HomeMy WebLinkAboutComplaint LAFCO USA Media Group I RICHARD R. PATCH (State Bar#088049)
GREGG M. FICKS (State Bar# 148093)
2 I-WEI WANG (State Bar# 195390)
COBLENTZ, PATCH,DUFFY & BASS, LLP
3 One Ferry Building, Suite 200
San Francisco, California 94 1 1 1-421 3
4 Telephone: (415) 391-4800
Facsimile: (415) 989-1663
5
Attorneys for Plaintiff/Petitioner
6 CEQUEL III COMMUNICATIONS I, LLC dba
CEBRIDGE CONNECTIONS
7
m
v 8 IN THE SUPERIOR COURT OF CALIFORNIA
v 9 IN AND FOR THE COUNTY OF NEVADA
am
J a 10 NEVADA CITY DIVISION
UM
. W
m o - I I CE UEL III COMMUNICATIONS I, LLC Case No.
Q m Q
6 dbaCEBRSDGE CONNECTIONS,
mu Go m 12 (1)LY REM COMPLAINT FOR
a <- Plaintiff and Petitioner, DETERMINATION OF VALIDITY OF
13 ACTION BY PUBLIC AGENCY;
vs.
0 a 14 (2) ACTION FOR DECLARATORY
LOCAL AGENCY FORMATION RELIEF; AND
10 ' 15 COMMISSION OF NEVADA COUNTY,
� o
oe (3)PETITION FOR WRIT OF MANDATE
< v 16 Defendant and Respondent.
(C.C.P. §§ 863, 1060 and 1085)
r�(0 17
t— .M
z � -
o 18 Plaintiff and Petitioner Cequel III Communications I, LLC, dba Cebridge Connections
m � 5
U m' 19 ("Plaintiff' or"Cebridge") brings this Complaint for Determination of Validity of Action by
T
20 Public Agency pursuant to Code of Civil Procedure Section 860 et seq. and for Declaratory Relief
21 to determine the validity of a change of organization regarding the service functions to be offered
0
22 by the Truckee Donner Public Utility District(the "District" or "TDPUD") approved by
23 Defendant and Respondent the Local Agency Formation Commission of Nevada County
24 ("Defendant" or "LAFCo"). Plaintiff further brings this Petition for Writ of Mandate for judicial
25 review of the conduct of Defendant in reviewing and approving the change of organization.
26 Plaintiff alleges that Defendant approved the change of organization in violation of
27 applicable law, including the Cortese-Knox Local Government Reorganization Act of 1985 (Gov.
28 Code § 56000 et seq.), its own policies promulgated under the aforesaid statute, its own prior
11859.001.0008.d I I
COMPLAINT&PETITION
I resolutions, and other applicable laws, statutes, rules and regulations, by: (1) authorizing services
2 that a public utility district is not authorized under law to provide; (2) authorizing bond financing
3 that will not qualify for tax-exempt status, although such status is necessary to achieve the
4 funding required for the project to be completed; (3) authorizing services without currently and
5 independently determining that the new service functions are needed; (4) authorizing services that
6 the District cannot provide on a fiscally solvent basis; and, (5) authorizing additional services,
7 although it is reasonably likely that existing ratepayers and/or taxpayers will have to subsidize, or
m
8 in fact have already subsidized, the new services. Plaintiff seeks a determination from this Court
9 that the change of organization as approved is invalid and void.
am
J a 10 THE PARTIES
UM
- .W
a o to I I 1. At the times relevant to this action, Defendant was a state mandated local agency
< W 0
m 6 12 organized and existing under the Cortese-Knox Local Government Reorganization Act of 1985
44z -
>_ M m 13 (the "1985 Act"),Division 3 (commencing with Section 56000) of Title 5 of the Government
U_
ma 14 Code, and was and is the agency responsible, among other things, for oversight and control of the
i o • 15 types and classes of services offered by the District, as further described below. In the
Uoo
1- N O
< 16 alternative, Defendant at certain times and with respect to certain matters relevant to this action,
PT ° 17 was governed by the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000
Z
J 0 - 18 (the "2000 Act"), which incorporated amendments to the 1985 Act but which retained its original
m , ?
