SLO County Ordinance Locks Los Osos PZ Homeowners into $200 a Month Sewer Bill

By ED OCHS

Los Osos homeowners living in the so-called “Prohibition Zone” received a bitter taste of what lies ahead for them financially when the County’s proposed “Rates & Charges Ordinance” began hitting mailboxes Oct. 30 with legal notice to pay their share – and undeveloped lot owners’ share as well — of the County’s bloated $165 million sewer project for Los Osos. The ordinance proposes a monthly sewer bill equivalent of about $200 per homeowner, which will drive many PZ homeowners deeper in debt and force thousands out of their homes.

Los Osos homeowners living in the so-called “Prohibition Zone” received a bitter taste of what lies ahead for them financially when the County’s proposed “Rates & Charges Ordinance” began hitting mailboxes Oct. 30 with legal notice to pay their share – and undeveloped lot owners’ share as well — of the County’s bloated $165 million sewer project for Los Osos.

The ordinance proposes a monthly sewer bill equivalent of about $200 per homeowner, which will drive many PZ homeowners deeper in debt and force thousands out of their homes. The $200 breaks down as $105 from the first Prop 218 assessment and $95 for rates & charges. Depending on water usage, rates and charges could be more or less than the $95 a month.

The postmarked mailing date of the ordinance kicked off the 45-day protest period, ending with a Dec. 14 hearing that is not a voting meeting. Between now and then property owners must decide whether to protest the ordinance in writing or accept it as is.

For a protest to be successful, 50% plus one of PZ property owners must protest the rates in writing, requiring in excess of 2,600 letters to be successful. Not responding by mail to the protest is essentially the same as a “yes.” If the protest succeeds, the rates & charges can’t be imposed and, instead, return to the County for restructuring and another mail-in Prop 218.

“If we receive protest of 50% plus one then the board can’t impose the rates,” said County Public Works Administrator Will Clemens on Oct. 26, when the ordinance was introduced at the Board of Supervisors meeting.

If the ordinance passes, homeowners will not be charged for services until the sewer becomes operational in 2014.

A mandatory connection component is a key part of the ordinance, but that cost is not included in the $200 a month. Homeowners must hook up to the sewer and decommission their septic tanks on a phased-in schedule over a 90-to-180-day period at an average expense of about $2,000. An SRF hook-up loan from the state might help some qualified homeowners, but many others will be hard-pressed to come up with the hook-up fee, although actual payment of that fee will not be required at the time of connection. Water meters will also be required to measure water usage.

SRF Tie-in
Clemens cited the “Rates & Charges Ordinance” as a necessary step in the SRF application process. “They want to see our rates & charges adopted and then they will make decisions on reduced interest, extended term, principal forgiveness,” he said. “So they make that decision once they see what the cost to the property owners is going to be based on that information.

“We also are pursuing various grants, so anything that we are successful in obtaining as far as grants will simply serve to reduce these costs, and (the) board will have the discretion to adopt rates on a yearly basis that are less than these maximums that are being approved at this time.”

Homeowners’ bills could be reduced by water conservation and perhaps grants, Clemens said, but reductions seem unlikely as project cost increases over time will probably negate conservation savings, and grants will only serve to reduce the higher debt, rather than lower bills.

Covering the $27 million allocated to undeveloped property owners in the first Prop 218 vote increases the long-term debt on developed property owners by approximately $40,000 per home or an additional $45 a month on sewer bills, so the notion of lowering sewer bills should be taken in the full context that the County ordinance calls for the maximum sewer bill for PZ homeowners, and any minor lowering of the bill could be exaggerated as a reduction. The fact of the matter is that already-taxed homeowners are being forced to take on the blind risk of bearing the undeveloped property owners’ $27 million share of the project to complete financing, and a small reduction in the sewer bill won’t compensate for the dead weight of the added millions.

Responding to a board question on the serious impact of the high sewer bill on lower-income homeowners, Clemens added, “Certainly we can see if there’s any programs out there,” suggesting it hadn’t been done yet and there likely aren’t any. “We’ve had discussions with the State Water Board on possibly a loan program for the on-lot costs, so that may be able to help not just those at lower incomes but the whole community,” he said. However, further discussions on connection loans depend on the passage of rates & charges, an SRF requirement, according to Public Works.

Regarding seeking more funding from the SRF at a lower interest and taking less from the USDA loan at the higher rate, Clemens said, “The State Water Board would decide how much they want to give us based on our application. But remember, the monthly cost is higher under the SRF program, so if the goal is to have a higher monthly cost and a shorter time period we can do that, but I wouldn’t recommend that.

