Even more pressure has been applied to the city this week and the water utility rates it approved earlier this year to pay for the surface water project.
Not only was the city’s legal team denied a chance Wednesday to speed up the ruling on the lawsuit that’s been lodged against the rates — important for city officials because they want to approach lenders without litigation tied to the rates in order to pick up the best possible financing for Davis’ $111 million share of the surface water project — but it also learned Tuesday that an initiative was filed by community members to repeal the rates altogether.
The initiative was drafted by Davis residents Pam Nieberg and Ernie Head, both of whom were proponents of the referendum campaign that overturned the first water rate hike the council adopted in 2011. Those rates also were approved by the council to pay for the now scaled-down and cheaper Woodland-Davis Clean Water Agency surface water project.
If Head and Nieberg collect more than 1,161 valid signatures — or 5 percent of those in Davis who voted in the last gubernatorial election — the rates likely would be placed on the next general election ballot for a public vote.
Once the city releases a title and summary in the next few weeks, Head and Nieberg will have six months to collect the signatures.
The two Davis residents say they want to suspend the rates because they charge ratepayers unfairly, specifically pointing to the consumption-based fixed rate model the council approved, and because they believe the drastic rise in water rates will have adverse financial impacts on the community, among other reasons.
Head told The Enterprise Wednesday, meanwhile, that he also hopes the initiative stops the city from moving forward with the surface water project.
“I hope it kills the surface water project,” Head said. “That’s been a mess since Day One. I don’t think we need it and I think it’s too expensive. … (The initiative) takes the money away from (the city), so how are they going to (build the project) if they don’t have the money?”
The City Council adopted a five-year rate hike in March that will triple water bills during the next half-decade. The first increase kicked in May 1 with subsequent increases on the way over the next five years.
Davis voters approved the water project, which the rates were raised to pay for, in March by a 54.1 to 45.9 percent margin, but project opponents have criticized the election because the ballot didn’t include the rates.
Mayor Pro Tem Dan Wolk said Wednesday that rehashing this issue would not be in the best interest of the community.
“This is just the latest in a long string of attempts to block our community’s access to clean surface water,” Wolk said in a statement. “These concerns about rates were thoroughly vetted by our Water Advisory Committee and exhaustively debated during the Measure I election. The community voted in favor of the project despite these objections.”
Davis City Attorney Harriet Steiner said Wednesday that even if the initiative collects enough valid signatures and successfully repeals the rates through the public vote, the council could simply restart the Proposition 218 process at any time and raise the rates necessary to continue paying for the water project.
Complicating the issue even further, Yolo Superior Court Judge Dan Maguire ruled against Steiner’s motion Wednesday to bifurcate the proceedings of the lawsuit that claims the city’s water utility rates are illegal under state law.
Maguire said that the bifurcation would not result in a more efficient judicial process, as the city had argued in its motion.
Steiner had hoped that by pushing up the ruling on the water rates, the city would be clear of the litigation and able to reap the best possible financing terms on the bonds it needs to pay for the water project as soon as possible.
Instead, the court ruled that the entire suit will be heard in December after several initial hearings to work out other procedural details.
Steiner said that the city is pleased to have a hearing date scheduled, but if the city takes out loans to pay for the project before then, creditors likely won’t offer up their best interest rates.
“The good part is we’ll get a ruling on everything all at once,” Steiner said. “The reason we wanted to bifurcate was to get a ruling as early as possible … (but) it may not quite jibe with the best schedule we’d love to have.”
City officials also say that with litigation hovering over the rates — aside from receiving less than optimal interest terms — it also could preclude the city from making a public offering, which, compared to a private offering, could save the city more in the end.
Pinkerton said last week that if the city can’t shake the lawsuit, the city may only bond out for the first year of the project’s costs this year, potentially leaving the city and its ratepayers vulnerable to cost increases, as interest rates could rise over the next year or so.
“This could cost the ratepayers millions and millions of dollars,” Pinkerton said.
Michael Harrington, the attorney representing the Yolo Ratepayers for Affordable Public Utility Services — the group suing the city — maintains that the city put itself in the position to incur more costs by moving forward with the rates despite the pending lawsuit.
The lawsuit alleges that the water rates the city adopted in March are illegal under Proposition 218, as they disproportionately charge ratepayers for the water they consume. The suit also alleges the city unlawfully fails to pay for the water it uses, among other charges.
Harrington also said Wednesday that he’s requested to have settlement discussions with the city that could resolve the suit before December.
“The plaintiffs want a global settlement,” Harrington said. “We want the rates to be fixed and we want them on the ballot.”
— Reach Tom Sakash at [email protected] or 530-747-8057. Follow him on Twitter at @TomSakash