Paso Robles’ water rate hike ruled a fee

Paso Robles won’t have to go to voters to get two-thirds approval for a water rate increase, but it does need to redo the notice it sent out, according to a tentative court ruling received by the city Wednesday. If the city doesn’t appeal the decision, it will give ratepayers another opportunity to protest the rate hike.

Paso Robles’ new rates, finalized May 21, would raise the cost of water on Jan. 1 to $2.50 from $1.32 per 748 gallons used. Rates on the 10,000 water customer accounts would then increase gradually in subsequent years before reaching $4.40 per unit in 2015. The new rate schedule drops the $18 fixed fee that appears on bills now.

A movement against the adopted rate hike garnered just 609 protests of about 5,000 needed to keep the rates from taking effect.

Five members of a Paso Robles-based citizens group that has actively fought proposals to raise municipal water rates filed a lawsuit against the city in May.

The suit said the city illegally adopted the rates because it should have referred to them as a special tax, not as a charge on a water bill. If it were a special tax, it would have gone before the voters and could only be passed with a two-thirds vote.

In a ruling signed Oct. 15, San Luis Obispo County Superior Court Judge Martin Tangemen said the rate hike is a fee, not a tax. A final order of the court is expected in a few weeks.

But the court also ruled that Paso Robles didn’t adequately describe why it needs to increase water rates. The Paso Robles City Council will have to decide whether to appeal the ruling once it becomes final or issue new public notices to better describe the reasons it is needed and how it was calculated.

“A number of months will be needed to pursue either or both options,” City Manager Jim App said Thursday.

Cities and other governmental agencies are required by voter-approved Proposition 218 to notify the public of fee increases. The proposition also allows the public to keep increases from taking effect if a majority of those affected protest the rates in a set period of time.

The rate increases are needed to pay the city’s portion of the Nacimiento Water Project, a $176 million pipeline system to deliver Nacimiento Lake water to Paso Robles, Atascadero, Templeton, San Luis Obispo and part of Cayucos.

Issuing new notices will postpone the scheduled increase on customer bills slated for January, further delaying the income Paso Robles needs to pay for the project.

Without a rate increase, the water fund will go broke by 2014, according to city documents released in the spring. The exhaustion of the water fund would leave a $3.3 million gap between revenue and expenses, App has said, posing a risk to the city’s general fund, which pays for police, fire and parks.

The petitioners who filed the suit against the city include residents John Borst, William Taylor, Brooke Mayo, Teresa St. Clair and Thomas Rusch. Except for Rusch, they are the same people who filed another suit in March 2009 alleging the city violated state law when it raised water and sewer rates in 2002 and 2004.

In it, they want to stop the city from collecting the fees and are seeking an $8 million-plus refund for the water and sewer rates water customers already paid. That case is pending until Jan. 19, Tangeman said.

Tentative ruling on water rate increases in Paso Robles