Friday, October 31, 2014
YOLO COUNTY NEWS
99 CENTS

Good news, bad news for city on water financing

By
From page A8 | July 19, 2013 |

The city recently got some good news and some bad news related to financing its share of the Woodland-Davis Clean Water Agency surface water project.

The good news, ironically, comes in the form of a contaminated supply of drinking water. The bad news is that the rates the city adopted to pay for the $110 million project, which will serve Davis with a new supply of drinking water by 2016, are still tied up in court.

Both ground wells serving North Davis Meadows, an unincorporated community adjacent to the Davis Golf Course north of town, exceed the state’s maximum nitrate levels, forcing residents to use bottled water for all of their drinking water.

Davis may be able to cash in on those spoiled wells because officials from the California Department of Public Health have proposed a deal where, if the city pipes drinking water to North Davis Meadows, the department would bump Davis into the “fundable range” for very low-interest loans through the state revolving fund program.

If the city borrowed money with those widely sought-after state funds to pay for the entire cost of the surface water project, it could save Davis and its ratepayers $60 million over the cost of other bonding options, according to Herb Niederberger, the city’s general manager of utilities, development and operations.

State revolving funds usually carry a payback term of 20 years at a very low interest rate, perhaps between 1.5 and 2 percent, as compared to traditional bonds that carry 30-year terms with higher interest rates closer to 4 and 5 percent, according to Niederberger.

Ratepayers likely wouldn’t see a huge difference in their monthly utility bills for 20 years because of the quicker payback term associated with the SRF loans, but city leaders are still excited about the prospect of saving a substantial amount of money nonetheless.

“It’s very exciting that this is a possibility, particularly the potential to qualify for SRF rates and the amount of money that it potentially saves the ratepayers overall,” Councilman Lucas Frerichs said last week. “That’s very positive.”

Water bills are still expected to triple over the next five years and continue to rise thereafter.

City management estimates that building a pipeline to North Davis Meadows and connecting the homes to Davis’ water supply would cost about $6 million, $2 million of which would be paid back by the unincorporated community over the next 20 years with similar, low-interest rates. Those terms could change, however.

Yolo County would be responsible for all of the local connections to the water supply and the corresponding meters.

Staff will work with all interested parties over the next few weeks to come to a full agreement, which will be presented to the City Council for approval after its members return from their recess in late August.

The bad news

Local officials say the lawsuit that’s been filed against the city, which alleges that the water rates the council adopted earlier this year are illegal, has creditors concerned.

That concern, city officials say, is jeopardizing not only potential interest rates, but also the type of bonds the city can issue to pay off the project.

“With a lawsuit pending, it will impact the types of financing the city can use and most likely will cost the ratepayers additional funding over the course of the project,” City Attorney Harriet Steiner said earlier this week.

“A lawsuit will always impact what (lenders) are willing to invest. … (Our advisers and the lenders) who are working on that will tell you that the city won’t be able to borrow money at the most advantageous rates while a lawsuit is pending.”

City Manager Steve Pinkerton said that with the lawsuit hanging over the rates, the city cannot make public offerings to investors, which consistently produce better interest rates for the issuers than limited private offerings. He also said the lawsuit could affect the city’s ability to lock down those desirable state revolving funds.

The suit was filed in March by a group called the Yolo Ratepayers for Affordable Public Utility Services, who claim, among other things, that the city’s water and sewer billing systems don’t charge ratepayers fairly under Proposition 218.

If the city can’t shake the lawsuit soon, Pinkerton says Davis may borrow only enough cash to pay for the first year of costs for the surface water project. And with interest rates at record lows, even modest increases in debt service could affect ratepayers dramatically.

“Let’s say two years from now we finance the balance of (the project), but rates are 2 percent higher at the time,” Pinkerton explained. “It could cost $1 (million) to $2 million per year (extra) of debt service at that point.”

An increase in $1 million of debt service per year translates to $50 per ratepayer.

“This could cost the ratepayers millions and millions of dollars,” Pinkerton said.

The city manager and his financial advisers are still considering what to ultimately recommend to the City Council, which will have to sign off on any financing plan that Pinkerton comes up with.

Expediting lawsuit

In an attempt to expedite the lawsuit’s proceedings and excise any problems from the city’s financing prospects, city legal staff filed a motion last month with Yolo Superior Court to bifurcate the overarching complaint.

Essentially, Steiner has asked the court to make a ruling on the sections of the lawsuit that allegedly are scaring away lenders from handing over their best interest rates.

