Measure U fight heats up

<p>Among the most far-reaching decisions that Petaluma voters will face this November is the question of whether to roll back sewer rates by approving Measure U — a decision that could relieve overtaxed citizens or bankrupt the city, depending on who you ask.</p><p>Measure U proposes to reduce wastewater rates to those in effect in 2006 — about $43 per month. The rates currently stand at about $63 per month and are scheduled to go up over the next few years, reaching $80 per month by 2011. Those increases are helping to pay for the state-of-the-art Ellis Creek sewer plant that opened in 2009 on Lakeville Street.</p><p>Proponents of the measure, led by a group called Petalumans for Fair Utility Rates, say that the dire financial effects of its passage would force the city to look hard at its expenditures and control spending, which they say is being unfairly passed on to residents.</p><p>Opponents, however, say that while lower bills seem appealing at first, they would ruin the city's finances because it is unrealistic to reduce rates and still be able to pay back debt on the plant. </p><p>“The money to build the new wastewater plant has been spent. The only issue now is whether Petaluma can repay the loans,” said city leaders in the ballot arguments against Measure U.</p><p>Petalumans for Fair Utility Rates was also behind Measure K, a similar 2008 proposal that addressed water as well as wastewater rates. Measure K was voted down by a margin of 55 to 44 percent of voters.</p><p>“The idea is not to limit the city's ability to move forward. The point is to get accountability,” said Bryant Moynihan, who spearheaded the Measure K and Measure U campaigns.</p><p>Petaluma completed work on the Ellis Creek sewer plant, which replaced a 70-year-old facility on Hopper Street, and opened it in July 2009. On Monday, plant received the Capital Project of the Year award from the American Public Works Association's Northern California division for its higher-than-normal standards for sewer treatment and recycled water use.</p><p>Yearly increases to wastewater rates started in January 2007, and will last over a five-year period. Petaluma's wastewater rates are currently about average for the county. The rate increases will help pay for the $160 million plant along with a state loan, bonds and bank lines of credit.</p><p>The city's wastewater utility fund currently brings in about $24 million in annual revenue, mostly from ratepayers. If the measure passes, the fund would generate around $13 million annually, which is the same amount as in 2006, before the rate hikes went into effect.</p><p>The city's wastewater operations currently cost about $10 million each year. An additional $10 million is needed annually to pay off plant, including the state loan and debts on bonds.</p><p>Although Moynihan disputes some of the city's financial data, he claims that the city could operate the wastewater utility with about $7 million, as was the case in 2006. </p><p>The rest of the shortfall, he said, could be covered with developer sewer hookup fees and by “reimbursing ratepayers” for wastewater fund money that he claims is being used improperly. He argues that the city's inter-governmental transfers include wastewater funds that have been used for traditionally non-wastewater purposes, such as stormdrain and park maintenance. The money for those uses should be reimbursed from the funds they went to, including the General Fund, he added.</p><p>Moynihan did not present a comprehensive plan for the city's finances if the measure passes, but said that it would be up to the city to reduce spending in the short term and eventually come up with a new rate structure. He said that “once the council gets its act together,” that structure would have to be approved by voters in a general election or special election. </p><p>“We're trying to get the city to be held accountable, then come up with a new rate plan,” said Moynihan.</p><p>Opponents of the measure say that it would have the immediate effect of canceling all planned capital improvements to save money, but would reach further. Once the wastewater fund burns through its reserves, its operations would have to be covered by the General Fund, which would force layoffs of police and fire workers, they say.</p><p>Opponents also say that besides the devastating fiscal impact the measure would have, it may even be illegal because it would cause the city to default on legal obligations to repay $128 million in loan agreements with the state and banks. If it passes, there are a number of legal challenges that the city may pursue, said Councilmember Mike Healy.</p><p>“Measure U's proponents imply that Petaluma can just stiff the state of California and banks on the $128 million borrowed for the plant,” said the ballot argument against the measure.</p><p>Even if the city files a legal challenge and the suit succeeds, the attorneys' fees to fight the rollback would be substantial, say opponents. Measure K and Measure U have cost the city $454,000 to date, they point out, which includes attorneys' fees, financial consultants' fees and bank fees for restructuring loans.</p><p>Earlier this year, the city restructured its loans with two banks after the threat of the measure passing kept the city from finding investors for bonds needed to pay off the lines of credit.</p><p>(Contact Philip Riley at philip.riley@arguscourier.com)</p>