HomeMy WebLinkAbout4 Robert Schwarz Letter Agenda Item #
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ublic Utility District
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: May 16, 2003
Subject: Request of Robert Schwarz
1. Why this matter is before the board:
Bob Schwarz wrote a letter to Ron Hemig asking that the board consider waiving the
increase in his electric facilities fees for Phase 2 of Pine Forest development. The board
agreed to agendize this item at the May 21 meeting
2. History:
The board approved an ordinance on March 5, 2003 increasing the District's electric
facilities fees. The new fee took effect on May 5, 2003. I got a call on May 6, 2003 from
Bob Schwarz asking that he be given a one day grace period to get his check in under
the old fee schedule. I told him I could not do that. He asked what options he had, and I
told him only the board can consider such a request. At that point he wrote the letter to
Ron Hemig. A copy of the letter is attached.
3. New information:
Joe Horvath had conversations with Mr. Schwarz's engineers regarding the increase in
fees. Joe is currently out of the office. He is due back on Monday. I will have him
prepare a memorandum for you detailing his conversations about the increase in fees.
We will also have a memorandum from Steve Gross regarding the legal implications of
the request.
FROM : PINEFORESTATTRUCFEE FAX NO. 925 602 1924 May. 06 2003 10:01AM Pl
PINE FOREST TRUCKEE, LLC
1380 GALAXY WAY•P. D. BOX 907 •CONCORD, CA 94522
PHONE: (925) 682.4830.FAX: (925) 682-4771
TO: ?,,
FAX: �o S� OF PAGES:
FROM: /k �l i
DATE: Sl y47
RE:
PINE FOREST TRUCKEE, LLC
1380 GALAXY WAY
CONCORD, CA 94520
TO: RON HEMIG - PRESIDENT TDPUD
FROM: ROBERT SCHWARTZ
DATE: MAY 6, 2003
FAX: 530.587.1189
RE: Electric Fee Increase
Dear Mr. Hemig:
T nm «mfinrt tT<io 1et+o.. .,.. T 1......e --.A-
increase in fees for power at the Pine Forest project. Please allow me to pay
my fees at the old rate because of the following reasons:
Phase 2 of Pine Forest consists of 55 home sites. The fee would increase
from. $79,000 to $145,000. If this was 1 or 2 parcels that would be one
thing, but you can see how large the number gets when 55 parcels are
involved.
One of the reasons this slipped between the cracks is that I just had back
surgery and have working from home. My secretary has been bringing
me work on a regular basis but no reminder of this increase, and I can't
remember seeing any warning of the increase or you know we would
have paid the original amount.
Please reconsider your position with regard to Pine Forest and I will have
a check to you Thursday morning. We have always paid all of our bills
and fees on time, and I guess because of my lack of attention do to the
back surgery I let this one go unnoticed.
korest
for your consideration.
wartz
PineAt Truckee
Agenda Item #4
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Memorandum
To: Board of Directors
From: Joe Horvath, District Electrical Engineer
Date: May 21, 2003
Date of Board Meeting: May 21, 2003
Subject: Request of Bob Schwartz
1. WHY THIS MATTER IS BEFORE THE BOARD
Bob Schwartz wrote a letter to the Board asking their consideration in waiving the
electric facilities fee increase for Phase 2 of the Pine Forest Project.
2. HISTORY
The electrical design for Pine Forest Phase 2 was completed and mailed to the
owner on March 31 of this year. At that time I contacted Martin Wood, the owner's
project manager for the Pine Forest project, and informed him that the Board had
increased the electric facilities fee rate and the developer was required to pay the
fees in advance. I told him that this new policy would take effect on May 5 so if
Mr. Schwartz wanted to save $66,000 (55 lots x$1200 per lot) in facilities fees, he
should pay the Development Agreement balance due of$79,391.17 by the May 5
deadline. Mr. Wood assured me that he would be in contact with the owner and
inform him of this change in policy. On or about May 5, 1 received a call from Mr.
Wood asking if Mr. Schwartz could pay the $79,000 balance so as to fall under the
old policy. I then asked Mr. Wood if he had informed Mr. Schwartz of the deadline as
we had previously discussed. He assured that he had informed the owner and had
even sent a spreadsheet detailing the cost differential.
3. NEW INFORMATION
By way of clarification, the original Development Agreement balance due of
$79,391.17 includes only connection fees (i.e. District labor and materials including
cable and transformers necessary to construct a line extension to serve the project),
as facilities fees were not collected from the developer under the old policy. The
facilities fees total of$66,000 (55 lots x $1200 per lot) is now payable, which brings
the new balance due from the owner to $145,391.17.
ATTORNEY-CLIENT PRIVILEGED AND,CONFIDENTIAL11E1130RA1#Jf�;ti�7
DATE> Mai9,2tlfl
TCI Board of Directors;TDPUD `
Peter Holzmeister;Gener41 Y[anager,,
1 ROM» Steve'Gros's
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RE Request for keductiori�of lecti i I. Background
At the May 7, 2003 the Board meeting, President Hemig read a letter dated May 6, 2003
that he had received from Robert Schwartz, Pine Forest Truckee, LLC. The letter requests that
Pine Forest Truckee, LLC be permitted to pay its electric fees at the District's old rate for phase
II of the Pine Forest at Truckee project. According to Mr. Schwartz,phase II of the project
consists of 55 parcels. Fees at the District's old rate would be $79,000.00 and fees at the new
rate would be $145,000.00, The District's new electric facilities fees became effective on May
5, 2003.
