Ballot measure to halt utilities rate hike sparks debate

A controversial ballot measure to halt a 9.2 percent city utilities rate hike is causing tension between city staffers and backers of the measure.

Two local groups, the Sacramento County Taxpayers League and the Campaign for Common Sense Utilities Rates, have gathered signatures to put an initiative on the Nov. 2 ballot that would stop the rate hike. The Sacramento County Registrar has found that 5,420 signatures presented by the groups were credible, according to a June 22 report from the Utilities Department. The registrar required proof of 5,420 legitimate signatures to place the measure on the ballot.

The City Council voted to increase rates on residents’ utilities bills last year, and the 9.2 percent spike kicked in July 1.

The title of the measure is the Utilities Rate Hike Rollback Act of 2010.

“Legally, it’s as good as gold to go on the Nov. 2 ballot,” said Greg Hatfield, vice chairman of the Campaign for Common Sense Utilities Rates.

City staff also expect the initiative to be placed on the ballot. Later this month, the City Council is expected to carry out the last procedural step required by state law to add the measure to the ballot, Assistant City Clerk Stephanie Mizuno said.

If voters approve the initiative, the department could lose 80 to 100 full-time employee positions, Utilities Department spokeswoman Jessica Hess said.

In addition to halting the 9.2 percent rate hike, the measure would establish that rises in the Consumer Price Index could justify rises in utilities rates.

At the same time, the measure would impose a rule saying that residents must vote on any utilities rate hikes that surpass the rate of inflation.

As it makes its case for the measure, the Campaign for Common Sense Utilities points out that the Sacramento County Grand Jury claimed in a recent report that the Utilities Department broke Proposition 218, a state law. 

The law states that money from residents’ utilities bills cannot pay for anything other than the cost of utilities services.

Read the Jan. 6 Grand Jury report here.

Residents’ utility payments may have been applied to additional programs in the city government, the Grand Jury claimed.

At this point, city officials and representatives for the Campaign for Common Sense Utilities Rates are sparring over the possible outcomes of the measure if voters approve it in November.

The Utilities Department is predicting that the measure could harm the department and the public in numerous ways.

Hess said revoking the rate hike would mean about $15 million in revenue would not come to the department.

On top of the $15 million, the department expects to face a $7 million rise in expenses including labor, electricity, fuel and chemicals, she said. If the measure passes, the department anticipates that it would need to immediately make cuts and changes to its levels of services, Hess said. That’s because the department must prepare a balanced budget for the 2011 / 2012 fiscal year, which begins July 1, 2011, she said.

The lack of funding could result in lowered water pressure, which may then affect the Fire Department, Hess said.

Among other problems cited by Hess, the department may have to cut back on maintenance and repairs of infrastructure.

“We have pipes in the ground that are over 100 years old,” Hess said. If the department is unable to replace or repair old pipes, there would be an increased chance they could fail, she said.

Read the department’s analysis of the initiative starting on page 11 of this presentation.

Meanwhile, Craig Powell, the chairman of the Campaign for Common Sense Utilities strongly disagrees with the department’s view of the measure.

The department’s analysis of possible outcomes from the measure is “overblown,” Powell said. “They have begun a campaign of scaring the voters.”

He countered that the department should rein in its labor costs, and also claimed that the department violated Prop. 218.

Read the text of the initiative here.

Photo by Ed Fogle, MaverickPhotography.us

Kathleen Haley is a staff reporter for The Sacramento Press.

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July 9, 2010 | 12:20 AM

Greg Hatfield, I will buy you a beer any time.

Great job!

Cheers.

July 9, 2010 | 10:01 AM

It has become very interesting how the Department of Utilities (DOU) can now cry when they have been abusing the system and the ratepayers of the City of Sacramento for so long. And the abuse continues with generic comments from DOU’s spokeswoman Jessica Hess. If the DOU were doing the job they were suppose to do, they would not be in the current situation they’re in, and the ratepayers would be receiving the services that were designed for them to receive.

