Metropolitan Water District Director's Letter to Fullerton City Council

You are probably all aware of the series of events that have taken place during the first 2 weeks of April. The month started off with the snowpack report for April 1st. The snowpack in the state of CA is at the lowest in recorded history. Governor Brown attended a snow measurement station in the Sierra's. After witnessing the measurement he ordered a mandatory cutback of 25% on urban water use.

 

The MWD had been analyzing our water supply and the possibilities of an allocation for the last few months. It was agreed upon and agendized for discussion at our April committee and board meetings. Governor Brown beat us to the punch with his April 1 announcement.

 

The MWD was very successful at moving water to the San Luis Reservoir during the large December storms. The discussions in February and March were centered around a Level 2 allocation, but as March went by it became clear that the snowpack was going to be very low. The snowpack measurement combined with Governor Brown's mandatory reduction caused the MWD to rethink it's allocation level. The allocation debate at the water planning and stewardship committee meeting on April 13th had varying opinions. The discussion was centered around a Level 3 or Level 4 allocation. A Level 3 being a 15% cut, and a Level 4 being a 20% cut in water use by MWD customers. The arguments for either level of allocation had merit. In the end, it was agreed to go with a Level 3 allocation with a monthly review that potentially could bring a revote to change the allocation.  

 

The MWD's water supply situation is not completely finished for this year. We may face some shortfalls in our water transfer program. The MWD contracted for a 100,000 acre feet of water from the rice farms north of the delta. We were informed on Friday April 10th, that the transfers were being halted by the state. That transfer is uncertain. Our fallowing program with the Palo Verde irrigation district will be utilized fully this year, but our stored water in Lake Mead has a slight chance of not being released if Lake Mead's level falls into emergency status. This condition seems unlikely, but nonetheless there is a small chance. These scenarios could trigger a deeper allocation.

 

I discussed the Level 3 allocation with our water manager Dave Schickling. His opinion is that we can meet a Level 3 allocation without penalty from the MWD. The penalty is over $1,400 per acre foot. It goes without saying that we should make every effort to conserve water over the next 9 months. Governor Brown's order for a 25% reduction will be tougher to attain, but if we can reach that level, or near it, the MWD's Level 3 allocation will not be an issue.

 

I have attached General Manager Kightlinger's letter to the state water resource control board. This letter outlines the MWD's position and provides a proposed framework for the mandatory cutbacks. I have also attached a letter to Governor Brown from Chairman Record. These letters were crafted through discussions in various committees, and they are enlightening about past water conditions, conservation, and our current situation. They are well worth reading.

 

On Tuesday April 14th, the board of directors voted to support a Level 3 allocation. I voted in support of the Level 3 allocation. I have also attached the summary report for April. There are 2 other items worth noting. We appropriated 41 million dollars to rehabilitate the filters at the Weymouth treatment plant. These filters are almost 80 years old. The new filters are an enhanced design that is compatible with the new ozone equipment being installed at the Weymouth plant. The other item of interest took place in communication and legislation committee. This action authorized the general manager to express support for SB 385 (Hueso, D-San Diego) primary drinking water standards: Hexavalent Chromium. This bill sets attainable standards for the presence of Hexavalent in our water supply.

 

As always if you have any questions, give me a call.

[redacted]

Pete Beard

WATER RATE INCREASE - Just say NO!

This week I received a notice from the City of Fullerton that they would like to raise water rates...AGAIN!  

The proposed rates are specifically for pass-through costs from Metropolitan Water District, Orange County Water District, Southern California Edison, and the City of Anaheim (we purchase electricity from Anaheim for Fullerton's wells in Anaheim).  

We know MWD (the agency that gave each employee a $6,000 bonus) recently raised rates to help cover salaries and pensions as well as some infrastructure needs.  We are required to purchase about 30% of all water from MWD.  The OCWD charges us a pumping tax that is significantly less than MWD but those rates keep creeping up. 

And those pesky electric bills keep going up as well.  

Let's recap a few important changes to your rates:

In 2012, a post-recall Council directed staff to refund about $7.4 million: http://www.ocregister.com/articles/city-374846-water-bills.html 

In 2013, a new council majority (Chaffee, Flory, & Fitgerald) voted to redirect staff to only refund about $3.3 million and concocted a new scheme to keep the rest and continue their slightly smaller skimming operation: http://www.ocregister.com/articles/customers-522970-water-city.html  & http://www.orangejuiceblog.com/2013/03/fullerton-water-heist/

Now, the City will charge you more and as a direct result skim more, and claim it in the name of pass-through costs.

