Prop 218 Requires a Cost of Service Analysis Consistent to all Water Users. Will the City Listen This Time Around?

Glendale, at a considerable cost, retained a consultant, Wildan, to prepare a water utility cost of service analysis–a COSA–and, based on it, a water rate restructure and rate increase ordinance. The ordinance was adopted in 2012. The increase was to provide needed water utility revenue.

The COSA is crucial because Prop. 218, among other things, constitutionally requires that water rates not exceed the proportional cost of providing water service to the ratepayer’s parcel. A flawed COSA that doesn’t accurately identify the relative cost of providing water service to the various ratepayers will cause an ordinance, based on it, to violate this State constitutional proportionality requirement.

Before the 2012 adoption of Wildan’s ordinance, I (besides a law firm retained by the Board of Realtors that practices in this area of law), in writing, pointed out several Prop. 218 errors in Wildan’s work. We were ignored and the ordinance was adopted.

This last December city staff reported that due to a Wildan computational error (i.e. using bimonthly data as if it were monthly data), the utility had collected $8 million less in anticipated water revenue. Glendale retained a new consultant, Bartle Wells, to correct this error. I assume to substitute the correct monthly data, rerun the numbers and modify the ordinance accordingly.

However, the staff reported that as a result of a detailed analysis of Wildan’s work “…a number of errors have been identified in calculations and methodology resulting in the need to perform an entirely new COSA to insure proper administration of water rates in compliance with Prop. 218 [emphasis added].”

So far the city hasn’t been willing to share those errors with Glendale citizens wishing to know what they are–errors, both computational and methodological, requiring the city to scrap Wildan’s entire COSA. Let me give you one methodological (as opposed to computational) error that I pointed out before the 2012 adoption. I would be interested to know if it was one of the several errors identified in that detailed analysis. But, I pick it now to illustrate how a flawed COSA and an ordinance based on it violates the constitutional requirement of proportionality.

The Wildan ordinance uses tiers for charging residential ratepayers for the cost of water service. When the amount of one’s use of water increases to a certain point the ratepayer moves to a higher tier where the per-unit cost of water increases. This is because data shows that during summer months residential ratepayer water use increases over normal use. This peaking effect–this incrementally higher use of water during summer months over normal use–results in higher costs for the delivery of water because: (1) the distribution system, along its related costs, has to be increased to accommodate this peaking and (2) during peaking a greater amount of more expensive metropolitan district water must be used as opposed to the limited amount of less expensive well water that’s available to the utility.

Here’s the problem. The irrigation ratepayers do not have tiers; but, it stands to reason that those users would also cause peaking along with its related increased costs. Indeed, GWP data shows that peaking, as a percentage of normal use, that’s caused by irrigation ratepayers is almost 1 and 1/2 times greater than that of single-family residential users; a class of ratepayers described as “public authority”, which also are not subject to tiers, cause almost 5 and 1/2 times more. You can hardly meet Prop. 218’s constitutional proportionality requirement when you capture peaking costs for one group of ratepayers (i.e. residential users) and not for others. There are additional methodological and computational errors in Wildan’s tier system; but, this one should suffice to make the point.

Only time will tell if the city’s new COSA and new ordinance will scrupulously comply with Prop. 218 and if the city will be receptive to listening to those of the public who take the time and make the effort to critique them. And, only time will tell if ratepayers are in for yet an other water rate increases to make up for the $8 million shortfall.