Cost for lawyers soars in rate war

Utility allots $800K for 2 lawsuits over billing

The Marin Municipal Water District is doubling down in its fight against two lawsuits challenging its water fees and seeking refunds on rates deemed unconstitutional.

The district’s board of directors voted unanimously this month to enter into a two-year agreement with the Grass Valley-based law firm Colantuono, Highsmith & Whatley. The district will pay up to $400,000 per year.

The district had already been using the firm to represent it in the two cases, but staff said the complexity of the litigation will require the district to retain the firm for a longer period, requiring the new agreement.

Some ratepayers and one of the organizations suing the district criticized the board for what they argued was needless spending amid a pandemic to defend unfair rate and fee increases.

“Now is the time to get money into the pockets of ratepayers,” Larkspur resident Chris Wheaton wrote to the board. “By proposing to fund up to $400,000 of legal expenses to defend large rate increases, you are forcing ratepayers to sue themselves and pay for both sides …”

“Come to your senses and scale back your spending and rates,” Wheaton wrote.

Jack Gibson, president of the water district’s board, said the district has a duty to defend its water rates and fees. He said officials have gone through a long and costly vetting process to ensure they comply with the state constitution.

“I’m a little shocked that we’re getting criticized for not defending the district on the cheap,” Gibson said. “We hired the most preeminent firm in the complex world of utility rates.”

While the lawsuits are separate, both allege MMWD violated the voter-approved Proposition 218 from 1996. The law prohibits government

agencies from charging more for a service than it costs to provide it.

“The district takes these matters seriously, and while we cannot comment on the specifics of pending litigation, the board is taking the necessary and appropriate steps to address both cases,” district spokeswoman Jeanne MarianiBelding said Friday.

One lawsuit, by Mill Valley ratepayer Anne Walker, has been in litigation since 2015. Earlier this year, Marin County Superior Court Judge Stephen Freccero made a key and potentially costly ruling against the water district.

Freccero found that the previous water rate structure in place from 2011 to 2015 violated Proposition 218. The rate structure was meant to encourage conservation by charging higher rates for people who used more water.

Walker argued that this tiered rate system was not based on the actual cost of the water service. Other water districts throughout the state had been using a similar system and were also challenged.

“After reviewing the record, the court can only conclude that there is no correlation between the rates in the different tiers and the cost of water service in those tiers,” Freccero wrote in his ruling on March 30.

This rate structure had been in effect since 2004, according to Walker’s attorney, Beau Burbidge, until it was changed by the district in 2016. The court is now deciding how many ratepayers were overcharged and how much they should be refunded, Burbidge said. Any refunds would be limited to rates charged in 2014 and 2015, Burbidge said.

“Essentially it’s been very clear that the Marin Municipal Water District has not complied with the constitutional requirements,” Burbidge said Friday. “That has been known from about day one. We’ve been fighting that for five years. We expect a further fight from them and it’s disappointing that a public agency that serves all of these customers and found to be overcharging these customers has done very little to try to remedy that wrong that has been done by them.”

The next court date for the Walker case is scheduled for April 27.

The second lawsuit was filed in 2019 by the watchdog group Coalition of Sensible Taxpayers, or COST. The suit has many similarities to the Walker case, but instead targets two fixed water fees charged to ratepayers.

COST argues that the new capital maintenance fee, which MMWD adopted

in June 2019, and the district’s watershed maintenance fee violate Proposition 218. Both fees are charged based on the size of customers’ water meters.

The district increases the fee charges as water meter sizes increase because of the potential demand that larger water meter sizes could have on the utility’s system. COST argues these fees should be charged based on actual water use.

“If you’re using lots and lots of water, and there are a few big water users around the district, you should be paying a lot more,” COST attorney Walt McNeill said. “That works, and it would work quite well in the Marin Municipal Water District, but they decided not to go that direction.”

The class-action lawsuit seeks to invalidate the fees and get all fee payments refunded.

The capital maintenance fee was adopted as a way for the district to pay for decades’ worth of upgrades within the district’s 22,000- acre watershed on Mount Tamalpais. The district is using the fee to pay for projects with cash rather than through bonds as it has normally done. This method would work to prevent customers from having to cover millions of dollars in interest costs that they would have to pay over the decades on the bonds, but it also comes with more upfront costs for ratepayers.

The majority of the district’s 60,000 customer accounts have 5/8th- inch or 1- inch meters, which equate to a $164 or $409 fee respectively each year. Following complaints, the district began allowing customers who have larger meter sizes — because of circumstances such as having to install fire sprinklers in their homes or to maintain adequate water pressure — to lower their fee amount based on how much water they use.

McNeill argues this afterthe- fact change requires customers to file an application with the district before any reduction can be approved.

“Their obligation is to give you a correct fee as you start paying that fee on the first bill,” McNeill said. “The burden is not on the water user to correct their mistake. It’s their obligation to make sure that they correct their mistake. It’s bizarre and it’s upside down.”

The watershed maintenance fee ranges from about $10 to $26 for most customers and is used for fire prevention, protecting habitats, improving water quality and maintaining recreational sites on the watershed.

A case management hearing in the COST lawsuit is scheduled for Jan. 15 in Marin County Superior Court.