Fill out your protest form that was attached on your bill.  If you didn't get the notice for any reason, fill out this form and send it in immediately.  Share with all of your neighbors, employers, friends, and family in Fullerton!

(Click image to view/print)

MWD Director Update for Fullerton Water Ratepayers

Thomas S. Babcock

Director to the Metropolitan Water District

Representing the City of Fullerton, California

August 1, 2013

To: Mayor Bruce Whitaker
Mayor Pro Tem Doug Chaffee
Council Member Greg Sebourn
Council Member Jennifer Fitzgerald
Council Member Jan Flory

Report on MWD Director activities

August 2013 Events:
• August 13, 2013 - MWD Meeting MWD HQ
• August 15, 2013 – OC Caucus meeting
• August 17, 2013 – MWD “Sustainability” Inspection Trip
• August 19, 20, 2013 – MWD Committee meetings and Board of Directors Meeting
• August 23, 2013 – Meeting with Jennifer Medina, Fullerton Engineering Dept
• August 26, 2013 – Meeting with California Avocado Commission Representatives
• August 27, 2013 – Other MWD Committee Meetings
• August 27, 2013 – Attend Mayor’s “Talk around town” to discuss MWD CRA trip in October

I have also included the August summary report of Board meetings.
Planned September 2013 Events:
• September 3, 2013 - MWD CRA Planning Meeting
• September 4, 2013 – MWDOC Joint Board Meeting
• September 5, 2013 – Orange County Caucus Meeting
• September 9, 10, 2013 – MWD Committee meetings and Board of Directors Meeting
• September 24, 2013 – Other MWD Committee Meetings

Summary Report for

The Metropolitan Water District of Southern California

Board Meetings

August 20, 2013

PUBLIC HEARING
Held a public hearing on the standby charge levy supporting Annexation No. 97 to Calleguas Municipal Water District and Metropolitan.

INDUCTION OF NEW DIRECTOR
Director Michael T. Hogan, was inducted to the Board of Directors representing the San Diego County Water Authority. DEFERRED TO SEPTEMBER (Agenda Item 5C)

COMMITTEE ASSIGNMENTS
None. (Agenda Item 5E)

TAX LEVY FOR FISCAL YEAR 2013/14
Received report on list of certified assessed valuations for fiscal year 2013/14 and tabulation of assessed valuations, percentage participation, and vote entitlement of member public agencies as of August 15, 2013. (Agenda Item 5G-1)

Adopted resolution maintaining the tax rate for fiscal year 2013/14. (Agenda Item 5G-2)

WATER PLANNING AND STEWARDSHIP COMMITTEE
Adopted the CEQA determination that the project is categorically exempt and authorized the General Manager to enter into an agreement with the San Gabriel Valley Municipal Water District consistent with the terms in Attachment 1 of the Board letter. REMOVED FROM CONSENT CALENDAR (Agenda Item 7-3)

AUDIT AND ETHICS COMMITTEE
Adopted the CEQA determination that the proposed actions are not subject to CEQA and adopted the policy principles in Attachment 1 of the Board letter; adopted the investigations procedures in Attachment 2 of the Board letter; and authorized $245,000 increase to the Ethics Department fiscal year 2013/14 budget. (Agenda Item 8-1)

FINANCE AND INSURANCE COMMITTEE
Adopted the CEQA determination that the project is not subject to CEQA and authorized the General Manager, with approval of the General Counsel, to execute a contract with CERBT to administer and invest Metropolitan’s pre-funding of OPEB benefits. (Agenda Item 8-2)

Adopted the CEQA determination that the proposed action is not subject to CEQA and authorized the General Manager to sign a nonbinding Memorandum of Understanding stating Metropolitan’s intention to pay its proportionate share of the Hoover Dam Visitors Center and the Hoover Dam Air Slots debt obligations, as approved by the General Manager and General Counsel; and authorized the General Manager to provide approximately $26 million of available cash funding from the Water Rate Stabilization Fund to repay Metropolitan’s proportionate share of the Hoover Dam Visitors Center and the Hoover Dam Air Slots debt obligations. The exact amount will be determined at the time of the repayment. (Agenda Item 8-5)

ENGINEERING AND OPERATIONS COMMITTEE
Adopted the CEQA determination that the proposed action is categorically exempt and appropriated $19.3 million; and awarded $11.11 million contract to Southern Contracting Company to construct the Stage 2 electrical upgrades at the Diemer plant. (Approp. 15380) (Agenda Item 8-3)

