DISTRICT REJECTS YLTA REFERENDUM
The Yorba Linda Water District Board of Directors unanimously rejected the referendum presented by the
Yorba Linda Taxpayers Association. The District’s position is that a referendum is not a valid tool to challenge
water rates set through the Proposition 218 process.
YLWD’s new water rates were approved via Proposition 218 by 77% of the District and voted into effect
on September 17, 2015.
Proposition 218, entitled the “Right to Vote on Taxes Act,” expressly provides for an initiative to reduce or
eliminate taxes or government levies. To that point, nowhere in Proposition 218 language is the word
“referendum” mentioned. Proposition 218’s omission of the referendum process was intentional.
Although similar, there is a clear difference between an initiative and a referendum. An initiative proposes new
legislation, whereas a referendum seeks to repeal a recent government decision that has already been made.
More importantly, a referendum cannot be used to eradicate taxes or rates that support essential government
functions such as water and wastewater service.
Furthermore, the courts have ruled that an initiative cannot set water rates so that they are inadequate to pay
the costs of the water district according to the California Water Code.
Yorba Linda Water District is an independent special district, operating under Section 31007 of the California
Water Code which states:
The rates and charges to be collected by the district shall be so fixed as to yield an amount sufficient
to do each of the following:
a)
b)
c)
d)
Pay the operating expenses of the district.
Provide for repairs and depreciation of works owned or operated by the district.
Pay the interest on any bonded debt.
So far as possible, provide a fund for the payment of the principal of the bonded debt as it
becomes due.
According to its bond and other debt contracts, the District is required to collect rates and charges that will be at
least sufficient to yield Net Revenues equal to at least 110% of the Debt Service obligations for the reporting
fiscal year.
The Yorba Linda Water District has been mandated by the State of California to reduce its water deliveries by
36%. This mandate has resulted in a substantial reduction in projected District revenue. As a utility providing
essential services, the District cannot sustain, even for a short period of time, a substantial reduction in revenue
without impacting services vital to the public health, safety and well-being.
Via a third party, the District conducted a comprehensive Water and Sewer Rate Study by which the new rates
were set, to cover the cost of service and avoid defaulting of the District’s outstanding bond and letter of credit.
Without the new rates being effective on September 17, 2015 YLWD would have been in default on its debt
covenance obligation. In addition, a repeal of the rates will have other direct and immediate negative impacts
on the District’s credit and, consequently, on its ability to continue to provide essential services.
The bottom line: The law does not allow for either an initiative a referendum to put a government agency out
of business.
For legal counsel’s letter to YLTA, click here. For legal counsel’s memo to the District, click here.