When a city nearly doubles its utility rates and sues the political opposition, it’s time to take a hard look at how the utility is spending its money.
When we studied the finances of Oxnard’s wastewater utility, one giant red flag was an expense called the Infrastructure Use Fee (IUF). Oxnard charges this fee to each of its three utilities, and the combined $7 million goes to the general fund to pay for city services other than the cost of those utilities. This type of scheme has been declared by courts to be a violation of the state constitution as amended by Proposition 218.
The annual IUF prescribed to be charged to the wastewater enterprise is about $2.3 million per year, which amounts to about 7.5% of its $30 million annual revenues. Skimming millions of dollars each year out of the wastewater enterprise has over time drained reserves needed to pay for deferred maintenance, and it has substantially worsened the financial stability of the utility. Rather than stopping their leeching, the city wants to just raise your utility rates an extra 7.5% and keep charging the IUF.
A 2014 study by a consultant firm established the basis for the current IUF levels, breaking the fee into three components. The wastewater utility is charged $1.2 million for police and fire protection, nearly $1 million for right-of-way maintenance of the streets, and over $100,000 for the cost of government facilities.
The Howard Jarvis Taxpayers Association (HJTA) authored Proposition 218, and they actively use the California courts when cities refuse to comply with it. In summary, under Proposition 218, city-owned utilities can only set their rates to charge for the actual costs of providing that specific utility service. The utility can not charge its users for other city services and then transfer that revenue to the general fund of the city so as to avoid the constitutional requirement for public votes on tax increases.
Yet, that is exactly what Oxnard is doing with the IUF charged to its utilities. There was no public vote when the IUF was first instituted. There is no public vote each time the city management increases the IUF, and the funds are used to pay for public services other than the utility.
California courts have declared similarly structured fees to be unlawful in cases such as Howard Jarvis Taxpayers Association v. Roseville (2002) and Howard Jarvis Taxpayers Association v. Fresno (2005).
Here is a copy of the appeals court ruling in the 2005 Fresno case, with underlines added to identify the highlights. Notice that the appeals court agreed with the trial court that a similar fee in Fresno violated the state constitution in three ways:
- First, the fee was not “required to provide the property related service” and therefore exceeded the cost to provide such services. (See art. XIII D, § 6, subd. (b)(1).)
- Second, “revenues” derived from “the fee” were used “for a purpose other than that for which the fee or charge was imposed.” (Art. XIII D, § 6, subd. (b)(2).)
- Third, “the fee” is deposited in the general fund and, therefore, violates the requirement that no fee “may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.” (Art. XIII D, § 6, subd. (b)(5).)
We have repeatedly cautioned the Oxnard City Council, the Oxnard City Attorney, and the Utility Ratepayers Advisory Panel (URAP) that we believe this is an unlawful scheme that must be eliminated from the current round of wastewater rate increases. So far the city has refused to stop charging the IUF in its utility rates.
We provided the HJTA with a copy of the 2014 consultant’s report which established Oxnard’s current IUF structure, and the HJTA attorneys provided us with this opinion about Oxnard’s IUF. Clearly, attorneys who are subject matter experts at HJTA believe Oxnard’s IUF scheme is unlawful. We have provided this HJTA opinion to the Oxnard City Attorney’s office and presented it at meetings of the URAP.
So far, Oxnard city management remains stubbornly committed to charging the IUF and making your utility rates unnecessarily high.
The city bemoans the poor condition of the sewer treatment plant, but if the wastewater enterprise could get back the millions of dollars skimmed into the general fund over the last few years, it would pay for a lot of needed repairs. If the money you pay on future wastewater bills actually stayed in the wastewater enterprise, many more repairs could be made.
Join us in calling on the Oxnard City Council to eliminate the Infrastructure Use Fee from the utility rates to comply with state law and to keep our utility rates reasonable.
UPDATE: During the URAP meetings, we requested a history of the actual IUF charges over the past few years. The city presented a slide purporting to show the data, but we quickly pointed out that their numbers were mostly wrong and also incomplete. We eventually obtained the data through a Public Records Act request. Below is a history of the IUF charges to the utilities since 2007. The IUF was charged for many years prior to 2007, dating back to at least the 1990s, but this is the time frame for which we requested data.
|2017||$ 3,034,300||$ 2,060,000||$ 1,985,700||$ 7,080,000|
|2016||$ 2,698,085||$ 2,314,176||$ 1,987,739||$ 7,000,000|
|2015||$ 3,200,049||$ 2,816,778||$ 2,094,235||$ 8,111,062|
|2014||$ 1,304,748||$ 1,517,532||$ 1,177,716||$ 3,999,996|
|2013||$ 1,660,864||$ 1,592,530||$ 746,606||$ 4,000,000|
|2012||$ 767,004||$ 964,992||$ 693,000||$ 2,424,996|
|2011||$ 790,870||$ 920,144||$ 713,986||$ 2,425,000|
|2010||$ 790,870||$ 920,144||$ 713,986||$ 2,425,000|
|2009||$ 790,870||$ 920,144||$ 713,986||$ 2,425,000|
|2008||$ 731,474||$ 851,040||$ 660,380||$ 2,242,894|
|2007||$ 731,474||$ 851,040||$ 660,380||$ 2,242,894|
|11-Year Total||$ 16,500,608||$ 15,728,520||$ 12,147,714||$ 44,376,842|