LIVINGSTON -- The city of Livingston's controversial, multi-year water rate hike is unconstitutional, a Merced County Superior Court judge declared, as he ordered the city to halt the implementation of that rate increase.
It's unclear what the city's response to Thursday's ruling will be -- whether residents will see lower figures on their next bill. City Manager Richard Warne, Finance Director Victoria Lewis and the city's attorney Jonathan Hobbs didn't return calls requesting information before the Sun-Star's deadline Friday.
"I am disappointed," Mayor Daniel Varela Sr. said in response to the ruling. "It's frustrating when you are trying to do the right thing for the community."
Varela said he didn't know if the city would appeal the ruling or cut its rates. He said city employees are working on what to do next.
Livingston's council passed the phased increase July 7, 2009, designed to raise water rates more than 100 percent over the next several years.
Officials argued the city hadn't raised rates since 1995. Officials have been taking money out of the city's general fund -- the fund that pays for essential services like police and fire -- to make up for a deficit in the city's water fund. The deficit exists, they say, because the revenue collected can't fully fund the cost of providing the service.
Superior Court Judge Brian McCabe found the city committed a number of errors in approving the rate increase. Under Proposition 218, the city was required to give affected property owners written notice of a potential increase. It also needed a two-thirds majority on the council to pass an ordinance raising rates, the judge concluded. The council failed to do either.
McCabe found while Livingston mailed notices to property owners, the notices included three separate scenarios of potential increases, but a fourth unlisted increase was eventually selected. The council also continued several meetings, and didn't re-notify the property owners appropriately, McCabe found.
The council deadlocked 3-2 several times on the issue of raising rates. The super-majority required four votes. Livingston's city attorney at the time, Malathy Subramanian, advised the council that it must reach that super-majority or leave the rates alone.
Ultimately, the council fired Subramanian and immediately hired the Sacramento-based Hobbs, who said the council could raise the rates by making the rate hike a resolution instead of an ordinance. The council did so, and it passed 3-2.
McCabe ruled that decision was an error. He, however, found no malice involved.
"It appears to the court that the respondent council majority ... were attempting to salvage the considerable time, energy and money expended on the subject. No sinister motive is apparent nor deemed," he wrote.
Varela said the council thought it could take that action because other communities around California had done so without problems.
The lawsuit was filed by Foster Farms in July 2009. The company has since followed up with a second lawsuit claiming mismanagement of city finances by city manager Warne. Carmine Zarlenga, an attorney with the Washington D.C.-based Howery law firm representing Foster Farms, argued there wouldn't be a water fund deficit if it weren't for this mismanagement.
"It's a fantastic outcome that benefits not only Foster Farms but all of the residents of Livingston that were outraged by the water rate increase," Zarlenga said Friday. "That's the positive. The negative is this is just a continuing pattern by the city of Livingston and their city manager to undertake unlawful actions and then spend hundreds of thousands of taxpayer dollars defending them."
Zarlenga said one of the victims in the case was the former attorney, Subramanian.
"She has been vindicated here. It just happened to be advice that the city manager didn't want to hear, so she got fired," he said. "Another firm was brought in, money was spent and it appears to be spent foolishly, and the bottom line is who's responsible?"
Reporter Amy Starnes can be reached at (209) 385-2453 or astarnes@mercedsun-star.com.
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