Analysis: City Analysis of Impact of Measure P Suggests It Is Not a Paper Tiger

water-rate-iconOne of the big questions is what happens if Measure P passes.  There are those who believe it would not be a huge impact for the city to have Measure P pass, as they would simply be able to pass new water rates.  There is a political argument against that viewpoint, but as the city analysis shows, there are fiscal and policy arguments against that, as well.

If Measure P passes, the water rates would be repealed in their entirety.  “If repealed, with no other action by the Council, the water rates in effect prior to May 1, 2013 would be reinstated because these were the rates replaced by the (Ordinance) 2405 rates.”

The impartial analysis prepared by the City Attorney states, “If passed, Measure P would not be retroactive and passage would not provide a basis for refund of 2405 rates already paid. Prior to the Measure P vote, the City may consider modifications in water rates, subject to compliance with requirements of the California Constitution (‘Proposition 218’) and without voter approval.”

Harriet Steiner continues, “If Measure P passes, the City Council, after complying with Proposition 218 could propose and, absent a majority protest from ratepayers, could modify and/or increase its water rates in the future without voter approval.”

City staff notes, “On February 26, 2013, the City Council approved the Amended and Restated Woodland-Davis Clean Water Agency Joint Powers Agreement (JPA). The Agreement contains sections regarding Termination (Section 10) that carry significant cost concerns in light of Measure ‘P’.”

The agreement may be terminated, but only by mutual approval of the parties and it cannot be dissolved “until all debts and liabilities of the Agency have been discharged or assumed in accordance with this Agreement and the dissolution agreement. This would include direct, actual and reasonable costs to redesign the Project Facilities to accommodate Woodland, amounts due to the WDCWA [Woodland Davis Clean Water Agency] and construction costs to date. Also, the city has an outstanding obligation to purchase its share of the 10,000 AFA [acre-feet per annum] water right from the Conaway Preservation Group (CPG). Davis’ share of this purchase is $36.5 million.”

Staff notes, “Passage of Measure ‘P’ would limit the ability of the City to meet deadlines stipulated in the agreement and affect the City’s ability to pay its obligations. In effect, passage of Measure ‘P’ can trigger the Termination Sections of the JPA.”

That alone would suggest to both sides that Measure P is a good deal more powerful than some have dismissively suggested.

Staff continues, “City staff has reviewed the fiscal and legal impacts if Measure P were to pass and has determined that the passage of Measure ‘P’ could have several adverse cost impacts. These impacts assume that the City will not be able to timely adopt new water rates that fully cover the upcoming costs of the DWWSP [Davis-Woodland Water Supply Project] and provide this funding within the timelines necessary to avoid a default on the City’s obligations for this project.”

Staff estimates that it would take 75 to 90 days (two and a half to three months) to adopt new water rates.

The city highlights several key impacts.  First, “Davis will not be able to proceed with financing of the DWWSP and will not have funds to proceed with the remainder of the Davis Water improvement projects.”

There are huge financial impacts of up to $25 million for the city of Davis, but the bigger problem is that damages to Woodland would be around $50 million.

City staff estimates, “Davis would likely miss the opportunity to finance the DWWSP and other Water improvements at the lowest interest rates. This has the potential to cost Davis residents over $100 million in long term project costs.”

Third, “If the City cannot perform its obligations to fund construction of the DWWSP and foregoes its chances to conjunctively use surface water to meet the demands of its residents, then the City will be mandated to retrofit at least 12 groundwater wells to treat for hexavalent chromium. The construction costs for wellhead treatment are estimated at $1 million per site or a $12 million immediate impact. The City does not have reliable estimated costs for the annual O&M costs for this treatment and removal but it could easily exceed $1 million annually.”

Finally, “If the City cannot perform its obligations to fund construction of the DWWSP and foregoes its chances to conjunctively use surface water to meet the demands of its residents, this will adversely impact the design and operation of the wastewater treatment plant improvement project. The City’s Wastewater NPDES Permit adopted in October 2013 contains water quality standards for Selenium and Electrical Conductivity that can only effectively be met with the City migrating to surface water or conjunctive use (combining surface water and deep wells). There are no viable solutions to meet these water quality standards through improvements at the wastewater treatment plant.”