Adopted the CEQA determination that the proposed action has been previously addressed in the certified EIR and that no further environmental analysis or documentation is required and appropriated $5.65 million; and awarded $3,801,758 million contract to J. F. Shea Construction, Inc. for seismic upgrades to the Weymouth filter buildings. (Approp. 15369) (Agenda Item 8-4)

Adopted the CEQA determination that the action is not subject to CEQA, and adopted a Board resolution authorizing the General Manager to apply for Safe Drinking Water State Revolving Fund financing for two projects, with separate applications for: (a) the Palos Verdes Reservoir floating cover replacement, and (b) enhanced bromate control, coagulation, and filter biomass control at the Weymouth plant. (Agenda Item 8-6)

COMMUNICATIONS AND LEGISLATION COMMITTEE
Adopted the CEQA determination that the proposed action is not subject to CEQA and is categorically
exempt and authorized the General Manager to express Metropolitan’s opposition to SB 731 unless
amended as described in the Board letter. (Agenda Item 8-7)

Adopted the CEQA determination that the proposed action is not subject to CEQA and is categorically
exempt and authorized the General Manager to express Metropolitan’s opposition to AB 52 unless
amended as described in the Board letter. (Agenda Item 8-8)

CONSENT CALENDAR
In other action, the Board:
Adopted the CEQA determination that the proposed action is categorically exempt and authorized the General Manager to grant a permanent easement to San Diego Gas and Electric Company in San Diego County. (Agenda Item 7-1)

Reviewed and considered information provided in the adopted Mitigated Negative Declaration and adopted the Lead Agency’s findings related to the proposed actions and adopted resolution granting Calleguas’ request for approval of Annexation No. 97 concurrently to Calleguas and Metropolitan; established Metropolitan’s terms and conditions for the annexation in Attachment 2 of the Board letter, conditioned upon approval by Ventura Local Agency Formation Commission, and upon receipt of annexation fee of $8,149.28; and adopted resolution to impose water standby charge at a rate of $9.58 per acre, or per parcel of less than one acre, within the proposed annexation area in Attachment 3 of the Board letter. (Agenda Item 7-2)

Adopted the CEQA determination that the proposed action is categorically exempt and appropriated $610,000; authorized final design to replace the heating, ventilating, and air conditioning equipment system at Metropolitan’s Water Quality Laboratory; and authorized procurement and installation of a new chiller unit. (Approp. 15391) (Agenda Item 7-4)

Adopted the CEQA determinations that the proposed action is categorically exempt and appropriated $350,000; authorized installation of pavement at Temescal Power Plant; and authorized preliminary design of pavement repairs at the Skinner area facilities. (Approp. 15441) (Agenda Item 7-5)

Adopted the CEQA determination that the proposed action is categorically exempt and appropriated $175,000; authorized preliminary design to upgrade the surge tank system at the OC-88 Pumping Plant; and authorized preliminary design to replace a sectionalizing valve on the Santiago Lateral. (Approp. 15441) (Agenda Item 7-6)

Adopted the CEQA determination that the proposed action is not subject to CEQA and authorized agreements with AECOM, Black & Veatch, HDR Engineering, and MWH Americas, in an amount not to exceed $2 million per year each for a maximum period of five years, to provide engineering services. (Agenda Item 7-7)

OTHER MATTERS
Director Larry Dick, representing the Municipal Water District of Orange County received a 10-year
service pin. (Agenda Item 5D)

THIS INFORMATION SHOULD NOT BE CONSIDERED THE OFFICIAL MINUTES OF THE MEETING.

Board letters related to the items in this summary are generally posted in the Board Letter Archive
approximately one week after the board meeting. In order to view them and their attachments, please
copy and paste the following into your browser http://edmsidm.mwdh2o.com/idmweb/home.asp

MWD Holds On To Surplus Revenue

A message from MWD Director Thomas S. Babcock for the City of Fullerton:

