Judge Rules Water Rates Meet Constitutional Standards

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

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