They rely on Palmdale for their claim, but Judge Maguire ruled, “unlike in City of Palmdale, the City has demonstrated a basis for its allocation of costs to the ratepayers. In particular, the Rate Study has calculated the costs to provide water, including the Surface Water Project, and allocates those costs into various categories.”

“It is true, as plaintiffs note, that low-volume users will pay more per gallon, sometimes much more, than high-volume users. This phenomenon is not unique to Davis, but is true of any traditional water rate structure with a fixed fee,” Judge Maguire wrote.

He argued that this is not a disproportionate charge since the city is merely recovering fixed costs, “even though this means that low-volume users pay more per unit, because the City incurs ‘readiness to serve’ costs that arise from potential demand.”

The plaintiffs challenge not just Bartle Wells, but also CBFR, arguing “the CBFR rates are disproportional because steady users (those who use water at the same clip throughout the year) pay less than typical users (who use more water in the summer).”

Judge Maguire noted that this feature helps to promote conservation and that “the California Constitution recognizes the importance of water conservation.”

He ruled, “Instead, the plaintiffs argue that the CBFR rates discriminate between users, by penalizing users who use more water in the summer. But there is a good reason, supported by the Administrative Record, to charge more for summer water: the system must be built to handle peak capacity, and that capacity is determined by summer usage.”

Finally, Judge Maguire ruled on sewer rates and their use of “winter water” as a proxy.  The plaintiffs argued, “Winter water use does not correlate well with sewer use.”

He noted, “The plaintiffs rely on a study that analyzed winter water use in El Macero, near Davis. That study showed that El Macero residents use significant amounts of water in the winter for irrigation, and the plaintiffs infer that other users must also irrigate in the winter. Thus, plaintiffs argue, it is disproportional to use winter water use to establish sewer charges, since much of the water used in the winter does not end up in the sewer system.”

He noted, while “winter water use” is “imperfect” as a proxy for wastewater usage, “it is a better proxy than year-round use.”

In the end, “The Court concludes that Proposition 218 may be satisfied if the agency’s rate structure and user categorizations are supported by the available data, so long as that data shows that the parcels have been divided into groups of similar users, and that there is a sound reason supporting any disparity in how the groups are charged.”

—David M. Greenwald reporting

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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29 Comments

    1. David Greenwald

      Tentative means that the plaintiffs (i.e. losing party) get ten days to submit additional comments and then Judge Maguire will go back and revise his ruling if he deems it necessary.

        1. Frankly

          I am not an attorney and I am not an expert on this subject, but folks that I know that are gave me a 50/50 opinion. So, maybe he was expecting it, but it appears that there was some basis for the arguments of the plaintiff.

          Can this be appealed?

  1. Steve hayes

    Frankly: January 22, 2014 at 2:34 pm: Did I just hear Mr. Harrington scream out loud?

    Until all of the residual whining by the pro-fluoride forces dies out, it is hard to tell!

  2. Mr. Toad

    So the opponents lost the election and now lost the law suit. What will be next? Will they petition to demand another vote? Will they appeal? Will they ever stop trying to obstruct? How much will their continued obstruction cost the rate payers? Every one percent in additional debt service costs about a million a year. About $15 million over a 30 year term bond.

  3. Michael Harrington

    It’s a very interesting tentative decision and both sides will provide comments. Plaintiffs might have more comments to the media after the Court’s decision is final.

    David, it’s 15 days, and we will provide them to local media at time of filing.

    We knew it was an uphill battle: remember the old saying: “It’s tough to fight City Hall”? Anyway, we all gave it a good shot, and we hope to prevail in the end with a court decision in Plaintiffs’ favor.

    1. David Greenwald

      Full quote from Mayor Krovoza:

      Our City Council — acting on the dedicated work of our Water Advisory Committee — took great care to make sure our new rate structures would be in full compliance with the law. The court’s decision affirms our careful work. This means our joint project with Woodland will proceed to bring Davis a clean, environmentally sound, and fiscally responsible long-term surface water supply.

      As we find ourselves in a significant drought, Davis’ ratepayers should be pleased that they acted to increase their water supply options. When the project comes online in mid-2016, we will have the ability to use surface water that can be supplemented by groundwater. That will be a great asset for our system’s reliability.

      Davis remains fully committed to everyone understanding the transition to our new and conservation-oriented water pricing. Outreach will continue, in the bills and via the press, our web site and public forums.

      Our ratepayers should also know that we continue to make great strides in project cost reduction. That has been job-one since Measure I passed last March. Since 2009, project costs have come down a full 35 percent through downsizing and our bidding process. And there are still prospects for more savings through lower interest financing.

  4. Michael Harrington

    Update: March 7th is a Status Conference to work out what else needs to be done to hear the remaining issues and when the court will conduct that hearing. The remaining issues include the City allegedly using potable water and sewer services for free.

    1. Mark West

      The judge rejected every one of the plaintiff’s arguments. It is for frivolous cases like this that we need a ‘loser pays’ rule for the Civil Courts in California. If this tentative ruling is confirmed, Plaintive’s lawyers should have to pay all of the City’s legal fees.

      1. Tia Will

        Mark

        As a member of the medical profession, I am no stranger to the idea of frivolous lawsuits.

        I totally agree that all costs of a losing lawsuit against the City should be borne by the lawyers bringing the suit. I do not believe that lawsuits should be used as a means of overturning decisions by either the public or elected representatives that one does not happen to like.

        I think that is indisputably what is occurring here.

        1. John Baldry

          Mr. West and Ms. Will, while I don’t disagree with you with respect to lawsuits that are clearly frivolous, I don’t think a blanket “loser pays” provision makes sense either. No one knows better than the judge whether the case was without merit. Those of us who are on the outside have no idea how difficult the judge’s decision was. So I’m inclined to leave it to the judge’s discretion whether one side or the other gets awarded any “loser pays” compensation.

          One of the very interesting aspects of Judge McGuire’s decision is that the Appeals Court ruling that he used as the principal precedent in his decision didn’t even exist at the time that the plaintiffs filed their lawsuit. Making a judgment about the Constitutionality of a decision today based on speculation about possible future events is a dicey proposition at best.

          1. Mark West

            Mr. Baldry:

            My understanding is that judges do not have the discretion to make an award of legal costs to the defendant in CA civil courts as they do in Federal courts. I would be happy with a system that gives that discretion to the judge, but I think it is important that the plaintiff’s lawyer be responsible for paying the award, not just their client.

  5. Mr. Toad

    Interesting that the remaining issues could have some merit although it will likely result in moving money from one pot into another. I’m not so sure I agree with Mark and Tia about the entire case being frivolous. Courts have ways of sticking it to lawyers and plaintiffs who abuse the system but if we make it too hard for people to test the law we will soon find ourselves at the mercy of the government and monied interests.

    1. Mark West

      It is an unequal system. The Judge has discretion to award legal fees to the plaintiff’s lawyer, but not to the defendant’s. Give the Judge discretion for making an award to either side and we will see fewer frivolous actions.

      As far as lawsuits against individuals, all of the winner’s legal fees should be covered by the losing party and that party’s lawyer. If the Judge rules that the action was particularly frivolous, the lawyer should pay a larger share of the award.

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