Commentary and Analysis – If you found yourself believing perhaps that the city of Davis was moving too fast to end the WAC process, you are probably not alone. But time was running out for the self-imposed deadline to put the measure on the ballot.
So here were are – the WAC has finished their job, for the most part, and will plop this project, the mess, the headaches, in the lap of the Davis City Council, who now has to convince the voters that this is the right way to go.
The deal that was approved was to “Direct City staff to draft a recommendation to City Council to adopt the DWWSP Option A, WAC Alternative 4b: 30 mgd DWWSP Project; Woodland: 18 mgd, Davis: 12 mgd.”
There would be compromise and amendments. First, that both cities will share in the cost of the pipelines to convey the treated water to the city limits of each city. Second, that the cost share percentages of the entire project change to reflect the current anticipated reliance on the treatment facility. And the third, a recommendation that the council use arbitration or mediation to resolve the equity issues if the councils of the two cities and the JPA could not do so.
That passed 7-2-1. Alf Brandt abstained due to the criteria. Michael Bartolic and Mark Siegler would vote against it.
Does this deal work?
There are a lot of questions. Woodland has seemed to indicate that they would discuss cost-sharing when Davis committed to going to Woodland for water. This motion does not finalize that commitment but it does move Davis in that direction.
Bill Marble and Skip Davies have played hardball in recent months – to some extent justifiably so. But at the same time, they have to recognize now that there is $30 million at stake for them and that Davis still needs to get a March vote passed.
In the end, staff believed that there was not now and would never be enough in the West Sacramento deal to make it viable.
Staff figured West Sacramento was about 12.5% less than what was currently on the table for Woodland. If Woodland agrees to this deal, at least a few believe that would make the Woodland alternative cheaper and less risky, with higher quality of water.
But questions still seem to remain. The questions about the rate structure persist. Matt Williams and Frank Loge have proposed an innovative rate structure that uses past usage as the fixed rate component.
However, City Manager Steve Pinkerton and Doug Dove from Bartle Wells, the water consultants, have a good of skepticism about their proposal.
Water attorney Kelly Salt, with the Best, Best and Krieger law firm, reviewed the proposed rate structure from Frank Loge and Matt Williams and, while she saw some issues that needed to be potentially addressed if the WAC moves forward with this plan, she ultimately thought this could work.
“I think conceptually this can work,” Ms. Salt wrote. “This is similar to the approach that Davis and a number of public agencies use for approximating flows for sewer service.”
However, City Manager Steve Pinkerton told the Vanguard via email, “While I’m not opposed to reviewing new methodologies, I would want it to be fully vetted before implementing a rate model that will eventually be requiring the City to generate over $25 million per year in revenue.”
He suggested, “We could run this method in parallel with a standard rate model for a period of years and then evaluate it to see if there were any unanticipated problems with the rate structure.”
“In addition, I would prefer that another entity take the lead and potentially deal with the first round of potential lawsuits that could ensue if the rate structure created huge cost increases for specific user groups,” he wrote. “I’m also concerned that the bond underwriters could have issues with a rate structure that hasn’t stood the test of the time.”
Doug Dove of Bartle Wells Associates, who is running the city’s rate study, has concerns about the Loge-Williams Consumption Based Fixed Rate Proposal (CBF).
He said in an October 12, 2012 memo that Bartle Wells Associates does not recommend the CBF as proposed.
While those issues will have to be worked out, the city must also figure out a way to get the project approved by the voters in March 2013.
Cutting the right deal could have muted some of the criticism. The sudden lurch to resolve this issue will play somewhat into the hands of the referendum committee.
Michael Harrington, the former city councilmember heading up the committee, commented on the sudden finalization of the Woodland project, “It was quite disappointing.”
He recommended prior to the vote that the city council halt the move toward a ballot in March, arguing, “The City of Davis is not ready to proceed with that specific project. The City has not worked out a realistic number for how much new potable water we will need, and the current rate system is unconstitutionally disproportional.”
He argued, “The City immediately focuses on establishing a constitutional rate structure, either by amending the current structure or going with a new structure, including but not necessarily that proposal made by Williams and Loge to the WAC.”
How much leverage would opposition have? A good deal more than the city would like to admit.
Ironically, the Williams-Loge proposal gives the referendum additional ammunition against this project. They now can argue that the rate structure – if the city does not go with Williams-Loge – is in fact unconstitutionally disproportional.
They now can argue that the electoral timetable, rather than policy considerations, drove the timeline.
The fact that the DBO will contain a private operator will give them some leverage.
But at the end of the day, this will come down to rates. If the number that the city ultimately comes up with for its Prop 218 number looks like it is triple the current rate in the near future, I do not see how this ballot measure passes.
It should be an interesting time. It is now the council’s responsibility to smooth out the rough edges here. Time is short and much has to be accomplished.
