Q&A with the City Attorney about San Juan's Water Lawsuit

EDITOR'S NOTE: As part of the staff report for the water workshop the San Juan Capistrano Utilities Commission will hold Thursday, the city attorney's office has prepared a FAQ about the water lawsuit the city lost  in August and residents' unchanged billing structure. Patch reprints the questions and answers here.

• Why isn't the city billing all use at the base rate, since the judge said all rates above that are illegal?

Judge Munoz's ruling did not focus on any one component or tier of the city's conservation tier rate structure; rather, the trial court ruled that the evidence in the record when the City Council approved the most recent water rate adjustments did not support the requirement that the rates are proportional to the cost that the City incurs in providing the water service to its customers. As a result, the court's ruling did not specifically focus on only the base rate, and did not direct the city to charge only the base rate.

• The judge said our rates are too high, why is the city not billing at a lower rate?

Judge Munoz did not rule that the city's rates are too high; rather, Judge Munoz ruled that the evidence in the record when the City Council approved the most recent water rate adjustments did not support the requirement that the rates are proportional to the cost that the city incurs in providing the water service to its customers.

Because the City has filed an appeal of Judge Munoz's ruling, that trial court ruling is not currently enforceable. And, because the water rates that Judge Munoz ruled on and which are now on appeal are the only rates that are currently in force in the city, the city must continue to charge those rates until such time that it adopts new water rates, or else the city will have insufficient revenues to continue to provide that water service. 

• Why didn't the city just adopt new rates right away?

Under the California Constitution (specifically, the provisions known as Proposition 218), the city cannot adopt water rates that might have the effect of increasing costs to any customer until the city has conducted a rate study showing how much revenue is needed to pay the anticipated water supply, treatment and delivery costs, and that the rates to be derived from the needed revenues and charged to its customers are proportionate to the city's cost to provide that service. That water rate study is underway, but takes time to conduct.  

Once the water rate study is completed, and new water rates are proposed, Proposition 218 requires that the city must both develop a detailed written notice explaining the proposed new rates, and provide a minimum of 45 days' notice to all water customers before holding a hearing on the proposed new water rates. Under Proposition 218, therefore, the city cannot adopt new rates sufficient to pay the cost of providing the water service without taking each of these somewhat time-consuming steps. 

• Why is the city continuing to bill its customers with tiered rates, since the judge said tiered rates are illegal?

Orange County Superior Court Judge Gregory Munoz did not rule that it is illegal for the city to adopt a tiered-rate structure.  Judge Gregory Munoz did rule that the city failed to demonstrate from the record (i.e., the evidence before the City Council when it approved the most recent rate adjustments) that the tiered-water rates are proportional to the city's cost of providing water to its customers.

The city disagrees with Judge Munoz's ruling, and has appealed that trial court decision to the California Court of Appeal. Because the filing of the city's appeal suspends the effect of the trial court's ruling, the city may continue to use its current rates in order to generate the revenues that are needed to provide its residents with water service. 

A decision by the Court of Appeal (or, if that decision is appealed, a ruling by the Supreme Court) will provide final and definitive direction regarding the validity of the city's rates and whether the evidence in the record is sufficient to demonstrate that the city's rates are proportional to the city's cost of providing water service to its residents.