The discussion today with a 3 hour Board of Directors board meeting (usually it has not gone over 1/2 hour). The Board majority approved the distribution of the $75M excess surplus after restoring the reserves to be distributed equally into 3 areas; repair and maintenance (PAYGO); OPEB ($575M underfunded retiree health benefits) and a water transfer fund to allow a restricted fund to purchase water as needed should MET need to purchase water to restore reserves as necessary.An alternative option to this distribution was to refund to the agencies $28M allocated on water purchases to reduce the budgeted 5% increase for 2014 to 3%. With the selection of "Option 1", this option was not considered.  However, a separate motion was made which I seconded to refund the 28% while agreeing to fund the 3 areas in Option 1.  While there were votes for this motion, it failed 75% to 25% based on the agencies assessed value weighted distribution voting. Had this passed, Fullerton would have received a refund of 2014 water purchases for approximately $150,000.It is generally believed that with the current drought condition, MET will sell more water than budgeted for in the 2014 budget and again have a surplus of funds this time next year when the 2015/2016 two year budget is considered.  With the financial reserves at their maximums, I am reasonably sure we will have this agency refund discussion again next year.Another item that was approved was a "freeze" in the ad valorem property tax rate for one year at the .0035% in an effort to stabilize the fixed portion of agency revenues. This is allowed under the Administrative code of the Metropolitan Act.  The current rate represents  a tax of approximately $10.50 for a $300,000 property. The tax would have dropped approximately $0.60 for the same $300,000 had this action not been taken and will result in a $4M increase in Metropolitan's fixed income sources.We had quite a few speakers addressing these 2 items for and against during today's meeting.  There was also a rather lively discussion among Directors.I felt these items were important enough to provide a summary in addition to my report which I will provide at the end of the month. Thomas S. BabcockDirector to the Metropolitan Water Districtfor the City of Fullerton

Thievery or Smart Governance?

"Let's re-purpose the fruits of our crime!"

Last year when I was a member of the City of Fullerton's Water Rate Study Ad Hoc Committee I hoped to end the illegal water tax (done!).  I also hoped to take the money overcharged to rate payers from the General Fund and put it back in the Water Fund where it was intended to be spent.  This would help offset and suspend any immediate need to raise rates for infrastructure investment.  This seemed like the smart thing to do.

However, after many thoughtful discussions and meetings with community members, ratepayer advocates, and tax fighters I realized the error in keeping the money.  From an ethics point of view, it is wrong to keep something that was taken through deception.  It's also wrong to hang onto something that is not yours without the consent of the owner.  

In this case, the City took ratepayers' money and told them it was needed to fund the water system.  The City then raised water rates repeatedly while skimming 10% to cover rising pension costs and personnel benefits.  According to the City's own records 70% of the skimmed funds were spent on police and fire salaries and benefits.  About 10% covered other staff salaries and benefits with the remainder being spent on subsidizing other departments, like Parks & Recreation.  That's the simple but ugly truth.  

None of the skimmed funds were spent laying new pipelines, treating contaminated water, or building reservoirs.  

If your employee (think city council) had been overcharging your customers (think ratepayers) to prop up the employee's retirement benefits and pay for office supplies for their side business, wouldn't  you fire the employee (think recall election) and give your customers a refund equal to the amount which they were over charged?  What if...after getting caught the employee concocted a scheme to keep the money or at least most of it?  What if they were convinced that they could do more good with it than your customers could?  Would you really tell your employee to just hang on to the cash and use it more wisely?  Look at it this way, after discovering your child took a cookie out of the cookie jar without your permission, would you let them eat it or maybe give it to the dog?  Or would you make them put it back where they got it?

Opponents of the refund would like you to believe that a refund would drain the reserves and bankrupt the City.  While the burden would be great, this assumes that the City would not cut expenditures in other areas and would instead simply raid the reserves much like the previous administrations continuous raids of the Water Fund since 1970.  

A refund of $7,000,000 is not an insurmountable figure to overcome but it will require a change in the way we do business.  Also, let's consider how much money a "typical" ratepayer can expect to be refunded given that City staff had assumed that the refund was going to be $2,500,000 and not the full $7,000,000.  The difference is due to the "costs" which staff attempted to lay on the Water Fund but which the current council rejected.

Staff had calculated that a "typical" water ratepayer could expect a refund of around $45 per meter.  That figure assumes the refund is $2.5 million, not $7-million.  Ratepayers can expect to receive $120 to $170 each for their portion of the $7-million refund depending on how much they were actually over charged.

While I appreciate the notion of reinvesting the ill-gotten revenue, I believe the ratepayers should have a say in the matter.  Perhaps allowing them to opt out of receiving a refund is more appropriate.  I am open to considering how to manage the refund process but absolutely reject the notion that the City of Fullerton, the same agency that created this mess, should simply keep the money.  

City Council Meeting Tuesday Night

Fullerton City Council Meeting August 7, 2012 at 6:30PM at City Hall, 303 W. Commonwealth Ave

The Agenda has some big-ticket items that you should be aware of.  Among them is the massive issue of water rates and determining what costs should be appropriately charged to the Water Fund.  

