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.  

Smarter Use of Tax Revenue: End the Fullerton Redevelopment Agency immediately.

In the event you didn't know where I stand on the Fullerton Redevelopment Agency, here is something to consider.  This agency goes into areas of Fullerton which it declares to be blighted and then skims the increased property taxes so that it can continue to grow its area of influence. It receives additional funding through the issuance of bonds that will end up costing Fullerton taxpayers dearly. An excellent article on redevelopment agencies is offered by California Assemblyman and former Fullerton Mayor Chris Norby:

“Redevelopment was created 60 years ago to end urban blight in California. It was never intended to be a permanent drain on the budget. Agencies are supposed to sunset after 40 years but are routinely extended indefinitely, and their indebtedness now tops $93 billion.

Redevelopment diverts an ever-growing share of property tax dollars into subsidizing big box retailers, auto malls, theaters, stadiums and low-income housing. Last year, redevelopment agencies diverted $5.4 billion in local taxes - 12% of all property taxes. That amounted to $2.7 billion taken from public schools and $646 million from counties. There is no money to backfill these losses.” (Read Assemblyman Norby’s entire article in Issue 6 of his Norby Notes at http://arc.asm.ca.gov/member/72/?p=newsLetters)

Fullerton Redevelopment Agency destroys hundreds of homes under the auspice of creating low- and very low-income housing. However, the housing only provides for a few low- and moderate-income families.

With dozens of homes falling into foreclosure each month, the City could purchase these homes and sell them at a discount to targeted moderate-, low-, and very low-income families. With the money saved, the City could beautify parkways and medians, repave streets, and enforce the municipal code to keep properties safe and appealing.