Um 19 goals and policies. The 1985 Act and the 2000 Act are referred to herein generically as the "Act"
a 20 except where differentiation between the two versions is necessary.
w
z 21 2. At the times relevant to this action, Plaintiff, as successor-in-interest to USA
0
22 Media Group LLC, was and is a duly franchised cable television provider serving, among other
23 locations, the areas in and around Truckee, California, including the territories within the
24 geographical jurisdiction of LAFCo and the District. Cebridge has a direct and beneficial interest
25 in the provision of cable television and other broadband services in the said region, and, as a
26 TDPUD ratepayer(for electrical and water service) and a taxpayer within the geographical
27 jurisdiction of the District, has a direct and beneficial interest in the provision of services by the
28 District. Cebridge, further, has a direct and beneficial interest in LAFCo's compliance with the
11859.001.0008.d 2
COMPLAINT&PETITION
I Act, with its own policies as set forth in the LAFCo Policies adopted April 28, 1994 and as
2 amended at various times(the"Policies"), with its own prior resolutions, and with all other
3 applicable laws, statutes, rules and regulations.
4 3. At the times relevant to this action, the District, which is not a party to this action,
5 was a public utility district under the Public Utility District Act, Division 7 (commencing with
6 Section 15501) of the Public Utilities Code.
7 JURISDICTION AND VENUE
m
v 8 4. The jurisdiction of this Court is invoked under Code of Civil Procedure Sections
9 860 and 863; under Code of Civil Procedure Section 1060; and under Code of Civil Procedure
am
-' a 10 Section 1085.
JUV)
N
NO N 11 5. Venue in this county is proper: (a) under Code of Civil Procedure Sections 860
U —
QNm
m u 12 and 863, in that the principal office of LAFCo is located in this county; (b) under Code of Civil
y z
> 13 Procedure Section 393, in that the causes of action and the transactions and occurrences
a4v
a
p a a 14 underlying the petition arose in this county; and/or(c)under Code of Civil Procedure
N LL
= e ' 15 Section 394, in that LAFCo is a local agency situated in this county. Venue is proper in this
U 0 0
h N 0
< v 16 Division of this Court because the acts complained of, including, but not limited to, final
m 17 consideration and approval of the change of organization at a Special Meeting of LAFCo on
Z v
o 18 October 14, 2004, took place in Nevada City, California.
m �?
U m 19 GENERAL ALLEGATIONS
0
w 20 The District's Proposed Addition Of New Services,
i 21 6. The statutorily mandated goals of LAFCo, as defined in the Act, include ensuring
0
22 the orderly formation and development of local agencies such as the District. Under the Act,
23 when reviewing applications for a change of organization or proposals to change or add to the
24 types and classes of service offered by a public utility district such as the District, LAFCo must
25 make findings and determinations regarding, among other things, the adequate and efficient
26 provision of services, and must approve or disapprove the application proposal in a manner
27 consistent with the policy goals stated in the Act and with LAFCo's own Policies.
28
11859.001.0009.d 3
COMPLAIN(&PETITION
1 7. On or about October 21, 1999, the District applied to LAFCo for approval of the
2 District's proposal to expand the services it offers, from electrical and water supply, to include
3 certain broadband communications services to residents of the District (the "Proposal").
4 8. On or about January 18, 2001, LAFCo passed its Resolution 01-01 ("Resolution
5 01-01"). A true and correct copy of Resolution 01-01 is attached hereto as Exhibit A. Resolution
6 01-01 conditionally approved the Proposal to allow the addition of the Services, subject to several
m
7 express conditions that the District was required to fulfill before incurring additional debt to
8 finance the initiation of the Services, and before approval of Resolution 01-01 would become
9 effective, as follows:
am
J a 10 (a) Drafting and submitting to LAFCo a satisfactory Master Services Element,
N
m o 11 as that term is used in the Act, describing the Services to be provided;
< ma
to 6 m 12 (b) Adopting a satisfactory risk mitigation plan "adequate to ensure [the
,aZ_
r 13 District's] water and electrical service ratepayers will not be required to subsidize the new
LL
LL
Z y
a a 14 services"; and,
m <
x o • 15 (c) Obtaining franchise agreements with the municipalities and counties within
I- oo
o
m 16 the District's jurisdiction(specifically, the Town of Truckee,Placer County and Nevada County).
a � a
P N ° 17 9. Resolution 01-01 expressly provides that "[o]nly upon issuance of the Certificate
I- m
Z0
w 18 of Compliance shall LAFCO approval to provide the additional class of service be effective."
J o —
m , a
Um 19 Under the Act, an action by a local agency formation commission is complete and subject to
W20 judicial review only upon the issuance and recording of a certificate of completion. (current and
i 21 former Gov. Code § 56102;see also current Gov. Code § 56020.5 and current and former Gov.
0
22 Code § 56103.) As further detailed below, no such certificate was issued or recorded until at least
23 August 17, 2004. Further, on October 14, 2004, LAFCo determined, as described below, that an
24 amended certificate would be issued.