There are a total of 27 items on the agenda and I hope to hear you speak about them.  Your voice matters so please speak up.

Click HERE for the Agenda!

Water Rate Study Ad Hoc Meeting - Be Heard!

PUBLIC MEETING AGENDA

 

Main Library Conference Center

353 W. Commonwealth Avenue

June 11, 2012

6:00 P.M.

                                                                                                                                               

1.  CALL TO ORDER

2.  ROLL CALL

3.  CONSENT

     Approval of the Minutes of April 9, 2012 Ad Hoc Committee meeting

4.  ACTION ITEMS

Consideration and final recommendation.

·         Utility Impacts of Street Maintenance

·         Lease of Office Space

·         Public Safety

·         Lease of City Property

·         Payback Options

5.  PUBLIC COMMENTS  

Public comments will only be heard on items appearing on the agenda.  Persons addressing the Ad Hoc Committee will be limited to three minutes.  

6.  CONSIDERATION OF MOTIONS OR RECOMMENDATIONS:

7.  ADJOURNMENT

Water Rate Study Ad Hoc Committee Meeting Canceled

The Water Rate Study Ad Hoc Committee meeting has been canceled with no reason given.

The meeting was scheduled for this Wednesday but City manager Joe Felz canceled the meeting.  No reason was given.

The meeting would have been held to review the City Manager's list of "costs" associated with operating the City's Water Department and determine how much should be billed to the Water Fund.

Meanwhile, Fullerton Water Department customers are still being overcharged 10% on their water bills.  

FREE EVENT - Meet the Candidates

I will be at the Fullerton Public Library (353 W. Commonwealth Ave.) tonight from 6PM-8PM for NUF's (Neighbors United for Fullerton) meet-n-greet.

Other replacement candidates will be there as well for you to speak with and ask questions.  This is your opportunity to interview candidates.

I hope I see you there!

Water Tax Repealed, Rate Decrease Anticipated

The City Council voted 5-0 to do the right thing: Rescind the 1970 City Council Resolution that granted an automatic transfer of 10% of gross water sales to the General Fund.  The money was then used to cover General Fund obligations, 80% of which is for salaries, benefits, and pensions.

The end of the water tax does not mean the automatic reduction of 10% of ratepayers water bills.

That will be explored by the Water Rate Ad Hoc Committee in the coming weeks.

For now, though, let's savor the moment.

One year ago I said that ending the water tax would allow for ratepayers' money to go where they had intended it to be spent, the water system.  "Oh no.  That would mean a $2.5 million cut to the General Fund" said the tax's supporters.  "We can't have that!"

The fact is, that money was not supposed to be going into the General Fund and reliance on those funds demonstrates a clear disregard of fiduciary responsibilities by our city officials.

The money was earmarked for water purposes and any other use is a clear misappropriation of public funds.  Suddenly with the water tax gone, the Water Fund has all the money necessary to begin replacing 4 to 6 miles of pipe per year instead of 1 mile per year.  This is a leap in the right direction.  However, there is much more work ahead.

You can expect another tax and spend plan to come forward to try to make up the $2.5 million annual cut in illegal funding.

Keep a wary eye out for gimmicks, games, and gambling with your money by city officials and vote June 5 to recall Bankhead, Jones, and McKinley.

Illegal Water Tax Not Quite Dead

Ending the illegal 10% water tax is only part of the solution

It shouldn't come as a surprise to anyone that the end of Fullerton's decades-old water tax will not mean the end of Fullerton's financial woes.

As far as anyone can remember only a handful of Fullerton employees fill out time sheets and account for their time spent on specific tasks or projects.

This was the case in 1970 when the City Council voted to tax the Water Fund 10% of the gross water sales.  The blanket application of a percentage-based tax instead of the actual specific costs for service is indicative of poor management from people who had no idea just how much time and effort their employees spent working on water projects and tasks.

The City Manager has placed the elimination of the water tax on Tuesday's City Council agenda citing legal reasons, not economic reasons.  He has very few economic reasons to support any tax because he has no proof of the time and effort spent by employees working on the system except for certain water system employees and engineering employees.

That being the case, how did the City and their consultant, Municipal & Financial Services Group, produce this chart?

Somehow city staff and the consultant concluded these figures and presented them to the Water Rate Study Ad Hoc Committee as facts for consideration when determining just how much water rates should be increased.

If we take a leap of faith that these numbers are remotely accurate, then there are no other costs.  Therefor, any newly discovered "costs" are truly fabricated from thin air.

