Tiered Water Rates – Part 1.

For almost two weeks before Brea Council’s August 20 meeting, I had been trying to find out if the San Juan Capistrano suit regarding tiered water rates and their non-compliance with Proposition 218 would impact Brea. I even emailed City Attorney Markman, who cut his teeth on water issues and enjoys quite a reputation in that area, for his opinion… and got no response.

Instead, at the end of last Tuesday’s meeting (when most people had been bored to tears and turned channel 3 off), Markman casually tossed out this “opinion” in an effort to wave off any possible inquiry from residents.

Capistrano Taxpayers challenge the city’s tiered water rates.

Markman, did acknowledge a “significant lawsuit” potentially effecting Brea and many California cities who have implemented tiered water rates. On Friday July 29, 2013 the Capistrano Taxpayers Association (CTA) and the City of San Juan Capistrano faced-off in Superior Court to decide whether the City of San Juan Capistrano was out of compliance with the restrictions imposed by Proposition 218 (passed in 1996).

As with most laws, Proposition 218 is mired down in legalese and, especially for the layman, is difficult to whittle down to the basic facts. Suffice it to say, Prop 218 was an effort to curtail bureaucrats looking for ways to raise revenues while avoiding Proposition 13’s restrictions. Shut off one faucet and the bureaucrats find another one to open… in this case tiered water rates.

Using conservation as an excuse to impose another tax.

jmarkman_bMarkman suggests that it was Brea’s intention to increase the per unit cost of water in an attempt to discourage users from squandering water. Prop 218 prohibits this, requiring rates to be tied directly to the cost of delivery.

His hinting at the silly notion of having to create 15,000 individual rates and the possible loss of Lifeline and Senior Citizen subsidies is worse than a smokescreen. It struck me as wholly unfounded gibberish designed to scare Brean’s away from sticking around to hear the truth when it finally emerges.

In 2006, Brea’s initial two tiered rate structure was concocted by a consultant; in 2009 Brea adopted a three tiered rate structure, again dreamed up by a consultant.

I’m still trying to determine if we’re talking about one or two consultant firms here. I have a somewhat complex CPRA request submitted, hoping to pull a few facts out from under the rug at city hall. Do stay tuned.

A few serious questions from the policy wonk in me.

In 2006, 10 years after Prop 218 became law, how many of those involved in implementing Brea’s non-complying water rates understood they were breaking the law?

Did the City Attorney, who’s professional resume is likely unequaled in the state when it comes to water issues, forget to mention to Council that their vote for tiered water rates may come back to haunt them one day?

Did the consulting firms accidentally or conveniently exclude any mention of Prop 218 in their recommendations to staff and Council? If so, would this lift the “intellectual property” protection on their calculations and other work property making them available through the California Public Records Act?

Did staff have knowledge of Prop 218 and it’s limitations? Were their reports remiss in giving Council a full and complete set of facts upon which to make their decision?

Wouldn’t be the first time. Remember when Council accidentally gave themselves raises only having to rescind them later due to public pressure? Remember, just a couple of weeks ago, when Council had to retroactively approve a $3.4 million purchase of water rights made by staff without proper authorization?

Will the swallows come back to Capistrano?

I’ve made inquiry to the Capistrano Taxpayers Association for their assessment of whatever appellate actions may still be in process. Their own communications indicate taking a wait-and-see attitude, though their spirits seem quite high. They believe that, sooner or later, the Appellate Court will uphold their claims.

Tonto_1Still, I would like to get to the bottom of Markman’s rather cryptic comment, “We’ve been waiting for this for a long time.”

What do you mean “we” Kemosabe?

Are you including Council? The consultants? Who has known that this could blow up in our faces and for how long?

Was there really a conscious disregard for the law or are Brea taxpayers, once again, witnessing wholesale corporate stupidity in action?

 

It’s Not About Water Rights.

Recent OCR articles by both Chris Haire and Terri Daxon have addressed Brea’s recent acquisition of Cal Domestic water rights. The question regarding who has the authority to spend Brea’s money and what the real issue is in acquiring water rights seems to have gotten overlooked in the swarm of facts and figures.

The acquisition of water rights and preferred stock, from Cal Domestic and the Metropolitan Water District, has long appeared to be complicated, if for no other reason than to dissuade the public from taking a closer look at the process. While both writers got the essentials correct, here’s an executive summary.

Water rights – distilled.

December 2011 – Council approves an $8.1 million purchase of rights for 665 acre feet of water. Pay once, get the water every year in perpetuity. Cost for water is locked in, cost to deliver can and does rise annually.

This purchase is made by transferring $5.6 million from Brea’s General and Risk Management Funds to the Water Fund. This is called a “loan” – at an interest rate of 2.17% for seven years. So far we’ve paid back about $1 million. I don’t know why it’s called a loan. The balance, $2.5 million, was already available in the Water Fund.

bill_gallardoJune 2013 – Jim Byerumm, Cal Domestic’s General Manager alerts Charlie View and Bill Gallardo of the availability of rights for an additional 225 acre feet.

Internal discussions ensue, excluding Council. Brea’s bid of $3.4 million, made without Council authorization, by Charlie View and Bill Gallardo is accepted by Cal Domestic.

Believing that there were still Water Funds available from the original transfer (loan) and approval given in 2011, View and Gallardo completed the transaction without giving Council so much as a courtesy heads-up.

After their oversight was discovered, the Cal Domestic invoice was ultimately paid using a $1.2 million credit from Cal Domestic’s terminated Capital Improvement Fund (accrued because we’d overpaid for almost 18 months) and $2.2 million from the Water Fund.

The error on the parts of View and Gallardo, in memory and judgement, involves $3.4 million, not $2.2 million as reported. Also, the fact that we paid Cal Domestic’s Capital Improvement Fund $70 thousand a month for a year and a half after they terminated the fund deserves some discussion, too. How many errors like this are going on? Why aren’t audits catching this sort of blunder?

The whole affair was discovered by Council member Simonoff, who set in motion the process that brought the matter into Council study session. Apparently Garcia and Murdock believe that being in the room is sufficient to allow them partial credit.

I disagree, but that’s another blog.

Now having retroactively covered their assets and having called in independent auditors to review both purchases to ensure there are no further problems, plus doubling the staff required to closely oversee transactions of this sort in the future, Gallardo suggests that Brea is pretty much out of the woods.

I wouldn’t be too sure about that.

No data trail, the real problem.

According to Bill Gallardo, none of this process is documented in any fashion prior to Cal Domestic submitting their invoice!

Not the notification of availability. Not the confirmation of interest. Not the details of negotiation, i.e. bids, counter bids, stipulations and contracts. Nothing. Not who was involved. Not how business was transacted. Nothing.

No other purchase or financial commitment made by the city, to the best of my knowledge, is conducted in such an unacceptable, loosey goosey manner. You know why? Because we’re in charge! We make the rules.

CA_SealWhen it comes to water rights apparently there are no rules. We can’t even demand a paper trail from Cal Domestic because we have no authority over them. Only the State of California does.

Instead of sending a representative to Washington to wade in on immigration issues, instead of sending an entourage half way around the world to watch a folkloric event and do a lot of sightseeing, maybe we should send someone to Sacramento to rattle Governor Brown’s cage on this.

falls_640tim_2aIf Brea is really a corporation, how about asking our “CEO” to start acting like he’s running a corporation.

After all, every glitch in this whole water rights matter circles right back to his office.

Where was he in this process? On vacation… again?