Is Paso’s water levy lawful?

October 24, 2008

By DANIEL BLACKBURN

An influential statewide taxpayer group views elements of Paso Robles’ proposed water rate increase as unlawful and unconstitutional, and is “strongly” advising city officials to take a different funding path.

Findings of the Howard Jarvis Taxpayers Association (HJTA) lend credence to a position advanced by a local group, Concerned Citizens for Paso Robles (CCPR).

Paso Robles city officials are seeking an additional water supply through the Nacimiento pipeline and related facilities and hope to pay capital improvement costs of $189.6 million over 17 years with proceeds from a steadily escalating water rate. Some critics contend the entire cost of the water treatment utility with debt servicing may exceed $300 million.

City officials presented a pared-down schedule of water payments for users Tuesday, and now will await residents’ reaction to the new plan.

Whether that rate hike is an “assessment,” a “special tax” or a “fee” is at the core of the disagreement. Proponents of the city plan insist the water rate boost is a fee. By applying such a definition, the matter has been decided — to this point — by a simple majority of the governing panel, the city council. An assessment or a special tax must be placed before the local electorate for approval by a two-thirds vote, and Paso Robles officials have not been optimistic that such an outcome could be obtained.

The Sacramento-based HJTA’s Eric Scott Eisenhammer wrote in an October 7 letter to the city council and City Manager James App that his organization “strongly and unequivocally agrees” that the city’s proposal constitutes an assessment, or a special tax.

“California’s state constitution and associated case law is clear in regards to how capital cost of your city’s proposed public improvement projects are funded,” Eisenhammer added. “We strongly advise the city council and manager to implement the capital cost portion of the proposed water rates as an assessment or… tax.”

If the issue ends up in court, it may begin to concern San Luis Obispo municipal water planners, too, because that city is depending on timely delivery of water through the Nacimiento system.

“All project participants have an obligation to pay for Nacimiento,“ said Gary Henderson, San Luis Obispo’s water manager, “so to that degree this (Paso Robles’ ongoing community dispute) bears watching.” Henderson said his city’s Nacimiento water plan encountered some community resistance, also, but that a “very unusual method” of public works funding places the primary cost burden on users.

Members of the Paso Robles group CCPR, in a statement posted on its Web site, argues the rate hike is a special assessment, a “compulsory charge placed… on real property within a predetermined district, made under express legislative authority for defraying in whole or in part the expense of a permanent public improvement.”

John Borst, an officer of CCPR, said only water customers are being asked to pay for the new facilities — with a fee that will produce more revenue each month than is needed to achieve wastewater regulatory compliance.

A 2004 California Supreme Court ruling decreed that “a fee aimed at assisting a utility district to defray costs of capital improvements will be deemed a special assessment from which other entities are exempt.” Such an assessment requires a vote of the electorate.

That ruling sought to clarify portions of the voter-approved Prop. 218, which defines the manner in which a public agency can fund capital costs of public improvement projects.

However, while the issue was still making its way through judicial review, many public agencies in California hustled to make legislative decisions on major public works projects in case the court ruled in favor of voter approval for new assessments or tax levies.

That’s when Paso Robles officials slipped through their controversial water project authorization.

An “assessment,” according to wording contained in Prop. 218, “means any levy or charge by an agency upon real property that is based upon the special benefit conferred upon the real property by a public improvement, the maintenance and operation expenses of the public improvement, or the cost of the service provided.”