25 10. Resolution 01-01 required the District to comply with the above conditions within
26 two years or seek an extension of time from LAFCo in which to comply. In or around October
27 2002, the District requested and received an extension until January 2005 to complete the
28 conditions. To Plaintiffs current knowledge, LAFCo did not make a further and current needs
I I859.om.o008A 4
COMPLAINT&PETITION
I assessment or other specific findings regarding the community needs for such services at the time
2 it granted the requested extension.
3 The District's Steps to Complv with the Resolution 01-01 Conditions and LAFCo's
Response.
4
5 11. From approximately January 2003 through July 2004, the District submitted a
6 number of draft revisions to its master service element(the"MSE")reflecting the proposed
7 addition of the Services. The District stated it would offer, through a for-profit,third-parry
8 contractor,Eagle Broadband, Inc. ("Eagle"), broadband services including cable television, high-
9 speed internet access, telephone service (including Voice over Internet Protocol ("VoIP")
am
u 10 capabilities) and certain data transmission services (the "Services"). The MSE describes the
0
U) o (0 11 telephone service to be provided as an "indirect service," referring to the fact that the District was
U
< N 0)
m U 12 not actually going to provide the service but, instead, was proposing to lease its infrastructure
La
Y rc 13 capacity to Eagle. It did not provide LAFCo with a copy of the actual proposed agreement
a a 14 between the District and Eagle. The District has since deleted telephone service from the
N 4
= o • 15 Services which will be provided by Eagle, but has failed to identify how or if telephone service
U O O
I- N O
< v 16 will be provided, and how this change in service affects the viability of the Proposal, or the need
H ° 17 for it.
Zu_
Lj o N 18 12. From approximately May through August 2004, the District submitted a number of
m � a
Um 19 drafts of the risk mitigation plan (the "RMP"), which included a business plan (the"Business
T
K
W 20 Plan"), a preliminary term sheet and various draft trust documents relating to bond financing to be
i 21 issued by the District to raise capital for the costs of creating the broadband system contemplated
0
22 in the Proposal and a draft private placement memorandum (the "PPM") for the bond issue.
23 (a) The Business Plan and the PPM, like the MSE, at that time provided (and
24 currently continue to provide)that the District itself would not provide telephone service via the
25 broadband system. Instead, the Business Plan initially provided that Eagle would be the provider,
26 and that the District would lease its infrastructure capacity to Eagle for that aspect of the services.
27 Later, as described below, in response to Cebridge's request for reconsideration of the
28 Resolutions, the District revised the Business Plan such that it is now silent as to who, if anyone,
I]859M1M08A 5
COMPLAINT&PETITION
I will provide these services. The MSE nevertheless continues to describe telephone service as part
2 of the Services to be provided, and such services are essential for the District to meet its financial
3 projections under the RMP and related documents.
4 (b) The RMP, including the Business Plan and the PPM, call for the financing
5 of the Proposal through the issuance of a public debt instrument, the interest payments on which
6 would legally be exempt from federal and California taxation under the Internal Revenue Code
m
7 (the "IRC") and California Revenue and Taxation Code. (I.R.C. § 103(a); Rev. & Tax. Code
8 § 17133.)
9 (c) The Business Plan and PPM also contain certain financial projections
am
_J u 10 purporting to show that the Services could become revenue-positive within the first three years of
.W
No �_ 11 operation. These projections are based on unsubstantiated, unsupportable, and demonstrably
e
Q N N
ro o m 12 erroneous assumptions including: (i) assumptions regarding revenues to be earned from the
z
"- 13 provision of telephone service, despite the fact that the Business Plan now is silent as to who, if
a "
a 14 anyone, will provide such service; (ii) projections regarding the market share the District would
x o • 15 be able to achieve; (iii) assumptions regarding the number of premium cable subscribers the
voo
F N O
a w ro 16 District would be able to attract; (iv) assumptions regarding the amount of projected revenues
N N m 17 obtainable for installation services; (v) projections regarding market penetration in internet
� .m
z 0 -
w 18 service; and, (vi) projections regarding personnel costs and cost escalations.
J o V
m _
u m 19 (d) The Business Plan and the PPM, in describing the cable TV aspect of the
w20 Services,provide that Eagle would obtain television programming content and sell it at wholesale
z 21 to the District, which would in turn retail such programming services to its cable TV customers.