In the motion, which will receive a ruling on Tuesday from Yolo Superior Court Judge Dan Maguire, the city’s legal team argues that bifurcation would result in a “more efficient resolution of this litigation, preserve judicial resources and minimize undue prejudice to the city.”

City staff also hope to set a hearing schedule so that the suit can be resolved in a timely manner without affecting the timing of the project. If the lawsuit is resolved by September, Steiner says, the city could turn to creditors with a clean bill of fiscal health.

“It’s absolutely clear to the city, based on all the experts we’ve been working with, the city would get much more desirable borrowing rates (without the lawsuit), which would translate to benefits to the ratepayers,” Steiner said.

But not so fast. The attorney representing the group suing the city, Michael Harrington — the Davis resident who led the referendum campaign that overturned the city’s water rates the first time the council tried to pump them up to pay for the water project in 2011 — has filed opposition to the bifurcation.

Harrington, in the plaintiff’s rebuttal, says it would not be fair to rule on the motion and the validity of the water rates based only on the city’s administrative record, or documented evidence pertaining to the case.

The plaintiffs’ attorney says the city’s record is incomplete.

“The requested relief, if granted, would do nothing to further judicial efficiency,” Harrington’s opposition states. “Moreover, such relief would severely prejudice the rights of plaintiffs by depriving them of the right to make a complete presentation with cross-examination of witnesses.”

Steiner has said the city asked the plaintiffs to add whatever they’d like to the record, but Harrington wants access to all city documents in order to ensure that everything pertinent is included.

As for the city’s request for bifurcation due to the financial implications, the plaintiffs have no sympathy.

“To the extent the city claims an urgency because it has already signed binding contracts, this is a self-inflicted wound, and does not serve as a basis to punish plaintiffs,” Harrington said.

Harrington adds that the city knew of the pending lawsuit on the rates before it entered into its “amended and restated Joint Powers (Authority) Agreement.”

The city signed the original JPA agreement in 2009.

Judge Maguire will make a tentative ruling on the bifurcation Tuesday, which will become the “ruling of the court” Wednesday unless a party desiring to be heard indicates it would like to appear in court.

Harrington would not say whether he would challenge the ruling if the judge finds in favor of the city.

— Reach Tom Sakash at tsakash@davisenterprise.net or 530-747-8057. Follow him on Twitter at @TomSakash

Comments

comments

Tom Sakash

Tom Sakash covers the city beat for The Davis Enterprise. Reach him at tsakash@davisenterprise.net, (530) 747-8057 or @TomSakash.
  • Recent Posts

  • Enter your email address to subscribe to this newspaper and receive notifications of new articles by email.

  • .

    News

    Gardner guilty of murder, with special circumstances

    By Lauren Keene | From Page: A1 | Gallery

     
    State superintendent makes campaign stop in Davis

    By Jeff Hudson | From Page: A1 | Gallery

     
    Meet Poppenga at Saturday reception

    By Enterprise staff | From Page: A2

    Bob Dunning: Lawn display causes a theological crisis

    By Bob Dunning | From Page: A2 | Gallery

     
    Couple killed in Yolo County crash

    By Lauren Keene | From Page: A2

    Same-party races challenge incumbents

    By The Associated Press | From Page: A2

     
    State races test one-party rule

    By New York Times News Service | From Page: A2

     
    Indians celebrate Diwali with gala on Sunday

    By Special to The Enterprise | From Page: A3

    Rairdan dinged for late report

    By Jeff Hudson | From Page: A3

     
    Veterans will tailgate at ‘Salute to Heroes’ game

    By Enterprise staff | From Page: A3

    Wolk hailed for environmental votes

    By Enterprise staff | From Page: A3

     
    Yamada honored for leadership on aging issues

    By Enterprise staff | From Page: A3

    Embroidery group meets at mall

    By Enterprise staff | From Page: A3

     
    Bet Haverim will hear Israel update

    By Special to The Enterprise | From Page: A4

    Local artisans featured at holiday craft fair

    By Enterprise staff | From Page: A4

     
    Got bikes? Donate ‘em!

    By Enterprise staff | From Page: A4

    Kids walk for friends at Birch Lane

    By Special to The Enterprise | From Page: A4

     
    Explorit: Creep out with some spooky science

    By Lisa Justice | From Page: A4

    Shambhala offers Tai Chi class

    By Special to The Enterprise | From Page: A4

     
    Bones for Life classes offered

    By Enterprise staff | From Page: A4

    Enjoy wine, music and art at Sunday fundraiser for DHS choir

    By Anne Ternus-Bellamy | From Page: A9

     
    .