Staff argues that the water system is an enterprise fund, funded through water rates, and city staff “cannot determine with any certainty the impact on the City’s water rates if Measure P is adopted and the aforementioned default and penalty payments are incurred and Davis no longer participates in the DWWSP.”

In their conclusion, staff writes that they believe, “City must do whatever it takes to avoid the possibility of defaults on the DWWSP and the consequence of penalty payments to either Woodland or the WDCWA. This includes investigating the cost and availability of interim financing to cover the costs that would need to be expended to preserve the City’s participation in the WDCWA and reduce or eliminate the risk of default costs.”

 At present, the City has expended over $13 million participating in the project.  Staff writes, “The best way to protect this investment and reduce default costs, which would be significant, involve increasing water rates to cover these interim financing costs but also reducing the debt service though one of the scenarios outlined above. This recommendation would require the City to make proactive changes in rates that reduce the revenue generated from those approved in Ordinance 2405 by approximately 8%.”

Staff recommends, “Upon certification of the Measure ‘P’ election results, if necessary, immediately initiate the Prop 218 notification and majority protest process required by state law to implement a series of new rates to go into effect over the next five years. If rates can be reduced pro rata across all rate classes, rate decreases can be considered and adopted without a new Prop 218 notification, which would shorten the time needed for new rates to go into effect by approximately 45-60 days. If a new Prop 218 notice was required, new rates could be effective in 75 to 120 days following the election.”

—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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19 Comments

  1. Mr. Toad

    If your view was correct then we must wonder why No on P isn’t pulling out the stops. Either they have polling that shows voter fatigue with the Anti-water people or they think passing P creates no real issues that can’t be easily overcome with a new 218 process.

    1. Davis Progressive

      he’s pulling the analysis from the city staff report, so i’m not sure you can characterize it as “his view”

      however, i think a point being made here by david is that the attitude of most people has been that measure p is not a big deal. they think that the water project is a done deal, and that if p passed, they would simply approve new rates. for the first time, the report from council castes serious doubt on that view. it will be interesting to see if the no on p adjust their response according to this new information.

    1. Davis Progressive

      dream on refers to what? i’m against measure p. i don’t expect p to pass, but i’m not sure the city or campaign knows that right now.

  2. Tia Will

    ” i think a point being made here by david is that the attitude of most people has been that measure p is not a big deal”

    I certainly hope that this is not the view of “most people”. If so, I think that they are discounting the ability of a small group of people who have fought the water project every step of the way, regardless of the merits ( or lack thereof ) of their claims to create major mischief with huge financial implications with their sole goal of blocking the water project entirely, or barring that, delaying its implementation as long as possible regardless of the cost to the community.

    I see this as the height of selfishness of this particular group to continue to block what was clearly the majority point of view in order to promote their personal agenda by any means possible. No one is always on the winning side of any particular issue. I was in the minority on Target and the Cannery. There comes a time to say, the majority does not agree with me, so I will stand down. The time for this group to take this position was long ago.
    I hope that “most people” will see this ploy for what it is and vote no on P.

    1. Barack Palin

      If I remember right 46% voted against the water project. That’s hardly a small group of people. It wouldn’t take too much to change that outcome, just 4 to 5 voters per 100.

  3. Tia Will

    Barack Palin

    Agreed. And that argument could have been equally well made against the Target when 49% voted against it.
    Would you have supported me coming up with one questionable legal argument after another to block that project?

    1. Barack Palin

      It’s called democracy. We already have State and Federal minimum wage laws but you seem okay with a local referendum that would override that. Many people would consider the $15/hour argument very questionable too.

      BTW, I voted against Target.

  4. Tia Will

    BP

    You are correct. I am all for anyone using the democratic process to put forward their preferred solutions.