0
22 The Business Plan expressly describes such video programming customers as belonging to the
23 District.
24 13. On information and belief, on or around April 17, 2003, the District entered into a
25 franchise agreement with the Town of Truckee; and on or about January 13, 2004, the District
26 entered into a franchise agreement with Nevada County. Further, on information and belief, in or
27 around May 2004, the District applied for a franchise agreement with Placer County but had not
28
I I a5aom.000a.d 6
COMPLAINT&PETITION
I entered into such an agreement as of August 17, 2004. To Cebridge's current knowledge, the
2 District has not yet entered into any such agreement.
3 14. From approximately June to August 2004, Cebridge presented a number of
4 concerns to LAFCo about the draft MSE, Business Plan, and PPM that had been circulated.
5 These concerns included, but are not limited to, the following:
6 (a) Dr. Ron Rizzuto, a professor of finance at the Daniels College School of
7 Business at the University of Denver, at the request of Cebridge,performed an analysis of the
8 June 15, 2004 draft of the Business Plan and provided to LAFCo staff a detailed, written analysis
9 and critique of the Business Plan. He submitted his analysis to LAFCo in a letter dated July 16,
am
a 10 2004. In evaluating the viability and accuracy of the financial model, Dr. Rizzuto opined that the
UM
N0 U 11 overall financial strategy reflected in the Business Plan was flawed, that the financial model was
U -
Q N O
m 6 12 inaccurate and overstated and that many of the financial assumptions underlying the Business
to
>
a 13 Plan(including overstated market penetration projections and understated programming and
� �
Z) a a 14 personnel cost projections) were unrealistic. After the District revised the Business Plan and
m �
= o • 15 resubmitted it on or around July 25, 2004 to address some of the issues raised as to the earlier
U 0 0
1- N 0
< a 16 version, Dr. Rizzuto performed a further analysis and again provided a detailed written analysis to
a 17 LAFCo explaining his opinion that the Business Plan still failed to present a realistically
z U --
wZ In18 achievable or feasible financial model.
J � �
o CO 19 (b) Cebridge representatives, as interested members of the public, appeared at
W20 a number of hearings and meetings held by LAFCo and/or its Ad Hoc Committee on TDPUD
Z 21 Telecommunications (the "Committee"), including meetings held on June 17 and July 22,2004.
0
22 Cebridge reiterated its concerns regarding the viability of the Proposal and the Business Plan.
23 15. In a report dated August 11, 2004 (the "Report"), the Committee documented its
24 conclusions regarding the RMP, Business Plan and other materials submitted by the District and
25 whether it believed they satisfied the conditions set forth in Resolution 01-01, including the
26 following findings or lack of findings:
27 (a) The Committee accepted the premise of the RMP and Business Plan that
28 —because the broadband video services proposed to be added under the Business Plan are "other
11859.00 1.0008A 7
COMPLAINT&PETITION
. t
I means of communications" within the meaning of Public Utilities Code Section 16461 —the
2 District has the authority to provide the Services. The Committee failed to determine or consider,
3 however, whether, under Public Utilities Code Section 16487—which requires that public utility
4 districts like the District shall acquire, own or operate"[o]nly revenue producing utilities" —the
5 District has the legal authority to provide broadband video services if such services are not utility
6 services.
7 (b) The Committee also accepted the premise of the RMP that tax-exempt
m
v 8 bond financing would be available to fund the broadband project under the Business Plan then in
v
9 effect, which included delivery of telephone service by Eagle.
am
10 (c) In its evaluation of the RMP (including the Business Plan), the Committee
J U M
- .N
/n o N 11 recommended approval. The Report noted that "[i]t is possible to critique various elements,
< M6
m u 12 1 assumptions,formulae, revenue estimates, cost estimates of the TDPUD Telecommunications
� Z -
> M 13 Business Plan, and the ultimate profitability and cash flow performance" of the proposed new
LL
a
mx 14 business. However,rather than engage in any such critique or reach any conclusions regarding
a
x o • 15 such a critique, the Report simply provides that"[i]t is the role and responsibility of the elected
11-- � 0
< 16 TDPUD Board of directors,not LAFCo, to make the judgment on behalf of District residents
a � a
r N 17 1 whether the project should proceed"
I- .M
w z m 18 (d) At this time, the Committee's evaluation of the risk that the District's
Jo -
m
UD 19 ratepayers would have to subsidize the provision of the Services was limited to the question
p 20 whether the financing bond was adequately structured so as to prevent bondholders—in the
w
21 event the broadband business failed to generate sufficient revenue to support interest and/or
0
22 principal payments—from having recourse to the assets of the District. The Committee
23 apparently did not consider(or had not been told by the District)whether District assets were
24 already being used to subsidize the broadband project.
