Though nothing has officially been filed, the City of Morro Bay’s new water-sewer rates recently approved by the City Council seem heading towards a legal challenge, but the City continued its march to build the $126 million project.
The citizens’ group, Save Morro Bay founded by local activist and project critic Aaron Ochs, has put the word out that it’s hired an attorney “to pursue legal recourse against the City of Morro Bay regarding their decision to disenfranchise nearly one thousand protest letters,” Ochs wrote in a recent posting on the Morro Bay Neighbor’s Internet gossip site.
“This is history in the making, but this is not the kind of history Morro Bay should be known for.”
On Sept. 11, the City Council held a hearing for the official Proposition 218 pro- test vote on new water-sewer rates, which are intended to pay for the City’s new sewer treatment plant and water reclamation system, collectively called a “Water Reclamation Facility” or WRF.
The increase customers face would add some $41 to the monthly bills starting July 2019, which is on top of an increase to $150 a month for the average user (5 units of water a month), and so would total $191 for water and sewer service for an average customer.
People who use less water would of course pay less overall and those using more than 5 units pay more. A unit of water is 748 gallons and 5 units represents the “average” residential user. Still, no matter how much one uses the $41 “surcharge” the City ap- proved will apply to everyone.
Commercial customers’ water-sewer rates are as a rule higher than residential and commercial sewer rates are also dependent on the type of user one is. For example a restaurant pays more because of the type of sewage it produces — with lots of grease and food particles, which is harder to treat.
At that Sept. 11 public hearing, Cynthia Hawley, an environmental attorney who’s been working with citizen groups on defeat- ing the new rate structure, turned in nearly 1,000 votes to the City Clerk to be counted in the total protest votes.
Hawley told the Council that those ballots were collected by Citizens for Affordable Living or CAL, prior to the City’s start of the Prop. 218 vote, but they were still valid, she claimed, because State law (Prop. 218) does not require a date be written on the ballots.
She argued that the City must include them in the “raw” count, made prior to the ballots being verified. Hawley’s argument was that some people would vote against rate hikes in principle, no matter how little or how high they were, and so their votes should count.
But with the reassurances of the City Attorney, the City Council voted unanimously to reject those votes. That meant the official protest vote count was some 2,154 and the protest needed some 2,794 (50% plus 1) to defeat the rate increase. By discounting the late votes, the Council proclaimed the Prop. 218 vote defeated and enacted the new rates.
That’s touched off a bitter fight with opponents of the project crying foul and the City Council defiantly pushing on with the $126 million project.
It also became a wedge issue amongst the five council and two mayoral candidates running in the Nov. 6 Election, which was just held this past Tuesday and whose results came in too late for The Bay News’ deadline.
And some heavy hitters from Sacramento are also now involved. The Howard Jarvis Taxpayers Association or HJTA, has been involved in the matter since June when it sent a letter to the City asking for clarification on some of the aspects of its proposed Prop. 218 rules for voting.
Among those was an initial call for the date to be on each ballot, and for property owners or water-sewer customers to sign under penalty of perjury that they were informed of the new rates.
The HJTA’s questions, as well as com- plaints from project critics led the council to remove the perjury portion but not the date requirement on the official Resolution passed in mid-July to set up the ground rules for the protest vote.
Ochs said of those late ballots, “They were turned in on time pursuant to State Law. The Council rejected the protest letters with- out evaluating them for validation. They broke the law in doing so. They rejected the letters on the unsubstantiated basis that all letters were undated.”
His attorney reportedly inspected the late ballots and “We learned that some of them were dated,” Ochs said. “They rejected the letters based on preconceived and biased notions that Citizens for Affordable Liv- ing, the organization that collected the letters, solicited letters based on false and mislead- ing claims.”
“The law prohibits voter disenfranchisement based on voter intent,” Ochs said. “There is no provision in the State Law allowing the City or any municipality to do so. While the City is allowed to administer the water/sewer rate procedure, they cannot discard protest letters based on arbitrary and capricious guidelines. City guidelines do not supersede state law and case law precedent.”
