Wednesday Aug 27 2008
State freezes funds for sewer plant construction
By: Tom Durkin
Grants, loans pulled from Colfax due to rate protest
The state water resources control board informed Colfax City Council members Tuesday night that all state grant and loan funds for construction of the Colfax wastewater treatment plant have been frozen. This could prevent completion of the nearly finished plant by the November deadline and subject the city to hundreds of thousands of dollars in fines as well as other far-reaching consequences. The state board took this action because of the defeat of the recently proposed sewer rate increases, said James Maughan, assistant deputy director of state’s Division of Financial Assistance. The board “interpreted” the rate rejection as evidence the city cannot repay the $5.3 million “state revolving fund” (SRF) loan it has received for the construction of the plant, according to Maughan. Furthermore, the state can also require the repayment of a $2 million grant. And the city will also face massive fines, penalties and interest, he stated. The sewer rate increases proposed earlier this summer were narrowly defeated by a majority protest of property owners. The owners exercised their right under the provisions of California Proposition 218 to reject an increase in taxes or assessments. The sewer rate increases, proposed May 15, consisted of three separate fees: base user rate, inflow-and-infiltration, and lift stations. The defeat of the base rate was the deal breaker for the state. The SRF loan contract stipulates the city will collect enough revenue from the base user rate to pay off the 20-year, 2.4-percent loan. The proposed base user rate would have increased fees from $60 to $87 a month. This increase would have covered the cost of meeting the city’s obligation to repay the loan. For weeks, leaders of the ratepayer revolt have been advocating offsetting the proposed rate increase by cutting the city’s general fund budget. Budget cut suggestions have included firing senior city staff and/or eliminating the city’s contract with the Placer County Sheriff’s Department. The only problem with that idea is that it’s not legal. “You can’t cut the [general fund] budget … to pay for the sewer,” Jean Ibbeson explained to the several dozen clearly distressed citizens at Tuesday night’s meeting at Sierra Vista Center. Ibbeson and Karen McBride of the nonprofit Rural Community Assistance Corp(RCAC), offered their organization’s help during the meeting. “You’ve got to finish the treatment plant,” Ibbeson stressed. “If you don’t pass the [base user] rate increase, the problem will get worse.” Councilman Josh Alpine added that using general fund revenues to pay for sewer enterprise fund costs would open the city up to litigation for misappropriation of funds. Although he offered no guarantees, Maughan said the board might release $600,000 in funds necessary to finish construction of the treatment plant — if the city can present a revenue plan that demonstrates it will collect enough fees to pay off the 20-year loan on schedule. Essentially, this means the city will have to propose a sewer rate increase again and have that proposal in the works by the board’s Sept. 16 meeting in Sacramento. The cadre of rate protesters openly vowed to defeat a rate increase a second time. There were also murmured threats of recall of any council members who voted to roll out a second rate increase proposal. Nevertheless, resolute council members directed city staff to come up with a variety of new rate increase proposals that might be more acceptable to property owners than the first proposal. Because of the looming deadline and strict requirements of Proposition 218, the council set a meeting for Tuesday, Sept. 4 to decide what to do so a revenue plan could be presented to the state board by Sept. 16. Because the state water board’s announcement caused so much consternation — and because some members of the audience ignored Mayor Sherrie Blackmun’s repeated requests to keep their comments short and to the point — the council meeting continued the scheduled public hearing on the city’s latest proposed general fund budget to the next council meeting.