And then there is yet another problem.

Tuesday's City Council agenda contains a resolution which will, in essence, stop the water tax for May and June of 2012 and from then on.  However, the 1970 resolution states that the 10% tax will be applied at the conclusion of the fiscal year.  In other words, NO MONEY SHALL BE TRANSFERRED until June 30.  Somehow, the City Manager has taken it upon himself to transfer funds BEFORE June 30.  That's illegal.

Read the resolution for yourself, in particular the last paragraph:

Also, the agenda includes a rate hike to cover the "pass-through" increases from Metropolitan Water District and the Orange County Water District.  The problem I have is that MWD will not be raising rates on Fullerton until January while the rate hike to you and I goes into affect on July 1.  

The bottom line is that you, the ratepayer, must attend the City Council meeting on April 17, 2012 at 6:30PM (303 W. Commonwealth Ave.) and speak out on the continued gross financial mismanagement.

How much overhead gets billed to the Water Fund?

Looking further into "costs" of service for our water, how many different ways is administrative overhead charged to the Water Fund?  This pie chart shows several.

1. "Administrative Services" (8% direct allocation from water bill)
2. "Other Expenses" (2% direct allocation from water bill to pay Community Development Department, Human Resources Department, Parks & Rec Department, the City Council, and the City Manager)
3. "Franchise Fee" (11% direct allocation from water bill to pay for the Finance department, City Administrator, City Attorney, and the City Clerk for their respective DIRECT SERVICES to the Municipal Utilities Department- see Resolution 5184 below) 

Resolution 5184, 1970

Good grief!  That's 21% of the Water Fund or $4,746,000.  If that number sounds familiar, it should.  That's the same amount being allocated to the Maintenance Services Department which are probably direct costs and not bloated overhead.

No wonder City Hall doesn't want the Water Fund audited!

The bottom line here is that everyone it seems has their hand in the Water Fund.  Adding additional taxes to current or future water rates is unacceptable and will not solve City Hall's spending problem.  

The Trench Tax

One of the attempted, and thus far rejected, justifications for a percentage-based franchise fee that was concocted by City staff was the Trench Tax.

The Trench Tax was created as a means to pay for the damage created by having wet utilities (water lines, sewers, etc.) buried in the street.

Keep in mind that the Trench Tax is part of the New & Improved Franchise Fee and does not include the cost of the Maintenance Services Department repairing the street each time their is a water leak or water line repair.

According to three licensed civil engineers that I have shown the transfer study to, trench settling occurs when the soil is not compacted appropriately.  Using the correct backfill material and compaction standards will create a base capable of supporting the road.  In lay terms, when done correctly, trench work does NOT accelerate deterioration of the street.  Also, when contractors want to dig in the street, a city inspector comes out to make sure that the street is constructed and restored correctly.  This is a double standard with no inspector verifying the City work.

Aside from the Trench Tax, Maintenance Services Department bills their time spent working on broken water lines to the City's General Fund, at least that is what Dave Schickling reported at the April 9, 2012 meeting.  I have found no evidence to support this claim but since there is no audit of the Water Fund, we cannot possibly know if money was paid to the General Fund to reimburse for the Maintenance Services Department's water-related work.  More importantly, this cannot be part of the Franchise Fee because that is suppose to cover certain administrative costs (which we were taxed twice for as well and is indicated in the pie chart - Franchise Fee vs. Other Expenses vs. Administrative Services).

And then there is this pesky but colorful pie chart which shows that the Maintenance Services Department accounted for 21% of the budgeted cost to maintain the Water System, or $4,746,000 in 2011.  

We are left contemplating just how many ways City staff will attempt to tax our water to fix the same piece of asphalt.  Here are at least two:

1. Trench Tax (a.k.a New & Improved Franchise Fee, less rent-back)
2. Allocation of Water Fund from water bill for Maintenance Services

But it gets worse.  How much bureaucratic overhead is paid for through your water bill and what does it actually cover?  Find out tomorrow.

Water Rate Study Ad Hoc Committee Calls On Council to Rescind Water Tax

Last night the Water Rate Study Ad Hoc Committee voted unanimously to recommend to the Fullerton city Council that the "in-lieu" franchise fee, or "water tax" as it has become known as, should be suspended indefinitely.

Another motion was made to recommend an audit of the Water Fund.  The motion failed 5-5.

Some members stated they had enough reports and felt spending more money would not provide any answers.  One member even said that no matter what is discovered in the audit, it would not be enough for some.