25 (e) As of the date of the Committee Report, the Business Plan stated that
26 "Eagle, not the District,will provide consumers with telecommunications services, including
27 VoIP [voice over Internet Protocol] services." In the Report, the Committee failed to consider the
28 legal effect of the fact that the District was not to provide the telephone services described in the
11 R>9.001.0005.d 8
COMPLAINT&PETITION
I Proposal on the District's authority to pursue the broadband project, or the availability of tax-
2 exempt financing.
3 (f) The Committee failed to consider or determine whether the District(and
4 hence its ratepayers) would be protected from loss, in the event of a bondholder suit based on
5 material misrepresentations in the PPM, including but not limited to representations regarding the
6 eligibility of the bonds for tax-exempt treatment, regarding the ability of Eagle to provide cable
m
7 television content at wholesale to the District's subscribers, and regarding the District's legal
v 8 authority to enter the cable television business as a non-utility service.
v 9 LAFCo's Approval of The Proposal.
am
� a 10 16. On or about August 11, 2004, after submission of the Committee Report to
Um
.N
c t9 11 LAFCo, LAFCo passed two resolutions, Resolution 04-09 and Resolution 04-15. True and
U —
N 4
m i m 12 correct copies of Resolutions 04-09 and 04-15 are attached hereto as Exhibits B and C,
> 13 respectively. Under Resolution 04-09 and Resolution 04-15, LAFCo concluded in summary
LL
U.
a a 14 fashion, among other things,that:
N �
z o - 15 (a) The MSE was consistent with LAFCo's sphere of influence plan for the
U 0 0
1— N 0
n¢. co 16 District and otherwise was satisfactory to LAFCo to demonstrate that the District can provide
0)
F n 17 adequate, reliable and efficient telecommunications services;
z 0 --
w m 18 (b) The terms and conditions set forth in Resolution 01-01 requiring
M � ?
t j m' 19 submission of a satisfactory MSE had been satisfied; and,
20 (c) The deadline by which the District must be able to provide all four Service
z 21 functions as requested under the Proposal and provisionally approved under Resolution 01-01
0
22 should be extended to January 1, 2008.
23 17. On or about August 17, 2004, LAFCo executed and issued a Certificate of
24 Compliance(the "Certificate of Compliance") certifying that the District"has complied with the
25 conditions set forth in Nevada LAFCo Resolution 01-01" and stating that"the District may offer
26 communications services as provided by Resolution 01-01." A true and correct copy of the
27 Certificate of Compliance is attached hereto as Exhibit D.
28
1 1859.001.0008.d 9
COMPLAINT&PETITION
1 18. By passing Resolutions 04-09 and 04-15 and by executing and issuing the
2 Certificate of Compliance, LAFCo completed its action as to Resolution 01-01 and rendered final
3 its approval of the Proposal, subject to Cebridge's Request for Reconsideration described
4 hereafter, and this Validation and Writ proceeding.
5 19. In executing its delegated authority and in carrying out its duties, LAFCo is
6 required by the Act to, among other things:
N
7 (a) Encourage "the orderly formation and development of local agencies" and
8 "obtain and furnish information which will contribute to the logical and reasonable development
v 9 of local agencies . . . so as to advantageously provide for present and future needs" (former and
am
a 10 current Gov. Code § 56301);
Um
- co
No m 11 (b) Ensure that local agencies "provide for the present and future needs" of the
u -
< mo,
m U m 12 communities they serve(former and current Gov. Code § 56301) such that affected populations
W
r a m 13 receive adequate, efficient and effective services from local agencies (former Gov. Code
'L4a
Z) a a 14 § 56841(b) and (d) (renumbered current Gov. Code § 56668(b) and (d)));
� 4
z o ' 15 (c) Consider the need, if any, for the governmentally "organized community
U00
F- N0
< W m 16 services"proposed to be added (former Gov. Code § 56841(b) (renumbered current Gov. Code
N 0 O 17 § 56668(b)));
Z
w W 0 —
m 18 (d) Consider the effect of the Proposal on "mutual economic and social
m , v
U m 19 interests" (former Gov. Code § 56841(c) (renumbered current Gov. Code § 56668(c)));
a
W 20 (e) Adopt written policies and procedures for the evaluation of proposals for
i 21 changes of organization in keeping with the policy goals and factors for consideration set forth
0
22 under state law (former Gov. Code § 56375(i), 0) (renumbered current Gov. Code § 56375(g)));
23 and
24 (f) Determine whether to approve or disapprove proposals in a manner
25 consistent with such written policies and procedures (current Gov. Code § 56375(a)).