Mr. Schwartz states that one of the reasons that payment of the fees "slipped through the
cracks"was because he recently had back surgery. He states that he did not receive a reminder
of the fee increase and does not remember seeing any warning of the fee increase. He states that
Pine Forest Truckee, LLC has always paid all of its bills on time.
The District's new electric facilities fees were adopted by ordinance on or about March 5,
2003. In accordance with AB 1600, new facilities fees cannot become effective until at least
sixty(60) days after the passage of the ordinance adopting the fees. The District published
notice of the ordinance and the new fees as required by law. The new fees became effective on
May 5, 2003. 1 have been informed that District staff who has been working with the engineer
for Mr. Schwartz's project, specifically informed the project engineer of the new fee schedule
before it became effective.
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IL Question Presented
May the District reduce the electric facilities fees for a project to the District's previous
fee schedule when the project's developer did not pay the fees before the new fees became
effective?
III. Conclusion
While the District has the exclusive authority to establish the amount of fees it charges,
the District must set its fees in such a manner that is not arbitrary, capricious or unlawfully
discriminatory. Care must given that if a reduction in fees is granted, that such reduction does
not constitute a gift of public funds. Based on the facts presented in this case, it appears that
reduction in the amount of facilities fees would not be permissible under current law.
IV. Discussion
A. Rate Setting Authority of the District
If the Board approves Mr. Schwatz's request for a reduction in facilities fees, that
action could as establishing a different facilities fees rate for phase II of the Pine Forest At
Truckee project. Local public agencies, such as the District, have a great deal of latitude in
establishing the rates they charge customers for utility service and the rates established by them
are presumed to be reasonable, fair and lawful. However,publicly owned utilities have an
obligation to deal fairly with their customers and may only charge different rates to different
customers as long as there is a reasonable basis for doing so. Hansen v. City of San Buenaventura,
42 Cal.3d l l72 (1986). If there is no reasonable basis for the rate differential,then the rate maybe
determined by a court to have been made arbitrarily and capriciously, in which case it will be
unlawfully discriminatory.
Where courts have considered the reasonableness, and hence lawfulness, of differing rates,
they have considered the cost of service to be a legitimate reason to establish different rates.
Hansen, supra. In Hansen ,the California Supreme Court that a public utility may charge higher
rates to non-resident users than resident users, so long as there is a reasonable basis for doing so. In
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Hansen, the city owned and operated a water company which served city customers as well as
customers outside the city boundaries. Due to an increased demand from non-resident users, the
city substantially improved the water service. In order to do so, however, the city was required to
purchase additional water from a neighboring utility, at a greater cost than the city had previously
paid for water. The city was also required to expand and improve its existing facilities to handle the
increased level of service. Because of the impact caused by the increased water demand, the city
adopted a surcharge for its non-resident customers.
Similarly, the District adopted a two-tier electric rate structure several years ago in which it
adopted higher residential electric rate for non-permanent resident customers. The rationale for the
two-tier system is that non-permanent residents do not consume sufficient electric power to cover
the costs associated with maintaining the system to provide such power. Specifically, due to the
number of non-permanent residents in the District, the District's electrical system must be built to a
capacity that meets the demand on peak weekends and holidays created by the non-permanent
residential users. This increased demand necessarily creates additional costs to the District in both
size and financial investment in the electric system. However, if permanent and non-permanent
residents are charged the same rate for electric power, permanent residents bear a disproportionate
burden of the costs associated with the increased size of the system because they use a greater
number of kilowatt hours of electricity than non-permanent residents. Yet, it is the non-permanent
resident population which dictates the necessity for the increased size of the electric system. When
challenged in court by one of its non-permanent residential customer, the District prevailed and the
two-tier rate was upheld as reasonable.
In the present situation, the District had reviewed the new rates at least a couple of tires in
public meetings, conducted a public hearing on the new rates, adopted and published and ordinance
establishing the new rates and District staff specifically informed Mr. Schwartz' project manager of
the future increases in fees in time for Mr. Schwartz to pay the fees before the increase became
effective. Mr. Schwartz' basis for the reduction in his fees is that he was not aware of the pending
increase in fees and that it had "slipped through the cracks" while he was recovering from surgery.
Therefore, he claims to have missed the deadline to pay the fees at the old rate due to some sort of
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mistake, inadvertence or excusable neglect. This rationale is not the type of cost of service or
reasonable basis that the courts have found to justify a rate differential or a reduction in fees.
Therefore, I do not believe that the reduction would be permissible under current law.
B. Gift of Public Funds
If the District were to agree to reduce Mr. Schwartz' electric facilities fees, such action
could be viewed as a gift of public funds. The gift would be the forgiveness of the difference
between the current rate and the old rate. In determining whether an appropriation of public funds is
to be considered a gift, the primary question is whether the funds are to be used for a public or
private purpose. A mere incidental benefit to an individual does not make a "public" purpose a
"private" purpose. The determination of what constitutes a public purpose is primarily for the
governmental agency to determine and its discretion will not be disturbed or overruled by the courts
as long as the determination has a reasonable basis.
In the instant case, there has been no showing or suggestion that the reduction in fees would
serve some public purpose. (If, for example,the request was to delay the date of implementation of
the new rates for all District customers in order to provide more notice of the pending increase or to
reduce the fees for certain types of District customers, then it may be possible to find some public
purpose in the Board's action.) In this case, the benefit of the reduction would inure to a single
individual. The benefit to the individual does not appear to be incidental to that individual. The
benefit to the individual would be the sole and only benefit. Under these facts, it appears that there
would be no public benefit in granting the reduction and that the reduction would be a gift of public
funds.
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