City’s Attorneys Preventing a Solution for Wastewater Bonds

The message from City Hall seems to suggest that we voters are to blame for revolting against the city’s 87% sewer rate increase. In reality, the precarious financial position the City of Oxnard now finds itself in is not due to the actions of voters. Rather, it is due to a series of poor decisions by city officials acting on the bad advice of its outside attorneys.

We have given City Hall numerous opportunities to take a different path of adopting more reasonable rates, and they chose not to:

• We agreed to meet with them early this year, before we filed the initiative that became Measure M. The City cancelled that meeting and instead sued when we filed the initiative.

• Once Measure M qualified for the ballot, city management could have worked with us over the summer to come up with compromise rates. Had that been successful, we could have withdrawn Measure M.

• The City could have drawn up a Plan B set of minimal rates that would meet the bond covenant requirements and the current operating expenses. They could have started the timeline for setting new rates immediately after Election Day, or even before, when it was clear that Measure M was going to pass.

Multiple offers to meet with city officials were rebuffed, most likely because having the city officials admit that they could operate the sewer system with anything less than an 87% rate increase would undermine their court case.

More than 72% of the voting public voted to adopt Measure M, to repeal Oxnard City Council’s abusive 87% increase in wastewater rates. The initiative specifically authorizes the city to set new rates, essentially allowing them to try again to be more reasonable.

Ever so briefly, common sense seemed to emerge. During the November 15, 2016 city council meeting, in the aftermath of an overwhelming victory by Measure M proponents, city staff conceded that it is indeed possible for our wastewater system to meet its operating and bond covenant requirements with less than an 87% rate increase.

Once again, we offered to be part of the solution. And this time, they actually began working with us.

Since that council meeting, without fanfare, we have been working with Oxnard city management to find a fast compromise solution to the ongoing dispute over wastewater rate increases. Our most recent meeting (on Monday, November 21, 2016) lasted four hours, and we made excellent progress going over their rate models and refining the numbers.

To provide assurance to creditors, we also opened up a channel with S&P and let them know about our progress with city management to develop a new set of rates designed to meet our bond covenants. Setting the expectation that we are now working in a collaborative manner with City Hall does a lot to assure that we won’t have a long drawn out court fight.

We were scheduled to meet with city management again on November 28, 2016 at 5:00 pm. Unfortunately, we were informed three hours before that scheduled time that the city’s consultant attorneys handling the related legal case advised the city management to cancel our meeting…so they did.

We have since learned that the consultant attorneys’ preferred approach is to fight it out in court in an attempt to overturn the will of the people and keep the entire 87% increase. These outside attorneys will make much more money if the fight continues, and the legal bills will be paid by the wastewater rate payers.

With credit agencies carefully watching the situation for signs of progress, this move sends exactly the wrong message. It likely INCREASES the chances of a downgraded bond rating by replacing a cooperative environment on a short timeline with an adversarial one on a longer timeline.

If it were motivated to actually find a solution, the Oxnard City Council could have new compromise rates in place well before the lawsuit could play out in court. Regretfully, this all-or-nothing gamble egged on by the attorneys will likely result in higher legal bills and further delays toward a solution, and ultimately place in jeopardy the financial health of our city’s wastewater utility.

It seems that the unelected, consultant attorneys are calling the shots at this stage, rather than the city council. Acting on the advice of their attorneys is what made a bad situation into an awful one that further tarnishes our city’s credit ratings and only serves to enrich those attorneys.

We call on the council to direct their staff to jettison this legal strategy and resume working with us – without attorneys – to actually find a short-term solution. The standoff with the credit agencies and bond holders could be fixed rather quickly. There may still be an opportunity to salvage the city’s credit rating and recover from their precarious financial condition – a condition of their own making – but only if the city cooperates with us.

The city bet the farm that they would defeat Measure M at the ballot box, but they were sorely mistaken. Now their attorneys’ all-or-none gamble makes it seem that they would rather see our credit agencies and bondholders drag us off the cliff so as to preserve their own opportunity to bill the city for legal fees.

Please contact the City Council. Urge them to reject the losing advice of their attorneys and to stop traveling down this ruinous path that seeks to overturn your vote.

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