26 20. Further, in determining whether or not to grant final approval to the Proposal,
27 LAFCo is required to follow its Policies (adopted pursuant to the Act), as those Policies existed at
28 the time the Proposal was first made to LAFCo (the version as amended February 15, 1996), and
11859.001.0008A 10
COM PLAINT&PETITION
I as they currently exist(the version as amended October 16,2003). Under these Policies, LAFCO
2 is required to, among other things:
3 (a) consider the District's ability to deliver "efficient and effective
4 governmental services" (Policy LC.3, as amended Feb. 15, 1996); or alternatively, consider the
5 District's ability to deliver"adequate,reliable and sustainable" services (id., as amended Oct. 16,
6 2003);
7 (b) determine that a financial analysis of the Proposal demonstrates that the
8 District can provide the proposed new services on a fiscally solvent basis (Policy V.13.6 as
a
9 amended Feb. 15, 1996; Policies V.C.1 and V.13.8 as amended Oct. 16, 2003);
am
10 (c) Cebridge moreover alleges that LAFCo was required by its own current
J U M
Noe 11 Policies, which were in operation at the time the Committee prepared its Report and LAFCo was
< N 0
m o 12 considering approval of the District's compliance with the conditions of Resolution 01-01,to
z
> " 13 prepare or obtain its own separate and independent financial analysis of the Proposal and to
q
O= m a 14 determine that such analysis demonstrated that the new services can be provided on a fiscally
4
i o • 15 solvent basis (Policies V.C=1 and V.13.8 as amended Oct. 16, 2003); and
U00
a w °w 16 (d) determine that the Proposal will not require the District's existing
P N ° 17 ratepayers for water and electrical services to subsidize (or that they have already subsidized) the
z �—
w m 18 new service (Policy V.C.3 as amended Oct. 16,2003).
J o —
m J V
O ' 19 21. LAFCo is also bound by public policy concerns, including those expressed by the
Um
p 20 Legislature in its 2000 passage of Assembly Bill 2300 (Stats.2000, ch. 723, section 1)which the
w
z 21 Legislature deemed to be of"great public importance"_ the need to "ensure that the California
0
22 municipal bond market remains a viable means of financing needed public improvements for all
23 levels of government in the state" and the"intent to protect the integrity of that market by
24 prohibiting certain risky practices in the issuance of bonds."
25
26 LAFCo's Abandonment of Its Duties to Make Determinations and Findings.
27 22. LAFCo issued the Certificate of Compliance in violation of the terms and
28 conditions set forth in its own Resolution 01-01. Neither Resolution 04-09 nor Resolution 04-15
11859.001.0008A 11
COMPLAINT&PETITION
I contain any resolution, determination or other finding by LAFCo after public hearing that the
2 District had in fact complied with all of the conditions set forth in Resolution 01-01. Specifically,
3 there is no record of a determination that the District satisfied the conditions requiring it to submit
4 a satisfactory "risk mitigation plan adequate to ensure [the District's] water and electrical
5 ratepayers will not be required to subsidize the new services" and to obtain franchise agreements
6 with Truckee, Placer County and Nevada County. In fact, the Certificate of Compliance shows
m
7 on its face that, as of the date of its issuance, a franchise agreement had not yet been reached with
8 Placer County, in violation of LAFCo's own Resolution 01-01. On information and belief, such
9 detemunations as to compliance with these conditions of Resolution 01-01, were not made, or if
am
a 10 made, were not made at or pursuant to any public hearing.
Um
m
N0 11 23. Moreover, LAFCo failed to make the determinations and/or to adequately consider
U -
< mm
m u m 12 the factors required, under the Act and the Policies, to be made and considered prior to approving
Wz
> " 13 the Proposal.
LL
a a 14 24. LAFCo abandoned its duties under the Act and the Policies in at least the
mLL
x o • 15 following respects;
U 0 0
1- N 0
< W o 16 (a) LAFCo failed to independently determine that the new services
17 contemplated under the Proposal are permissible utility services that the District is authorized to
zUj
�-
o N 18 provide. Instead, in January 2001 LAFCo requested, and ultimately accepted, an agreement (the
to 2
U m 19 "Utility Indemnification Agreement")from the District that it would indemnify and defend
w 20 LAFCo as to any claim or challenge that the Services do not fall into the category of"utility
z 21 service," as an inducement for its conditional approval under Resolution 01-01. A true and
0
22 correct copy of the applicable LAFCo staff reports and Utility Indemnification Agreement are
23 attached hereto as Exhibit E.
