1. PROPOSITION 218 IMPACTS ON UTILITY USER FEES Case Study City of Dixon Sewer Rate Repeal of 2007

2. City of Dixon 2007 Sewer Rate Repeal Act I – The Sewer Issues  The City of Dixon operates a wastewater treatment plant (WWTP) that utilizes a land-based treatment and discharge process consisting of treatment ponds, and evaporation and infiltration ponds  Since 1995, the City has been operating its WWTP under several Cease & Desist Orders (CDO) issued by the California Regional Water Quality Control Board (RWQCB)  The primary issues with the RWQCB include addressing adequate capacity to meet residential growth surges during the 1990s and beyond, high infiltration and inflow in the sewer collection system, and elevated salinity levels in wastewater potentially impacting groundwater in the Central Valley

3. City of Dixon 2007 Sewer Rate Repeal Act I – The Sewer Issues  In July 2005, the City and the RWQCB agreed on a revised CDO that identified proposed WWTP improvements, cost estimates, and an implementation schedule  In December 2005 a Wastewater Finance Plan was approved by the Dixon City Council, proposing the sale of $38.2M in revenue bonds to finance wastewater capital projects  The revenue bonds were to be repaid through increases in sewer rates and connection fees  The Finance Plan proposed a sewer rate increase for residential users that incrementally increased rates from $15.35 per month to $45.20 per month over a 5 year period

4. City of Dixon 2007 Sewer Rate Repeal Act I – The Sewer Issues  The Finance Plan included projects that addressed the full range of CDO issues, including both water quality (salinity) issues resultant from current practices, plus capacity issues related to future growth  In May 2006, the City Council adopted sewer rate and connection fee increases to underpin the proposed bond sale, projected for August 2006  Members of a local citizen’s taxpayer group protested the rate increases on the grounds that the proposed WWTP projects were excessive, too costly, and that current sewer users were being charged to pay for capacity improvements that benefit future development

5. City of Dixon 2007 Sewer Rate Repeal Act II – Proposition 218  Proposition 218 (1996) placed restrictions on how local governments’ impose taxes, assessments and other property- related fees, including utility fees such as water and sewer  Sewer fees, or rates, are considered a “special fee” rather than a “general fee”, in that the revenues can only be used for a specific purpose, paying for sewer facilities and related services  Under Prop 218 requirements, to increase property-related fees, the local government agency must comply with a series of detailed procedures and requirements

6. City of Dixon 2007 Sewer Rate Repeal Act II – Proposition 218  Proposition 218 requires a local agency to perform a detailed rate calculation to back up any proposed rate increase  Then the agency must provide the opportunity for residents and property owners to protest the proposed rate increase  Therefore, Prop 218 has effectively shifted the power over taxation and revenue generation from locally elected officials to property owners and residents

7. City of Dixon 2007 Sewer Rate Repeal Act II – Proposition 218  The property owner election process consists of the following:  The local agency must mail information regarding the proposed rate increase to every property owner  Hold a public hearing at least 45 days after the mailing  Reject the proposed rate increase if written protests are submitted by two-thirds of the property owners  In March 2006, the City of Dixon mailed information regarding proposed sewer rate increases to 5,290 property owners  The City received 1,879 protests, less than the minimum 3,527 required to reject the proposed rate increase

8. City of Dixon 2007 Sewer Rate Repeal Act III – Measure ‘L’  In July 2006, the Dixon Chapter of the Solano County Taxpayers Association filed a valid petition to place a measure (Measure L) on the November 2006 ballot to repeal the sewer rate increase enacted by the City Council in May 2006  On November 7, 2006, the voters of the City of Dixon passed Measure L by a vote of 2,781 to 1,944 thus overturning the sewer rate increase  The repeal of the sewer rate increase through the passage of Measure L removed the finance mechanism to support the sale of revenue bonds for completion of wastewater programs and projects required to address issues identified in the CDO

9. City of Dixon 2007 Sewer Rate Repeal Epilogue  In January 2007, the City Council, in response to the voter initiative, appointed a 12-member Citizen’s Wastewater Committee with the charge to evaluate wastewater treatment options and financing methodologies, and provide the Council with recommendations for a wastewater treatment and disposal program that will meet the requirements of the RWQCB  In October 2007, the Wastewater Committee presented its recommendations to the Council, which include a comprehensive list of wastewater programs and projects, estimated costs, and a proposed timeline for implementation  In November 2007, the City formally requested a revised CDO from the RWQCB, to include the proposed program presented by the Wastewater Committee to the Council

10. City of Dixon 2007 Sewer Rate Repeal Epilogue  In December 2007, City staff and the City’s wastewater consultant met informally with the RWQCB Executive Officer and her staff to discuss wastewater issues, the requested revised CDO, and potential timelines for implementation  In that meeting, the Executive Officer stated RWQCB staff was willing to move forward with preparing a revised CDO for RWQCB review, anticipating a draft document in February/March 2008 and an April 2008 Board hearing  However, the Executive Officer stated, implementation of the revised CDO will be mandatory within stipulated periodic milestones, or civil fines, currently totaling over $1M and rising, will be levied

11. City of Dixon 2007 Sewer Rate Repeal Post Epilogue  On January 25, 2008, the City of Dixon received a 12-page Administrative Civil Liability Complaint from the RWQCB Executive Officer with a $220,000 fine, citing failure to comply with milestones established in the 2005 CDO  The City has 30 days to respond to the complaint, and a hearing will be scheduled before the RWQCB in April 2008  The City has not received a revised CDO at this time

12. City of Dixon 2007 Sewer Rate Repeal QUESTIONS AND AND OPEN DISCUSSION OPEN DISCUSSION