COTTONWOOD -While the Cottonwood Council has delayed by a couple of months the implementation of an 8 percent water rate increase, the city will not also ask for a hike in rates for the independent wastewater utility.
The second rate adjustment vanished with little fanfare last week, all because of a complicated bit of ballot wording 23 years ago.
City Attorney Steve Horton found the issue while preparing the legal process for the rate adjustment.
Back in 1987, when the city held an election to launch a wastewater system, it placed three questions on the ballot. Horton says that third question locked up the use of excess revenues from the "sewer bonds."
The first question on the ballot asked for authorization to enter the wastewater business and for the construction of the system.
The second question asked for authorization to issue $10 million worth of bonds to build the system.
In part, the third question restricts the proceeds of the resulting sales tax to be used only for "construction, reconstruction, improvement, extension, operation and maintenance of the wastewater system, acquisition of rights-in-land, properties, facilities and equipment necessary for the operation of said sanitary sewer system, payment of any type of obligation incurred for any of the foregoing and all professional, legal, financial, accounting, engineering and other necessary costs incurred in connection therewith."
That would preclude expenditures for any other activities. Since the sunset of the bond issue, the excess reserves had been proposed to be used for capital improvements and operations, as the 1-percent sewer tax is today.
"Basically, it said that the excess revenues (from the sewer tax) is only to be used for the wastewater system," Horton said.
But the attorney believes there was a flaw in the ballot measure: "There was a Supreme Court case that said that general law cities like ours can ask the voters what the law says we can ask, so we can't pick and choose what we can ask the voters on a ballot."
Horton said the first two ballot questions were OK. "Those questions have to do with creating the wastewater system in the first place and issuing revenue bonds for its construction. Those were perfectly fine."
But, Horton said, there is reason to believe that Cottonwood should not have placed the third question on the ballot at all in 1987.
"So even though the language itself suggests that we can only use the money that we derive from that tax for the wastewater system, the measure may not actually be binding, because it is a question that we should not have asked."
On the other hand, Horton advised that neither the council nor this city would want to challenge the issue in court. "Whether or not we were supposed to ask the question, we did so and the voters approved the question. So the stronger argument is that it is a done deal."
For now, the council has accepted "that is what the citizens said" in 1987, Manager Doug Bartosh explained.
The bond ended after 20 years. There is no money still derived from the "sewer tax," because the 1-percent tax is now instead re-enacted for less restrictive purposes.
But there remains a substantial reserve in the account of just more than $13 million collected when it was still a sewer tax, according to Finance Director Rudy Rodriguez.
Horton said the issue was not noticed until now because bond documents don't have the same restrictions that the ballot measure did. They just said that whatever excess you have after retiring bonds may be dedicated to any other purpose.