24 (b) LAFCo failed to independently determine that the issuance of tax-exempt
25 bonds—the availability of which is an assumption underlying the financial viability of the
26 Proposal as a whole—would be a legally viable option under the Business Plan then in place.
27 Specifically, LAFCo failed to consider or independently determine whether the proposed bonds
28 are "private activity bonds" under Section 103(b) of the IRC and similar provisions of the
11859.001.0008.d 12
COMPLAINT&PETITION
I California tax code, and therefore taxable, in light of all the facts cited herein, including, but not
2 limited to, the fact that under the Proposal as initially submitted,Eagle would provide all
3 telephone services to be offered over the broadband system.
4 (i) A bond that satisfies the"private business use" test of IRC
5 Section 141(b)(1) fails to meet the requirements for tax exemption. Section 1.141-3 of the
6 Treasury Regulations provides that private business use occurs if more than ten percent of the
m
7 proceeds of the bonds are used, directly or indirectly, in the trade or business of a non-
v 8 governmental person. A lease of bond financed property to a non-governmental person
9 constitutes such use. Treas. Reg. § 1.141-3(b)(3) (1997). Direct or indirect use also includes a
am
10 management contract that entitles the non-governmental service provider to compensation based
.M
o W 11 on the net profits from operating the bond-financed property. Treas. Reg. § 1.141-3(b)(4) (1997).
Qmm
m z m 12 The Internal Revenue Service has outlined a series of safe harbors for structuring compensation
Q
13 formulas under management contracts so as to avoid a distribution of net profits. Rev. Proc. 97-
L "
a a 14 13, 1997-1 C.B. 632. However, such qualifying management contracts may be recharacterized as
m4
= o ' 15 leases that result in private business use if the service provider has sufficient control over the
U 0 0
I— N O
< 16 property and/or bears the risk of loss from operating the property. Treas. Reg. § 1.141-3(b)(3)
N m m 17 (1997). In addition to these specific rules, Section 1.141-14 of the Treasury Regulations provides
z � -
.J Z18 that if a transaction has theprincipal u ose of transferring significant benefits of the tax-exempt
mo o - purpose g g P
Um 19 financing to the service provider, the Internal Revenue Service may disregard the specific rules
w20 discussed above and measure private business use on a basis that reasonably reflects the
i 21 economic substance of the arrangement.
0
22 (ii) Under the documents in existence at the time LAFCo passed
23 Resolutions 04-09 and 04-15 and executed and issued the Certificate of Compliance, Eagle
24 clearly was to use the bond financed property in its trade or business.
25 (iii) In the absence of tax-exempt bond financing, the District either will
26 not be able to raise sufficient financing or will carry a substantially higher debt burden that
27 invalidates all of its financial projections. In addition, the ineligibility of the bonds for tax-
28 exemption would render the PPM materially misleading.
1 I s59.o01.000fi.d 13
COMPLAINT&PETITION
I (c) LAFCo failed to independently determine: (i)that the Business Plan
2 describes services that are needed; and, (ii) that the District can provide such services on a fiscally
3 solvent basis. LAFCo instead approved the Proposal, including the Business Plan, after
4 concluding that "[i]t is the role and responsibility of the elected TDPUD Board of Directors, not
5 LAFCo, to make a judgment on behalf of District residents whether the project should
6 proceed . . . ."
N
7 (d) LAFCo failed to determine if it is reasonably likely that existing ratepayers
8 and/or taxpayers will have to subsidize—or in fact already have subsidized—the broadband
9 enterprise contemplated under the Proposal. For example, under the Proposal as it existed at the
am
J a 10 time LAFCo passed Resolutions 04-09 and 04-15 and executed and issued the Certificate of
U CI
^ .N
O N 11 Compliance, LAFCo,in effect, authorized the District to transfer assets of its existing power
th u -
aNN
m 6 m 12 operation—a run of fiber optic cable from Sacramento to Reno (the "Fiber Run")—to the
(a z
r 13 proposed broadband unit. The District valued the Fiber Run at $185,000 for purposes of
LL4v
LL
� a a 14 transferring the asset to the broadband unit, but has publicly represented (to LAFCo) that the fair
N LL
s 0 ' 15 market value of the Fiber Run is $7.0 million. LAFCo, therefore, approved the RMP and
U00
I_ ^ 0
< w m 16 Business Plan despite knowledge that the District's existing ratepayers would have, or already
tl � a
m 17 had, subsidized the new Services, by as much as $6.815 million— i.e.,the actual value of the
Z 0—
o 18 Fiber Run in excess of the original $185,000 under the then-current Proposal.