Others, like myself, feel it is a disservice to the public to not account for the misappropriated funds.  As we look to answer the question of how much was overcharged to ratepayers, we realize we cannot arrive at a fact-based answer.  Instead, the city's staff will have the Ad Hoc Committee look at what could or perhaps should be charged to the Water Fund.  That may be an appropriate step going forward but without an audit we will never know where our money went.

Water System Manager Dave Schickling offered up the City's Comprehensive Annual Financial Report as an audit that covered the Water Fund.  Unfortunately, the CAFR does not look at the Water Fund in any detail.  Instead, the accounting consultant was provided total dollars into and out of the Water Fund.  This may show that the Fund is operating in the black but does nothing to ensure that the transfers were legal or that the funds were used in support of water projects and system management.

I asked the Director of Engineering, Don Hoppe, and the Water System Manager, Dave Schickling, about how Maintenance Services bills their time to repair water leaks and the street that they dig up.  They said the time is all billed to the General Fund.  At the May 23, 2011 meeting the Water Rate Study showed that Maintenance Service accounted for 21% of the operations and maintenance of the water system.  This created some confusion, at least for me, because the Rate Study showed these maintenance costs as being part of the allocation from the Water Fund and not part of the franchise fee.  In the end, I am left to guess where at least $22.5-million was spent.

The chart below shows that Maintenance Services expenses accounted for 21% of the O&M expenses, "Other Expenses" as 2% (read the footnote on the chart to see what "other" refers to), and then the Franchise Charge at 11%.  According to the City, this chart represents all of the costs and expenses necessary to operate the Water System and consequently the Water Fund.

City Manager Joe Felz will be compiling what he believes to be a list a various "costs" to bring back before the Ad Hoc Committee.  The purpose would be for the Ad Hoc Committee to determine what "costs" are appropriately associated with and billed back to the Water Fund.

The Ad Hoc committee seemed somewhat unified in a desire to have only the actual costs billed to the Water Fund, but as we have seen, those "costs" are subject to staff interpretation.

Since last night's meeting, many members have expressed their concern over the way the entire Water Rate Study has been handled.

I think a large part of the problem has been the business-as-usual approach by staff to have a committee rubber stamp studies, reports, and recommendations all at the behest of city staff.

That's not to say the process yielded no results.  In fact, early in 2011 I made it my goal to end the water tax.  Last night, the first milestone was reached with the Ad Hoc Committee's recommendation.

As a final thought on water rates and the City's handling of this issue, I want to draw your attention to the City's Budget Study Session tomorrow.  The purpose of the meeting is for the City Manager and department managers to present their respective budgets.  This is where we find out how much of our money the City would like to spend and where they will spend it.  Even though the Ad Hoc Committee recommended that the City Council end the water tax completely, the City Manager, Joe Felz, intends to move the budget forward on the assumption that the General Fund will continue to receive a percentage of the Water Funds revenue.  So you see it is business as usual at the Fullerton City Hall.

Business as usual left us with an $8-million budget gap in the two-year budget for 2011/2012 and 2012/2013.    The proposed budget for 2012/2013 & 2013/2014 will have a $5-million deficit with the ending of the water tax and the official plan is to ignore it.

Water Rate Study Ad Hoc Committee Meeting Tonight

Water Rate Study Ad Hoc Committee meeting tonight

City Yard (1580 W. Commonwealth Ave.)

6:00PM 

Park in the gated employee parking lot

Please bring your neighbors and speak up.

Double taxation: Water Fund is City Hall's Go-To Cash Cow

How would you feel if money you paid for your water bill was used for something other than production and delivery of water?  Would it bother you that the City wasn't investing it in the water system?  It should.

August 18, 1998, the Fullerton City Council voted unanimously to transfer $250,506 from the Water Fund to pay for 1/3 of the City's portion of the total cost to seismically retrofit the PD and City Hall.  

Plenty of people raised valid questions and yet the resolution passed after Administrative Services Director Meyer noted that the Water Department uses office space at City Hall.

This transfer was in addition to the 10% water tax of $1,408,961 for FY1997-1998!  


But wait!  Wasn't the franchise fee supposed to cover costs associated with the Water Department's use of office space at City Hall?  


We just got taxed twice.  

Why Didn't Norby Speak Up On Fullerton's Water Tax? He did.

Back on May 6, 1997 a resident named Tom O'Neill told the City Council that he opposed the practice of transferring money from the Water Fund to the General Fund.  O'Neill said it's deceptive and builds mistrust in elected officials.  Then Mayor Chris Norby noted that the City attorney was reviewing this issue and would report on it at a future meeting.

