Moynihan wins lawsuit against city

After almost 20 months spent battling the city in court over what he says is a misuse of ratepayer funds to pay for storm drain maintenance, former City Councilmember Bryant Moynihan received a partial victory Monday when a Sonoma County judge told the city it must repay up to $2.1 million of those funds spent over a three-year period from 2009 to 2012.

How much the city will have to repay, and how long it has to do so, will be decided at a hearing Oct. 10.

Moynihan has long contested the city's practice of using wastewater fee revenue to fund what he says are unrelated projects, like cleaning storm drains. He says doing so resulted in the city overcharging its wastewater ratepayers. Moynihan filed a lawsuit on behalf of the ratepayers in January 2012, demanding that the city stop using the wastewater enterprise fund to pay for stormwater projects and that the city reimburse the ratepayer fund. His suit claimed the city had inappropriately spent at least $4.7 million from the wastewater fund since 2004.

"The state's constitution is very clear that cities must spend sewer ratepayer revenue on the sewer system," said Moynihan Tuesday. "I'm grateful that the court recognized that Petaluma has been violating the constitution and that this order means the city will have to return money to the ratepayers."

But City Attorney Eric Danly said that he sees the ruling as at least a partial win for the city.

"Moynihan's original complaint was seeking $4.7 million going back to 2004," said Danly. "There's vindication for the city in not having the judge count all of what the suit claimed."

Danly also pointed out that Moynihan's claim of the city overcharging ratepayers was discredited in the ruling, when the judge pointed out that the annual revenue from the wastewater treatment plant is only about $20 million, while it's expenditures are more than $23 million.

"It shows that ratepayers are being subsidized (by other city funds) as it is," he said. "This just means that this action will put further hardship on the city's other revenue sources."

In fighting Moynihan's suit, the city claimed that maintaining stormwater drains was a direct benefit to the wastewater treatment plant, diverting excess water away from the facility. But court rulings showed that unless a benefit is tied directly to the fund, voters must approve any outside uses. In response to this concern, the city removed about $500,000 in storm drain costs from the wastewater budget in December 2011, cutting many of its storm drain projects to do so.

The city also claimed too much time had passed since 2004, making Moynihan's request that Petaluma repay expenses from that time period past the legal statue of limitations. But the 26-page ruling handed down Monday from the Superior Court of Sonoma County said that, contrary to city arguments, the statue of limitations had not expired and Moynihan's case was valid for the most recent three years.

"The statute of limitations is purely a legal issue," said Councilmember Mike Healy. "The ruling could have gone either way and today, it went against us. Now, the main question will be figuring out how much money the city will have to pay back and how long we have to do it. If it's over a period of several years, we can budget it in, but if it's all at once, we'll be facing some issues."

The hearing to decide the amount the city must repay will be at 3 p.m. on Thursday, Oct. 10.

(Contact Janelle Wetzstein at janelle.wetzstein@arguscourier.com)