“We’re building a 40- to 50-year system, this sewer treatment plant, so financing over 20 years at a lower interest cost, you’re basically upfronting the cost for those people that are living there for the first 20 years and those who live (there) for the second 20 years would be getting a free ride. The goal is to match your debt with the life of your asset so that everybody pays equally and pays less on a monthly.”

‘Hopeful for Certainty’

The once-“next step” assessment of undeveloped properties, whose share is now heaped on previously assessed PZ homeowners by the ordinance, has been delayed, said sewer ramrod Supervisor Bruce Gibson on Oct. 26, because, “We want to gain greater certainly that undeveloped properties have an ability to build before putting under the consideration of a Prop 218 similar to one that went on the developed properties. We have four years roughly until the start of operations of this plant. We’re hopeful that we can provide greater certainty for undeveloped properties, that they would have a normal path to get to development. I believe we can get there, but until such time as we feel confident, I think we’re going to hold back on an assessment.

“I think we can show that once that certainty is greater, it’s to the benefit of the undeveloped property owner to go through an assessment process, because the cost of financing that is less than the individual property owner could get if they had to go to a bank to finance a connection fee. This ordinance had to be two-tiered to account for both possibilities, but when that trigger does occur then Exhibit B (in the ordinance) becomes the law of the County at this point and the rates drop accordingly.”

Gibson was adamant that the rates & charges was not a “blank check,” a term used in the community to describe the first Prop 218 vote – and with good reason: the County has already spent about $8 million on planning for a project that doesn’t exist at this point, and they still have yet to officially accept the project.

“The ‘Rates & Charges Ordinance’ as being put forward does not provide an open-ended charge,” Gibson claimed. “That’s the very purpose of the proceeding that we undertake under Proposition 218. The amounts that users of the wastewater project will use are quite
clearly specified in the ordinance and this County does not have the ability to raise those rates, save for going through another process under Proposition 218.

“I think it’s clear,” he added, “that this (ordinance) does provide a cap, that any adjustment upward on rates & charges needs to be subjected to a process under Proposition 218.”

Yet the ordinance states:

“The purpose of these service charges is to generate sufficient revenues to pay for (a) all of the costs of the administration, operation and maintenance of the wastewater collection and treatment system, and (b) the portion of the interest, principal, and reserve requirements of the sewer system that is not backed by existing assessments, and (c) to provide for repairs and depreciation of the system, to provide for unforeseen emergencies, and to pay for other lawful obligations and expenses of the system.”

Any and all costs for “repairs and depreciation” of what Clemens described as a “40- to 50-year system” and all “unforeseen emergencies” will be paid by rates & charges. And since there is no cap on the project, a project still without a final price, there can be no cap on rates & charges, either, despite Gibson’s assertion.

Any additional expense in operations & maintenance, in repairs, from depreciation and unforeseen emergencies, could cause sewer costs to inflate at any time, eliminating any potential reduction in rates as a result of excess revenue, or in the form of additional loans or grants, or by conserving water. By the end of the 40-to-50-year life cycle of the system, depreciation and replacement could become a more significant expense for then-current homeowners.

Moreover, once the “Rates & Charges Ordinance” is locked in place and the sewer becomes operational at 90% capacity, the County is no longer required to turn to another Prop 218, according to the ordinance, to seek PZ homeowners’ permission to increase fees. They can just add those charges to Los Osos sewer bills over the next 30 or 40 years.

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HOW TO PROTEST: Submit a Written Protest. If you oppose the proposed sewer service charge, your protest must be submitted in writing to be considered, even if you plan to attend the public hearing. If written protests are submitted by landowners of a majority of the affected parcels, the proposed sewer service charges cannot be imposed. Electronic mail protests will not be formally considered in calculating a majority protest. Protests must contain a description of the property, including the parcel number. Please indicate that it is the sewer service charge that you are protesting. Landowners may mail or deliver their written protests to the County at County Clerk/Recorder’s Office, Attn: Clerk of the Board, 1055 Monterey St. Suite D120, San Luis Obispo, CA 93408 in a manner that ensures receipt by the County no later than the close of the public hearing on December 14, 2010. Landowners may also present or withdraw written protests at the hearing on December 14, 2010. Only those written protests that are actually received by the County prior to the close of the December 14, 2010 hearing will be considered. If you agree with the need for the proposed sewer service charges, no action on your part is required. If landowners of a majority of the parcels upon which the sewer service charges are proposed for imposition submit written protests on a timely basis, then the Board of Supervisors will not be able impose the proposed sewer service charge ordinance.