Click image for full screen.

Then, in September of 1997, the Water Fund issue rises again as the priorities for Hill Crest Park were being considered.  The Water Fund and Redevelopment Fund were being eyed as the primary funding source.

The City's consultant tried to explain why these funds could be used.  His logic?  If a new waterline and reservoir were to be installed, many of the other park improvements could be logically tied to the water work.

Marie Whaling and Barbara Marr asked questions about the use of Redevelopment Funds and Water Funds for the park.

Mayor Norby explained that Redevelopment Funds were to be used for alleviating blight.  He went on to say that the concerns expressed regarding funding sources are legitimate and that Water Fund monies are for water purposes and expenditures must be related to water and its delivery.

Click image for full screen.

Click image for full screen.

City of Fullerton Gets Facts Wrong

My inbox alerted me that the City's latest Focus On Fullerton newsletter published by City Hall had been deposited.

Perusing the topics I found a "A Q&A: "Understanding the City's water fund transfer".  It sounded pretty honest until I got to this part:

Q: I have heard the City’s water franchise fee described as “illegal,” is this true?

Cities are entitled to recover all of their costs for utility services through their water service fees, including costs provided by the General Fund in support of the water utility. The City has determined, however, that it is appropriate to identify and quantify rather than estimate the direct charges that should be assessed to the Water Fund for the use of City-owned property and facilities in support of water system operations. The City engaged an independent rate consultant for this purpose.

As you might expect, I take issue with the answer.

First, the city did NOT determine that it is appropriate to identify and quantify rather than estimate the direct charges that should be assessed to the Water fund.  No, it was the Howard Jarvis Taxpayers Association and California Courts that determined activities similar to those practiced by City Hall were illegal.

Second, it is absurd to think that Municipal & Financial Services, Inc. is an independent consultant.  This is the same firm that conducted the Rate Study last year and who told the Water Rate Study Ad Hoc committee that we shouldn't ask questions about the franchise fee because we''l be "opening a can of worms."  I'm confident that M&FS did exactly what they were hired to do: justify as much of the transfer as they could articulate.

So, while the City chooses to dance around the subject and smooth over the problem with distractions, I'll answer the question... YES, THE FRANCHISE FEE IS ILLEGAL AND IT IS STILL IN PRACTICE IN FULLERTON.

On a "minor" side note, the City also incorrectly tells us that we can only bring up the issue when it is on the City Council Agenda:

Does the public have any say?
Yes, members of the public may speak at Ad Hoc Water Rate Study Committee and City Council meetings when the item is agenized. They may also write letters to the City Council.

This is another piece of bad or erroneous information.  The public may speak to the City Council about anything within the Council's purview, such as water rates, rebates, and franchise fees even if the issue is not on the agenda.  This is what the PUBLIC COMMENTS section of the City Council meeting is reserved for.  You have a legal right to speak before your elected representatives whom serve you.

There are a few other topics in this issue of Focus On Fullerton which I take issue with and will bring up before the City Council tonight.  The meeting starts at 6:30PM with several presentations and proclamations.

Fast Facts About Fullerton

Here are a few fast facts about Fullerton:

400 - the number of years it will take to replace that water line in the street (current replacement cycle should be 6 miles per year on 50-year cycle)
547.6 - millions of dollars of pension liability (CAFR 2011, page 69)
657.9 - millions of dollars of Redevelopment Agency liability (March 20, 2011 agenda item 6: "PROPOSED THIRD AMENDMENT TO ENFORCEABLE OBLIGATION PAYMENT")
91 - the percentage of increase in water rates proposed by City of Fullerton May 23, 2011
2,000 - approximate dollars paid per month in daily stipends to Councilman Bankhead as a Director on the Orange County Water District Board (City Council Agenda Item 12, April 3, 2012)
27 - millions of dollars skimmed since 1997 from the Water Fund to pay for salaries and benefits of employees not associated with the water department  (Public Records Request data from Julia James, Administrative Services Director, City of Fullerton)
2.7 - millions of dollars the City plans to skim June 2012 (Based on Adopted Budget FY2011-2012)
64 - days left for you to decide if you want to change any of these numbers (Recall Election June 5, 2012)

Please join me...

...for a neighborhood meeting to discuss where your water bill is going.

April 1, 3:00-4:00 PM 

356 Del Cerro, Fullerton

(The Medici Residence)

Where is the money going, how do we stop it, and can we get it back?

I have a plan but I need your help!

Find out this Sunday