The following highlights from the 2009 – 2010 Sacramento Grand Jury Final Report regarding Proposition 218 explains the DOU’s misuse of their authority in the area of the City’s use of Drainage Funds which has now placed them in a very precarious position at the expense of Sacramento’s ratepayers:

* Natomas Auto Mall land purchase by Department of Utilities (DOU). In 2003 land for the proposed Natomas Auto Mall was purchased with approximately $2,000,000 from the Drainage Fund. As a result, Drainage Fund set-asides for capital improvements, about $400,000 per year, have been discontinued for several years. This means that Sacramento’s drainage infrastructure has been under-funded annually by that amount. There has been no reimbursement for the purchase, which has an estimated present worth of $2,553,000. The purchase was authorized by the city council.

* Economic Development Capital Improvement Program contribution. From 2001
until 2009, $1 million was allocated each year from DOU revenues (Drainage, Water, and
Sewer Funds) to pay for utility aspects of development projects in downtown Sacramento
“when the project couldn’t afford it.” In one case, these set-asides from ratepayer funds
were used to subsidize infrastructure for a new auto dealership. While not all of the
money was used every year, some of it was. The money relieved developers from having
to pay their fair share of utility upgrades necessitated by their projects. No audit was performed to determine how the money was actually used or what the developers’ fair share would have been.

* The initial decision to divert DOU funds came from the office of the former city
manager. The policy was continued by the present city manager until the FY 2010
budget was being prepared in early 2009. For almost a decade DOU reserves were
allowed to dwindle while the aging infrastructure continued to deteriorate.

* Further, the grand jury finds a disturbing pattern of management failures and the absence of accountability at the highest levels of city government. The city’s top management has failed to fully identify and to correct questionable uses of ratepayer funds. These city officials contend that the city’s practices are not abuses of Proposition 218 until the city attorney issues an opinion that they are. Sworn testimony from multiple sources reveals that the city manager and his subordinates have suppressed a 44-page report that analyzed the potential costs of Proposition 218 noncompliance. Some members of city council testified that they do not remember receiving that report, which was sent to each council member in July 2008. As much as $5 million is being illegally transferred from Department of Utilities (DOU) enterprise funds to the city’s general fund each year.

The DOU created this mess, and the people of Sacramento are not interested in bailing them out!

July 9, 2010 | 1:44 PM

If you are interested, the Department of Utilites did a report back to the City Council on the Grand Jury Report. It can be found here: http://www.cityofsacramento.org/utilities/CityofSacramentoDepartmentofUtilities-SolidWaste-Proposition218.cfm

July 9, 2010 | 4:20 PM

Not interested in being bamboozled by the DOU again.

July 9, 2010 | 10:18 PM

does it really matter what the DOU thinks?

Gee let me guess, they disagreed with the Grand Jury.

Thats the problem with Grand Juries – they are useless, they have no power – that power was stripped from them, they were a danger – Citizens could actually affect change – that could not be allowed – so Grand Juries were declawed – it’s a shame.

July 9, 2010 | 3:24 PM

Whether prop 218 was the law of the land or not, it is unfathomable that millions of dollars of unrelated costs would be piled onto the DOU without anybody speaking up.

The reason that DOU revenues could be diverted in the first place is simply because DOU had been running a $5M / per year surplus for the last decade, maybe longer. Translation: Each one of that lives in the city of Sacramento have been overcharged for our utility services.

At some point why didn’t DOU propose a rate cut to the city council or city manager? Answer: Because this kind of thinking is counter-bureacracy.

So now we have the DOU claiming that simply holding costs inline within inflation and population growth is too restrictive. And after overcharging us for a decade, they are now threatening the citizens of Sacramento with cuts to our water supply.

And isn’t it interesting that the first “solution” offered by Ms. Hess is service cuts to the same taxpayers that have been overcharged for a decade. Wouldn’t it be more logical to first address the out of whack labor costs from the Stationary Engineers Local 39, who refused to agree to pay cuts last year?

Unless your point is just to scare voters, of course.

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