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Judge: Yorba Linda residents can't use a referendum to void water rate hikes

An Orange County Superior Court judge ruled Monday in a closely watched case that customers of a water district cannot void rate increases using a referendum.

The ruling comes in the protracted fight between a group of Yorba Linda residents and their water provider over a $25-a-month rate increase. The dispute has at times become heated as both sides have accused the other of distorting facts. Two of the water district’s five board members now face recalls, and one other board member announced last week that he would retire rather than face reelection in the fall. 

Having failed to overturn the increase through the traditional process, the residents had submitted a referendum, demanding that the district repeal the new rates or put them up to a vote.

But the water district rejected the referendum, saying it was not valid under the law, so the residents sued the district in January asking the court to order the water provider to honor the referendum.

But on Monday, Judge Robert J. Moss denied that request. In court documents, Moss nodded to California’s prolonged drought and wrote that the “consequences” of the court ordering the water district to repeal the rates or put them on the ballot “would be serious.”

The water rates, Moss wrote, were “passed as an urgency measure enacted to avoid severe constraints on the district's ability to meet its fixed financial obligations during the current severe drought.”

“This finding, coupled with the finding that the essential governmental function of providing safe, clean, potable water might be impaired if the referendum is allowed to proceed, compel the court to deny the petition,” Moss wrote in his decision. 

Ed Rakochy, a spokesman for the Yorba Linda Taxpayers Assn., which had sued the water district, said he was “very disappointed” by the decision. 

“The judge missed the constitutional argument that the voters have a right to a referendum,” Rakochy said. “There’s no hard evidence that this was an emergency measure. It wasn’t even passed as an emergency measure. It’s like looking at a cat and saying, ‘That’s a nice dog.’

“In my humble opinion, I don’t think the judge wants to rock the boat…. This is a safe decision. He can sit there and claim, ‘Hey, we were in a drought.’”

Yorba Linda Water District spokesman Damon Micalizzi said, “It’s unfortunate that it had to come to this, but as you can see, the judge’s ruling validates everything we’ve done, every step of the way.”

Across California, the drought and mandatory water conservation have been driving down water use, and in some cases, left gaping holes in the budgets of water providers, officials from various water districts have said. To help cover the deficits, some suppliers have chosen to raise water rates.

Many officials at those water districts said they were watching the Yorba Linda case and worrying about its potential effect on their own rate-making ability. 

Had the court allowed water rate increases to be repealed through a referendum, officials said they were concerned that residents would turn to that option whenever they did not want to pay an increase. That kind of revenue instability would cause districts to default on debt obligations and eventually go bankrupt, officials warned.

But members of the Yorba Linda Taxpayers Assn. countered that although they did not want to hinder their district’s ability to operate, the power to decide a rate increase should rest with the ratepayers – and that power should be easier for them to exercise than it is under voter-approved Proposition 218. 

Leaders of the taxpayers group said they felt exploited by the hasty increase, which raised the basic service charge to $41 from about $16. They said the increase was excessive, and their attorneys argued that the residents had a constitutional right to repeal the rates through a referendum. 

Moss disagreed, writing in his two-page order that “while voters have a right to challenge legislative enactments through the referendum process, that right is not unlimited.”

The California Constitution, Moss wrote, “specifically precludes certain types of legislative enactments from the referendum process. Namely, statutes that are urgency statutes.” 

He wrote that the court was “persuaded” that the water rate hikes were an “urgency measure.”  

Rakochy, the spokesman for the residents’ group, said he and his colleagues would “talk over” whether to appeal the ruling.

Citing loosened state conservation requirements and an anticipated increase in water sales, the water district’s board unanimously adopted new water rates last week that reduced the basic service charge by about $9. 

In setting the new rates, the board also rescinded the old ones, which is one of two specific actions that residents had demanded in their lawsuit.    

But Rakochy said the decrease “hasn’t changed our thinking.” 

“The rates need to go down more — $9 is a joke,” he said, adding that the water district should provide rebates to its customers to cover what the group says is higher-than-projected profits.

As the fight in Yorba Linda evolved, the rhetoric between the water district and some of its customers became heated and personal.

On the taxpayer association's Facebook page, a few residents called for a boycott of a local restaurant owned by one of the water district's board members. Meanwhile, water district board members have openly accused the group of attempting to seize political power.

Earlier this year the taxpayers association filed petitions with the Orange County registrar of voters to recall two of the water district’s five board members; those petitions qualified Thursday, the  registrar of voters said. 

Two other board members had been up for reelection in the fall, but one of them, Michael Beverage, announced last week that he would not seek another term.  

Yorba Linda Water District Board President Ric Collett said he hopes that the court decision will help sway voters to oppose the recall.

He said the lawsuit cost the district about $250,000; the district’s recent rate instability forced the district to refinance loans at a higher-than-normal rate, costing ratepayers an additional $330,000, he added.

Collett said he would ask the district’s legal counsel whether it would be appropriate to countersue the Yorba Linda Taxpayers Assn. and plaintiff Kent Ebinger to recover legal fees.

The taxpayer group, which Collett said has functioned under different names in the past, “has caused dissension in our community for too many years.”

“It’s time,” Collett said, “to push back a little and say, ‘Stop.’”  

matt.stevens@latimes.com

Twitter: @ByMattStevens

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This article erroneously states that refinancing district loans had cost Yorba Linda Water District ratepayers about $330,000. No refinancing occurred. In fact, the district expected to save $330,000 by refinancing but was unable to do so because of uncertainty over its fiscal health, a spokesman said.
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