Sewer Prepayment Period Extended as Bond Sale is Stalled

A lawsuit challenging formation of the city’s recently formed assessment district has stalled the issue of millions in bonds and the La Cañada Flintridge City Council on Monday extended to Sept. 3 the period in which residents of that district can prepay assessments to receive a discount.

Hours before the city council was set approve issue of some $28 million in improvement bonds two weeks ago, resident James Short served the city with a suit alleging city officials undertook in various improprieties in forming sewer assessment districts. The legal action has forced the city to delay the issue of the bonds, which city officials have said could increase the cost of the $37-million sewer project for Sewer Area No. 3. The sewer project site lies above Foothill Boulevard and between Ocean View and La Cañada boulevards to the west and east.

The city council was scheduled to meet with the city’s legal team in closed session Monday night for a conference on Short’s suit. There was no reportable action from that conference.

But at a meeting Monday, members of the city council reiterated concerns that the suit may jeopardize the cost of the project, with members publicly questioning the merits of the suit and defending actions taken in forming assessment districts. At risk is a favorable bond insurance rating that reduces interest rates and a multi-million-dollar contract with the contractor, various city officials said.

Claiming Short’s lawsuit has “absolutely no merit whatsoever,” Councilman Greg Brown said: “I think it is important to know that anyone can file a suit for a filing fee.”

Short on Wednesday defended his lawsuit and denied claims that the legal action is irresponsibly holding up the project, saying: “I believe I have valid legal rights and arguments and claims.

“I did not delay the bonds. The city and its attorneys chose to delay the bonds.”

Short wants to have his assessment lowered or eliminated and to be exempted from being “forced to abandon my septic system and hook up to sewers at great personal expense.”

A volume of legal documents sent by the city, Short said, seek to dismiss his suit and state that the action is an attempt to “prevent the city from educating its residents about the sewer district.”

“That’s absurd,” Short said, adding that part of his complaint alleges the city “failed to provide fair and timely information to residents.” He said the city is using its “vastly greater legal and financial resources to try to make me go away.”

The suit, which names county Sanitation District No. 28 and the La Cañada Flintridge Financing Authority, on which council members sit, also alleges city officials violated Short’s Public Records Act and First Amendment rights, namely free speech and right to petition the government.

Not so, said Brown.

“If there is anyone who hasn’t been deprived of his First Amendment right, it’s Mr. Short,” Brown said at the meeting.

Short has been one of the most vocal critics of the sewer project, writing to newspapers a number of letters in opposition to sewers and speaking against the project at many city council meetings.

Construction in Sewer Area No. 3 was to begin in August but will likely be delayed “a couple months,” City Manager Mark Alexander said. A hearing on the suit is scheduled for Aug. 20. If the suit is dismissed, as city officials would favor, the city would have to wait until the end of the appeal period to issue bonds. If not, the delay could be longer and could potentially disrupt the sewering process. The bonds would have gone to market about two weeks after approval of their issuance, the city’s bond finance team said.

A “AAA” insurance rating that would lower interest rates on the bonds is only good for 60 days, members of the bond finance team said. Added to that is that a delay in the project schedule could allow contractor Ken Thompson Inc. to withdraw from its current $20 million bid, which came in some $10 million less than bids from other contractors. City officials said they fear bids would come in much higher a second time around. Any increase in the cost of the project would come out of a contingency fund built into the assessment district. If the project is completed under budget property owners would get money back from that fund.

Another resident’s concerns with the sewer project were aired at Monday night’s council meeting, specifically in regard to the $400,000 loan from the city to the La Cañada Unified School District and the way in which the city was divided into five separate sewer areas.

Responding to a charge that the loan agreement between the city and the school district is illegal, City Attorney Mark Steres said the agreement is legal and is representative of the city’s working relationship with the school district.

“It’s really a policy question,” Steres said, adding that the loan monies came from the city’s general fund and not the assessment district for Sewer Area 3. The city and school district have partnered on a number of projects, including joint use of the district’s recreational fields and Lanterman Auditorium.

Efforts to install sewers in La Cañada have been in the works since before the city was incorporated in 1976. The borders for sewer areas that exist today were devised using calculations of where sewage would flow, Councilman Stephen Del Guercio said.

“That is what we inherited when we became a city,” he said.

With the extension of the assessment prepayment period, residents in Sewer Area No. 3 have the option of prepaying all or a portion of their assessments to receive an 11-percent reduction in the assessment amount. Assess-ments on most single-family homes in Sewer Area No. 3, which is divided into sub-areas 3A and 3B, are $18,000 and $22,000. Payments must be postmarked or hand-delivered to city hall by 5 p.m. Sept. 3. A $13 charge to remove a property from the county assessor’s tax roll will be applied.

Slightly more than $4.5 million was collected during the first prepayment period, the city manager. Fifteen percent of the 1,600 homes in the assessment district prepaid all or a portion of their assessments. In the days before filing suit against the city, Short prepaid all but $110 of the $18,000 assessment on his home in Sewer Area 3B.

Pending resolution of the lawsuit, money collected during the prepayment period will be held in an interest-bearing account, Alexander said. Those interest earnings belong to the assessment district for Sewer Area No. 3 and will be used as an addition to the contingency fund. However, if the assessment district is nullified in court, the money would be returned to those who paid, along with the earned interest, Alexan-der said.