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I hadn’t heard about this until I just saw Fullerton City Council Candidate Jan Flory’s post on Facebook, so I’m going to quote it in full before getting to my somewhat thunderstruck analysis. (No, I did not know that it was coming until just now when I read the story; I’ve had to undo posting of another story because of it.)
[Disclosure: I am a candidate for the 29th State Senate district, which includes Fullerton, and an opponent of this lame-brained move. Readers may be excused for concluding that I won't feel entirely satisfied until Tony Bushala puts up a Bob Huff poster on his front lawn so that I can take a picture of it and taunt him over the next few decades. OK, here's what Jan Flory had to say:]
DRIP, DRIP, DRIP
At 12:15 a.m. last night, the City Council took up the question of how to refund $7.3 million to people who overpaid their water bills in our city over the past 3 years. Mayor Sharon Quirk moved to continue the matter to the next city council meeting because of the late hour. Doug Chaffee concurred. Bruce Whitaker, Travis Kiger and Greg Sebourn voted to go forward no matter how late or how tired the council members. It also might have had something to do with the fact that the audience had dwindled to a handful by that time. So much for transparency and accountability.
A little history first: To begin with, the water fee was never an “illegal water tax”. The water tax was first adopted in 1968 at 2% of the water bill. The purpose of the tax was to pass through to the ratepayers (you and me) the city’s cost of getting water to your tap. Fair enough. The tax increased to 10% in 1970. We had aging reservoirs, pumps and water lines that needed replacement and ongoing maintenance. The water fee was a way to do that. In 1996, the California voters passed Proposition 218 which required there be a connection between a fee charged and the services rendered. In other words, you couldn’t just pull a number (like 10%) out of the air.
Proposition 218 was tested and upheld by the courts beginning in 2002. The Water Rate Study Committee was authorized by the OLD council long before the Recall to address concerns about the 10% charge to the Water Fund. Ultimately, the study committee determined this summer that the city should have been charging in the neighborhood of 7% rather than 10% in order to comply with 218. The committee relied on the work of an independent financial consultant, Municipal Financial Services Group (MFSG), to determine the City’s cost in providing water to its customers, and outside legal counsel (Best, Best & Krieger) to make sure that the outcome comported with Proposition 218. The results were even submitted to the Howard Jarvis Taxpayers Association that concurred with the methodology used in the study.
The NEW council majority threw all that out the window, disregarded the recommendations of the Water Rate Study Committee, and completely eliminated the “in lieu” fee. That will have the effect of reducing city revenues annually by $1.7 million which could have properly been charged by the city to bring water to our homes.
Because the city had charged its water customers 10% (rather than 7%), the Water Rate Study Committee found that the city had overcharged the rate payers the sum of $7.3 million over the last 3 years. It recommended that the overpayment of the water fee be accomplished by an incremental transfer from the General Fund to the Water Fund to be used for infrastructure repairs,–something that desperately needs addressing. This would also avoid the City’s incurring debt to pay the debt.
What did the new Libertarian majority do? It voted to rebate the entire $7.3 million back to the rate payers. It is estimated that this will be a onetime payment of $100 to $400 per household depending on how much water was used during the 3 years. It’s an accounting nightmare for several reasons. The overpayment has to be calculated for each household in the city. Some residents have moved or died; thus, creating the dilemma of finding out where to send the money. Finally, the question of where the money is to come from must be determined. We don’t have enough in the General Fund to pay the lump sum. Staff suggested that a debt issuance might be necessary, with an estimated yearly debt service of $500,000. So now we not only have a decrease of $1.7 million in revenue, but we need to add $500,000 for debt service. This totals $2.2 million if you’re counting.
Last night, the council majority (Whitaker, Kiger and Sebourn) directed staff to find “creative ways” to pay off the debt such as selling off surplus properties. In other words, asking city staff to remove the rope the council majority had put around its own neck.
Change on the Council cannot come quickly enough. Drip, drip, drip.
Hope that you haven’t turned in your ballots yet, people of Fullerton, because this right here is your issue. Do you want a solvent city that can address the collective needs of its residents, or do you want to try to convince a Bankruptcy Judge to let Fullerton bust its unions, slash its services, and renege on its pensions? (This won’t work, by the way, because the city’s population is pretty wealthy compared to other cities and the BK Judge will look at things exactly like this to see whether the City has committed self-inflicted wounds to make it look like it’s in worse shape than it is. And thanks to this, the answer is that much more likely to be “yes.”)
There was apparently a problem with a portion of the water tax, although apparently not a particularly sinister or unusual one. A portion of it was going to general city expenses rather than to the delivery of water service — or, at least, if it was all legitimately going to water services then it was insufficiently well-documented. So there was a question of what to do with the excess money that had been collected.
One way to look at this is: “how does the city’s government best serve its people?” The responsible thing to do would have been to move money from the General Fund to made significantly needed repairs to Fullerton’s water provision infrastructure. Everyone thus benefits from the expense.
If, however, your plan is to try to bankrupt the city, you may prefer a different path: require the city to pay the money back even to those who didn’t use it. Furthermore, you should try to do it in the most expensive way you can, requiring your staff to make individual assessments of how much each taxpayer should get. You may also want to make it unfair — and thus subject to court challenge — because a large amount of those taxes would have been passed on by landlords to renters as part of their rent, and those renters for the most part are unlikely to be found. So that means that landlords not only got to have the taxes repaid by renters, but they also get that same amount of taxes repaid by the city! Sweet deal, huh? You’d almost think that these three guys were being financed by a big landlord!
(People at FFFF, when I’ve raised this point, simply deny that landlords in effect pass on the cost of water to their renters. All I have to say is: ask an economist about that. They pass on property taxes to renters, too, to the extent that the market will bear it.)
The most revealing this about this is where it says that Fullerton may have to, unnecessarily, take on extra debt payments to cover the cost of these refunds — and then they say that staff should look into selling of city assets instead! That’s what conservatives often do — remember Schwarzenegger with the OC Fairgrounds? — and often it’s because people with money – remember Dave Ellis with the OC Fairgrounds? — want to be able to buy it for a song!
GEE — DOES ANYONE AROUND HERE HAVE THE MONEY TO BUY PROPERTY THAT THE CITY OF FULLERTON HAS TO SELL OFF AT “FIRE SALE PRICES”?
A special note to Doug Chaffee: if they do something like this again, after midnight and after the unsuspecting citizenry has gone home, you should VOTE ALONG WITH THEM so that you can bring up a motion to reconsider at the next meeting. I don’t know the City’s rules on this, but I hope that you can agendize an item for the next meeting for reconsidering this item anyway. The next scheduled meeting is not for three weeks, which is Election Day, Nov. 6, but I think that your colleague Mr. Kiger can tell you how to call for a special meeting on, say, Oct. 30, over doing those infrastructure repairs. When it comes to paying for it, I’m sure that you can think of a recently approved expenditure to reverse.
I hope that the Council will meet on the 30th, because I’m sure that plenty of people who didn’t stay up until midnight would LOVE to weigh in on why the Council apparently wants to push the city into bankruptcy any way it can. That’s something worth talking about before the election, isn’t it?