    Forum

    New-school cheating on the smartphone

    By Creators Syndicate | From Page: B5

     
    My choices on Tuesday

    By Letters to the Editor | From Page: A10

     
    Garamendi, Dodd get my votes

    By Letters to the Editor | From Page: A10

    Tom Meyer cartoon

    By Debbie Davis | From Page: A10

     
    High hopes for Sunder

    By Letters to the Editor | From Page: A10

    Public service is in her heart

    By Letters to the Editor | From Page: A10

     
    A calm, thoughtful voice

    By Letters to the Editor | From Page: A10

    Sunder is a perfect fit

    By Letters to the Editor | From Page: A10

     
    Best predictor is past behavior

    By Letters to the Editor | From Page: A10

    Vote for students, with Tuck

    By Letters to the Editor | From Page: A10

     
    .

    Sports

    DHS plays undefeated Pacers Friday night

    By Enterprise staff | From Page: B1

     
    Blue Devil girls net an easy win at Grant

    By Enterprise staff | From Page: B1 | Gallery

    Aggie offense A-OK; now what about defense?

    By Bruce Gallaudet | From Page: B1 | Gallery

     
    In Davis, rugby is as American as apple pie

    By Bruce Gallaudet | From Page: B1

     
     
    Niemi’s 43 saves aren’t enough in loss to Wild

    By The Associated Press | From Page: B8 | Gallery

    .

    Features

    .

    Arts

    Calling all artists for upcoming show

    By Enterprise staff | From Page: A11

     
    ‘Birdman': A dark comedy that soars

    By Derrick Bang | From Page: A11

     
    DHS Madrigals host singing workshop

    By Enterprise staff | From Page: A12

     
    Marcia Ball to play at The Palms

    By Enterprise staff | From Page: A12 | Gallery

     
    .

    Business

    Big, capable luxury defines Yukon

    By Ann M. Job | From Page: A5 | Gallery

     
    .

    Obituaries

    Joseph Francis Gray

    By Special to The Enterprise | From Page: A4

     
    .

    Comics

    Comics: Friday, October 31, 2014

    By Creator | From Page: B6

     
    .

    Real Estate Review

    Featured Listing

    By Special to The Enterprise | From Page: RER1

    Professional Services Directory

    By Special to The Enterprise | From Page: RER2

    Lyon Real Estate

    By Special to The Enterprise | From Page: RER3

    RE/Max Gold

    By Special to The Enterprise | From Page: RER4

    Kim Eichorn

    By Special to The Enterprise | From Page: RER5

    Susan von Geldern

    By Special to The Enterprise | From Page: RER6

    Team Traverso

    By Special to The Enterprise | From Page: RER6

    Yolo FCU

    By Special to The Enterprise | From Page: RER6

    Juan Ramirez

    By Special to The Enterprise | From Page: RER6

    Tracy Harris

    By Special to The Enterprise | From Page: RER7

    Susan von Geldern

    By Special to The Enterprise | From Page: RER7

    Wells Fargo Home Mortgage

    By Special to The Enterprise | From Page: RER8

    Julie Leonard

    By Special to The Enterprise | From Page: RER8

    Joe Kaplan

    By Special to The Enterprise | From Page: RER9

    Melrina A Maggiora

    By Special to The Enterprise | From Page: RER9

    Coldwell Banker

    By Special to The Enterprise | From Page: RER10

    Leslie Blevins

    By Special to The Enterprise | From Page: RER12

    Julie Partain

    By Special to The Enterprise | From Page: RER12

    Robin Garland

    By Special to The Enterprise | From Page: RER13

    Jamie Madison

    By Special to The Enterprise | From Page: RER13

    Diane Lardelli

    By Special to The Enterprise | From Page: RER13

    Karen Waggoner

    By Special to The Enterprise | From Page: RER14

    Jamie Madison & Associates

    By Special to The Enterprise | From Page: RER14

    Lisa Haass

    By Special to The Enterprise | From Page: RER14

    Ciana Wallace

    By Special to The Enterprise | From Page: RER15

    Travis Credit Union

    By Special to The Enterprise | From Page: RER16

    Malek Baroody

    By Special to The Enterprise | From Page: RER17

    Marcelo Campos

    By Special to The Enterprise | From Page: RER18

    F1rst Street Real Estate

    By Special to The Enterprise | From Page: RER20