November 18, 2015 -- Santa Monica’s sharp rise in water rates could lead to a court challenge alleging the City violated a California law that prohibits government agencies from charging more for services than the cost of providing them.

Santa Monica attorney Donald F. Woods said the City’s big jump in water rates violates Proposition 218, a California initiative passed in 1996 that mandated fees charged by public agencies cannot “exceed the proportional cost of the service attributable” to customers.

Water rates in Santa Monica rose 9 percent in March, following a 6-0 vote by the City Council the previous month. Rates are set to continue increasing by up to 9 percent each year until 2019.

Woods contends the significant increases do not reflect the actual costs of providing water. Instead, he said, they appear to be an attempt to convince customers to cut back on water due to California’s four-year drought.

Costs “just don’t jump up like that in the real world,” Woods said.

The City Rent Control Board, he said, recently put the 2015 rate of inflation at 0.4 percent. Woods said the City needs to prove it can justify a rate hike much higher than inflation.

His arguments against Santa Monica’s water rates are much like those made in a successful legal case against the City of San Juan Capistrano in Orange County earlier this year, Woods said.

In that battle, the tiered rate structure used by San Juan Capistrano to encourage conservation was found by the 4th District Court of to be a violation of Proposition 218.

The case was closely watched in California, and the fallout is still uncertain. Like Santa Monica, about two-thirds of the state’s public water agencies rely on some structure that involves tiered water rates.

In the San Juan Capistrano case, the court ruled that tiered water rates are constitutional only as long as the government can prove each rate is tied to the cost of providing water. The court said the City did not sufficiently make that case.
San Juan Capistrano subsequently set aside $4.1 million to refund residents and businesses.

Woods said Tuesday that he contacted Santa Monica Deputy City Attorney Susan Y. Cola for information on how the City’s rates are calculated.

But the water studies she referred him to did not spell out how “costs of providing water of various levels of usage” were determined, he wrote in a letter to the City last month.

In the letter sent on behalf of water rate payers in Santa Monica he informs the City that he is considering a lawsuit compelling the Santa Monica Water Department to “demonstrate its compliance with Proposition 218.”

Woods said he would first give the Water Department time to present a rate study with enough detail and “substantial evidence” to withstand an independent review.
No one acknowledged the letter, so he sent another letter last Thursday to Gil Borboa, the City’s Water Resources Manager, Woods said.

In it, Woods requested the same information, this time specifying it as a Freedom of Information request. Borboa has not yet replied, Woods said.

Responses to Freedom of Information requests are required within 10 days under California law. Woods said he could file another lawsuit charging a violation of that law if there is no reply.

Neither Borboa nor Cola returned calls for comment for this article.
Rates in the City water’s system vary according to the tier.

For instance, the first tier for a multi-family residence is $2.73 for one hundred cubic feet to four hundred cubic feet of water use per dwelling unit. Following that, a second tier goes into effect at a rate of $4.09.

Woods said Tier 2 is “precisely 50 percent higher” than Tier 1, and Tier 3 is exactly 50 percent higher than Tier 2.

When the City Council voted to increase rates in February, officials said it would help shore up the City Water fund, which had been hit by rising costs and City-mandated water reductions prompted by the drought.

Without the rate hike, the fund would have gone into the red by next year, City officials said.

The City's goal is a self-sufficient water supply by 2020, which officials say requires improvements to the infrastructure.

Nearly all of the 20 people who spoke at the Council meeting opposed the rate hikes, particularly some proposed increases that reached double digits.