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Lompoc Utility Commission Rejects ‘Flawed’ Methodology to Assess $4.35 Million in New Fees

Lompoc’s five-member public advisory utility commission sharply criticized a new city plan Monday evening that proposes charging municipal utility ratepayers and Lompoc Airport users $4.35 million in fees for operational costs of other city departments in the current two-year budget.

The proposed fees would assess the city’s user-funded enterprise departments — water, wastewater, solid waste, electric, broadband and the Lompoc Airport — charges to reimburse the city’s General Fund for services including public safety, street maintenance and capital improvements to city facilities.

“I think that whole methodology of determining what the reimbursement should be doesn’t hold water,” said John Linn, Utility Commission vice chair and former Lompoc mayor.

“It’s arbitrary and capricious. It’s a flawed method.”

Commissioners also objected to creating new fees for municipal utilities after adopting a schedule of steep rate increases in 2013 for water and wastewater that would nearly double ratepayers’ bill in five years.

“We raised the rates so we could fix the infrastructure, not to send it all back to City Hall,” said Bob Holloway, longtime utility commissioner and current chairman.

“That’s the people’s money. We have to be transparent here and I want to know where all that money is going.”

Holloway said he believed the rate increases in 2013 were justified because of the need to replace miles of aging water and sewer pipes.

“If they’re going to take the money away, they should put in a fund that takes care of the streets and the water and the sewer and not give it back to City Hall.”

The three proposed fees are based on complex formulas that tie reimbursement costs to percentages of other departments’ budgets rather than the actual cost of the services provided. The fees would increase each two-year budget cycle.

Fees for public safety would be based on the market value of each enterprise department’s physical plant assets, for instance, rather than the actual cost of providing services.

Linn also criticized the market values listed for physical plant assets, noting that the total value was 38-percent higher overall than the value listed on the city’s balance sheet for the same assets. The higher market value would allow the city to increase what it could charge utility ratepayers, Linn said.

Under the proposed methodology, solid waste would be required to pay $9,244 per year for public safety, while the wastewater fund would pay $687,196 annually.

“It is clear that the assessed value method does not even come close to providing an equitable public safety cost distribution,” Linn said.  

Melinda Wall, financial services manager, said the reimbursement methodology was “defendable and supportable in court” and the consultant paid to develop the methodology has worked with more than 300 government agencies.

Holloway and Linn both disputed the assumptions used in the two-part methodology for determining street maintenance charges to each department based on road surface and subsurface wear and tear.

Linn said the street maintenance fees “struck me as completely out of whack. The report overstates reimbursement to the city by a factor about 10 times the actual road mileage. We don’t want utilities to overpay.”

Wall said the amounts are based on an average from other cities. 

“Then they need to come to Lompoc,” Holloway said.

Commissioner Ken Ryan, a former city employee, said Lompoc’s utility infrastructure “is already falling apart. It’s very frustrating when these people come and ask for money to repair our infrastructure and then they throw it out the door.

“They need to get with it and get this stuff fixed because they’re going to have some big problems out there.”

Commissioners voted unanimously to recommend the City Council reject the fees as proposed and re-evaluate each of the three methodologies used to set fees that are more closely aligned with the cost of services.

The proposed charges were initially presented to the City Council for approval on March 15, but council members voted to delay taking action for 45 days until both the airport and the utility commission could review the report and new fees.

The $4.35 million proposed in new fees would be in addition to more than $10 million over a two-year budget the user-funded enterprise departments pay the city’s General Fund for administrative support.

HF&H Consultants, a Walnut Creek consulting firm that specializes in rate-setting plans for government entities, developed the $30,000 reimbursement methodology study.

Noozhawk contributing writer Carol Benham is a longtime local journalist who lives in Lompoc. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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