June 29, 2007

Water rate increases passed by San Jose City Council

Cortese declines pay, vehicle allowance raises

By Carol Rosen
Staff Writer

City council members approved a recommendation to increase San Jose Municipal Water System (SJMWS) potable water rates and charges by 7.3 percent, effective July 1, at the June 26 council meeting by a vote of 8 to 3, with Vice Mayor Dave Cortese and council members Kansen Chu and Sam Liccardo voting against it.

The recommendation was based on a memo by Mayor Chuck Reed that also asked the staff to complete a cost study to validate transfers from the SJMWS to the general fund. It further directed the staff to “review all assumptions, financial and non-financial, made when the council declined to sell of lease the Municipal Water System and report back on the impacts of the cost study on those assumptions.”

In addition, Reed’s memo asked the staff to analyze and report the effects of the absence of “rate on return” and “in lieu fee” transfers from the Water Utility Fund to the General Fund would have on the balance of the General Fund and to analyze and report on the consequences to the General Fund if rates were not increased.

The staff agreed to report back at an informational meeting or the first meeting in August.

Cortese issued a news release on June 18, approximately a week before the vote, noting that he would ask the council to “reject the city manager’s recommendation to proceed with a 12 percent increase,” which several days later was dropped to a 7.3 percent increase. In the same release, he said he would ask the staff to hire a consultant to audit the Municipal Water System and “determine the differential between past fees paid by MWS ratepayers and the amount of fees that should have been paid pursuant to Proposition 218.”

The release stated that the city’s historical practice of raising fees of SJMWS ratepayers and regularly transferring excess funds collected from those fees to the General Fund is in violation of Proposition 218, which passed in 1996 and highly regulated the manner in which property-derived fees could be utilized.

Cortese claims that General Fund deposits from the MWS fund “have not been used for projects and programs in Evergreen per se; they have been apportioned throughout the entire city but at the expense of a small fraction of the rate-paying population.”

During the meeting, he suggested that the high rate of return could be in violation of the California Constitution.
Four members of the public spoke to the council about the subject during the June 19 meeting. One called the situation unfair because it charges more to single-family homeowners than to multiple units.

Cortese declines pay increase, vehicle allowance increase
In other District 8 news, Cortese sent a memo to Director of Finance Scott Johnson declining both the pay raise to council members and the increased vehicle allowance throughout the remainder of his term, which runs through December 2008. The council approved the raises on May 22.

“Although the city attorney has indicated that the amount of the increase could be donated to charity, the spirit of my opposition was to reinforce and acknowledge the many needs of the General Fund during this time of recurring annual deficits,” Cortese stated. “For this reason I am revoking the increase so that the total amount of the approved increase will remain in the city's budget during my remaining term of office.”