He added that his group doesn’t want to sue the City but it’s left them few options.
“Those believing the proposed Water Reclamation Facility is fair and just cannot idly stand by and allow our laws to be impugned and our rights to be quashed,” he
said. “We urge everyone on both sides of the issue to come together and demand ethical, lawful and transparent action from our local officials. Count and verify the protests. Should the City continue to venture down this legally perilous path, we will seek justice for all residents.”
Ochs and supporters of Citizens for Affordable Living or CAL have persistently denounced the council for its actions, which would seem to ignore the will of the people in protesting the new rates.
City Manager Scott Collins told The Bay News that they believe they are on solid foot- ing with regards to the law and that while they haven’t checked the ballots beyond a raw count, in copying them for the HJTA public records request, the staff has looked at them and noticed a lot of other errors, such as husbands and wives both voting when only one vote per property is allowed, duplicate votes and more.
There were even some protests for City- owned properties, he said, including City Hall and the Police Department, which of course would be thrown out (the City, which is also a customer of its water and sewer departments, presumably would not vote against its own rate hike).
Collins said if the matter ends up in court, they will have all pertinent documents and votes ready to submit to the court. With the errors the staff has noticed with just cursory glances, he’s not sure the official number of 2,154 would even hold up.
Of course, if a judge declares all the ballots should be counted, the potential is for more than 3,100 votes and defeat of the new rates. Most likely though, a judge at the worst could order the whole Prop. 218 protest vote be done over.
In a subsequent letter, HJTA demanded that the City preserve all documents pertain- ing to the Prop. 218 voting — from the actual ballots to the information packages that were sent out, and all Internet information that was available — seemingly in preparation of filing a legal challenge.
That letter was accompanied by a notice directed at the City’s contractors and lenders notifying them that their contracts could be worthless, should the rate hike be success- fully challenged in court.
Collins said they’ve spoken to their fund- ing agencies, contractors and consultants and none of them are concerned about the challenges.
The financing of the WRF is as complex as its approvals have been. The City is in line to receive a “Water Infrastructure Finance and Innovation Act” or WIFIA, a program under the Environmental Protection Agency, for $62 million covering some 49% of the total costs. That loan is at 3.5% interest saving about $20 million in interest payments over a 35-year repayment term.
It already has one State Revolving Fund loan for $10.3 million that it has yet to tap, instead using cash from current rates to pay the more than $5 million it’s cost from 2013 to this point in the process.
The current financing plan calls for raising the remaining monies with $22.78 million in cash collected through the sewer bills, and $4.84 million in water fund cash; and then selling some $24.7 million worth of municipal bonds at 4%-5% interest for 30 years.
Selling municipal bonds would be the most expensive way to finance the project and the City hopes to get additional SRF monies (at about 2%) to reduce the need for bond financing.
Collins said they would this week submit an application for an additional $47 million from the SRF Program, which would allow the City to reduce the $41 a month surcharge to somewhere around $30 a month.
Collins believes they will get the extra loan even though according to the City’s rate setting consultant, Alex Handlers of Bartle & Wells Associates, the SRF Program has about $1 billion to loan out and $6 billion in loan requests.
If they do get the additional SRF loan, Collins said they could either reduce the monthly surcharge or use the extra monies the rates would provide to work on a number of infrastructure repairs with both the water and sewer systems.
Meanwhile, the council has pressed on with its project. On Oct. 23 it awarded a $67.2 million design-build contract with FilancBlack & Veatch, which was the lower of just two bidders on the treatment plant portion of the overall project.
Work on a feasibility study of the reclamation portion of the WRF continues with GSI, a consultant that will figure out if the Morro Creek groundwater aquifer can handle the approximately 1 million gallons a day of effluent to be injected into the ground and extracted again, treated and returned to the drinking water system.
By Neil Farrell