—David M. Greenwald reporting
Does anyone think this outcome was ever in doubt? Sure they went through the motions but no surprise here.
“Ironically the Williams-Loge proposal gives the referendum additional ammunition against this project. They now can argue that the rate structure – if the city does not go with Williams-Loge – is in fact unconstitutionally disproportional.”
So on the flip side couldn’t all of us users claim that we’ve been overcharged all these years because the rate structure was unconstitutionally disproportional and seek amends?
rusty, my sense is that you could claim that the fixed charges have been historically disproportional, and almost surely win that argument. The problem would be in collecting damages because the meter-based fixed rate methodology has been accepted throughout the industry for years, and until Frank and I did the analysis we did, agencies did not know that the tried and true standard was indeed disproportional at all, much less to the extent that it is. So, I don’t think a court is going to be likely to punish past events. However, now that our analysis is out there in the public knowledge base, agencies can no longer argue that they didn’t have any reasonable way to know that disproportionality exists in meter-based fixed rates, so going forward damages are going to be much more likely to happen if lawsuits are filed.
“You knew, but still didn’t do anything about it,” will more than likely be a core argument in future cases.
Note: all of the above is said by a non-lawyer.
Rusty: “[i]Does anyone think this outcome was ever in doubt? Sure they went through the motions but no surprise here.[/i]”
First, the WAC did far more than ‘go through the motions’ and I think it is rather disrespectful to suggest otherwise. Second, no I did not think the outcome was in doubt since the City Council made the right decision the first time. Some people will simply never accept that idea regardless of how long we delay and how many experts look at the problem.
wodland passd 8-2. Don’ leav out than
While I value the work my colleague Matt Williams has done on the issue of rates, the dis-proportionality of rates charged different classes of rate payers in Davis was pointed out by various community members at least as early as the 218 rate imbroglio of September 2011.
The dis-proportionality of our water rates was then confirmed by Bartle Wells consultant Doug Dove sometime prior to or early in spring of 2012.
Certainly from comments made by city staff during the discussions ensuing from Doug Dove’s presentations on our rate inequities it appears that city staff have known of this dis-proportionality for years; this does not include Steve Pinkerton, City Manager, nor Herb Niederberger, City Utilities Manager, who are both fairly new to our city administration.
The primary contribution of Matt, more recently aided by our colleague Frank, is in outlining a path to a potentially equitable methodology for assessing water costs to users, while guaranteeing stable revenues to pay for any expensive new system. If implemented in context with the Chamber of Commerce’s uniform flat rate for variable costs, the Loge-Willliams rate plan model does have intriguingly positive possibilities as a good solution to our rate plan needs. But, that potential is subject to some of the pitfalls and implementation problems identified by staff, albeit based on the assessment of another of the WAC’s rate consultants such challenges can be overcome.
The city has had the opportunity to address the dis-proportionality of the current rate structure for some time, and the WAC had the opportunity to endorse to the City Council that this be addressed some months ago. However, city staff advised the WAC they’d rather continue the current rate structure until this winter, and resolve the dis-proportionality at that time. Accordingly, the motion to bring current rates into conformity with Proposition 218 was voted down by the WAC 9-1 (my vote dissenting).
Last, the motion to approve the JPA/DBO/WDCWA (aka the “Woodland option”) was an 8-2 vote with no abstentions, with myself and Mark Siegler in the minority. The second measure, dealing with pursuing an equitable deal with the City of Woodland, actually only calls for mediation, not for arbitration, in the event that the JPA representatives from Woodland and Davis reach an impasse on the issue of equitable cost sharing. Also, although the vote on this second motion does from my notes appear to have been 7-2-1 with Alf Brandt abstaining, I do not belief the dissenting votes include my own ballot, since in fact I suggested the language adopted in the motion to direct our City Council reps on the JPA to pursue not a “better deal” (as the original language stated) but an “equitable deal”, i.e., without dis-proportionality in charging Davis residents a higher cost per unit of water from the same jointly-owned plant, run by a single management, versus the substantially lower cost per unit as would be charged Woodland under the JPA/DBO/WDCWA plan as now in force and if left unmodified.
This is not a point in time where I wish to either belabor or extoll, broadly or in detail, the outcome of the WAC’s work over the past 11 months. There will be other opportunities for that, both before the City Council and the public. And no matter my assessment of the WAC’s vote giving a majority endorsement of the JPA-lite version of last fall’s plan, the task of making that plan salable to the public is now in the lap of the City Council, and the WAC must move on to the issue of recommending a fair and legal rate structure.
In regard to last Thursday’s WAC meeting, I will only say it was sad that the most important single meeting of the WAC was needlessly jumped to a special meeting on a date where it was shunted into obscurity, hidden from the public at a subfusc site instead of televised and shown live via web streaming. It’s tempting to apply a metaphor to that decision, but since the action speaks for itself I shall refrain …
Fiat Lux,
Mike Bartolic