    What I do not advocate is the ad infinitum usage of the legal process to attempt to thwart what the majority has clearly voted into place. Please note that I do not object to the existence or promotion of Measure P. What I was pointing out is that this same group has tied the process up for significant amounts of time using very questionable legal pretexts to delay. I do not see this as the same process as attempting to engage enough people of like mind to sign a petition.

    1. Barack Palin

      “What I do not advocate is the ad infinitum usage of the legal process to attempt to thwart what the majority has clearly voted into place.”

      Like Prop 8?

      1. Tia Will

        “Like Prop 8 ?”

        Maybe, but this speaks to motivation. If one genuinely believes that a law is unconstitutional, then one has not only the right, but also the obligation to challenge it. I do not think obstruction should be based on personal preference alone. Constitutionality is another matter.
        I could be wrong, and if so would like one of the opponents of the water project and/or the rates to correct me, but I feel that they have put forth so many different objections over time, starting with the statement “we don’t need this project”, that it leads me to believe that their objective is to block or delay, not to truly address what they see as an unconstitutional law.

    2. Matt Williams

      BP and Tia, for me the key issue is summed up in the last five words of Tia’s first paragraph … “put forward their preferred solutions.” To the best of my knowledge, no solutions have as yet (or ever) been proposed other than “stop what you are doing and do nothing.” That solution was actually appropriate for Measure I, because that vote was about whether to move forward or not and having no surface water plant was indeed an option. However, Measure P is about rates, and having no rate structure is not legally an option.

      When the supporters of Measure P step forward and actually propose a solution to the problem they say exists, then they will be playing with a full deck. Until then all they are doing is shuffling cards.

  5. paul Brady

    The County Clerk sent out NO on I info via 3rd class mail! It went via train through LA someone told me, and arrived after some had mailed in their ballots. It was a Mail-only ballot so this made a difference the NO on I people feel.

    Another point: Why did the rate increases have to be so high? One can estimate what it would cost to finance the $106 million project [Davis’s share], the City system upgrades [~44 million] plus the Conaway river water payments of about $1.8 million/yr to Tsakopoulos. The City will save an estimated $2million/yr in pumping, maintenance, etc., costs in shutting down most the 15 intermediate wells used now. The total net cost of river water is therefore about $ 8-10 million a year over 24 years. The City water rate increases amount to nearly $22 million a year of additional revenue by 2018! This a factor of two too much! All that pork!

    1. Matt Williams

      Paul, your analysis excludes the cost of operation and maintenance of the underground water distribution system. In 2011 the costs to operate the wells and the groundwater distribution system were $13 million per year. I don’t know where you got your $2 million per year pumping, maintenance, etc. costs savings, but lets accept it as accurate for the purposes of discussion and say the baseline expenses are $11 million per year. Then add the 1.8 million per year Conaway water right payment and you are at $12.8 million. Debt service on the new East Water Tank ($12 million financed at 4%) adds $882,000. Debt service on the City system upgrades [~44 million financed at 4%) adds $3.2 million. The $106 million of plant costs at 4% are an additional $7.8 million. Add those all together (13 – 2 + 1.8 + 0.9 + 3.2 + 7.8) and you get $24.7 million, which is a bit above what the 2018 Rates will generate. Where is the pork?

      Further, the 2011 Rates generated approximately $10 million that year. For the 2018 rates to generate “nearly $22 million of additional revenue” the total rate revenue in 2018 would need to be in excess of $32 million. In fact it is between $23 and $24 million. Where are you getting your $32 million in 2018 number? It is wholly and completely inaccurate. it sounds like you are using the same 50% overstated numbers that John Munn used in his initial city services analysis (see http://www.davisvanguard.org/munn-files-paperwork-discusses-city-services-costs/ ), which John later corrected (see http://www.davisvanguard.org/corrected-davis-city-services-costs-summary/ ).

      1. hpierce

        Save your fingers, Matt… Mr Brady wants great, generous allocations of water, at little to no expense to him. For consumption, landscaping, and swimming pools.

    2. hpierce

      And we {City] could save more if the City never allowed ‘old Willowbank’ a connection to City water, and they could have replaced their own wells, full of nitrates. Maybe we should seek a “do-over” on that.

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