�j m 19 25. In addition, in an act further constituting an abandonment of LAFCo's statutory
w 20 and Policies-based duties of oversight, LAFCo accepted and entered into the Utility
i 21 Indemnification Agreement with the District prior to the passage of Resolution 01-01 and final
0
22 consideration of the Proposal. LAFCo accepted and entered into the Utility Indemnification
23 Agreement as an inducement to making the incomplete and improper findings described herein,
24 and as an inducement to passing Resolutions 01-01, 04-09, and 04-15 and for the issuance of the
25 Certificate of Compliance. Further, because LAFCo accepted the Utility Indemnification
26 Agreement from the District(which represents the interests of the District's ratepayers), LAFCo
27 compromised its independence and shifted the risk and the legal, practical, and financial
28 ramifications of its failure to make independent and sound determinations regarding the Proposal
(1959.001 000s.d 14
COMPLAINT&PETITION
I back to the very individuals it is mandated to protect—the ratepayers—further creating an
2 untenable conflict of interest between itself and the ratepayers, and directly affecting LAFCo's
3 independence. Although the District has described the Utility Indemnification Agreement as a
4 condition imposed by LAFCo for approval of the Proposal and passage of Resolution 01-01, the
5 Utility Indemnification Agreement was not mentioned or discussed in Resolution 01-01.
6 26. Alternatively,if LAFCo had made the appropriate determinations and considered
7 the appropriate factors as required by the above statutes, rules, policies, resolutions and other
m
v 8 governing authorities, it did so: (a) in a manner that was arbitrary, capricious, lacking in
9 evidentiary support, contrary to established public policy and/or unlawful; and/or(b) in a manner
am
u 10 that fails to demonstrate a rational connection between (i)the factors to be considered and
.m
m 0 W 11 determinations to be made; (ii)the decision to grant approval; and, (iii) the purposes of the Act
N U —
< mm
m 6 m 12 and Policies.
� z
" 13 Cebridge's Request for Reconsideration and LAFCo's Reconsideration of the
" Proposal.
� aQ 14
m �
x o • 15 27. After LAFCo passed Resolutions 01-01, 04-09 and 04-15 and executed and issued
U 0 0
I_ ^ O
< W m 16 the Certificate of Compliance, and within the time prescribed by the Act(former Gov. Code
a. v
n ° 17 § 56857 and/or current Gov. Code § 56895), Cebridge submitted a written request for
Z u
o 18 reconsideration (the "Request") to LAFCo. The Request summarized Cebridge's concerns
m � ?
Um 19 regarding LAFCo's actions in passing Resolutions 01-01, 04-09 and 04-15 and in executing and
20 issuing the Certificate of Compliance, focusing on the above-described failures of LAFCo to
W
i 21 comply with its own Policies and the Act to make findings and determinations as to: (a) whether
0
22 the new services are permissible utility services that the District is authorized to provide;
23 (b) whether the proposed bonds qualify for tax-exempt status; (c) whether the Business Plan
24 describes services that are needed; (d) whether the Business Plan describes services that can be
25 provided on a fiscally solvent basis; and, (e) whether it is reasonably likely that existing
26 ratepayers and/or taxpayers will have to subsidize the District's provision of new services.
27 28. Cebridge delivered the Request to LAFCo on or about August 24, 2004. The time
28 in which an interested person under Code of Civil Procedure Section 863 may bring an action to
11859.001.0008.d 15
COMPLAINT&PETITION
. .................... ... ..
I determine the validity of LAFCo's actions in passing Resolutions 01-01, 04-09 and 04-15 and
2 executing and issuing the Certificate of Compliance was tolled during the pendency of the
3 Request,pursuant to former Government Code Section 56857 and/or current Government Code
4 Section 56895.
5 29. LAFCo initially placed the Request on its agenda for a regular meeting held on
6 September 16, 2004. LAFCo first considered the Request at this meeting, but continued
7 consideration of the Request until October 14, 2004.
8 30. Just prior to the October 14, 2004 continued bearing on the Request, the District
9 made certain modifications to the Proposal, apparently in response to some of the specific
am
� U< concerns
10 conces raised by Cebridge's Request. However, the changes failed to render the proposal
_j M
� W
U) 0 N 11 fiscally or legally sound. The primary modifications were:
U) u
< 0
6 12 (a) Conceding the validity of Cebridge's concerns regarding subsidization by
Z
13 existing ratepayers, the District amended its Proposal to provide that the Fiber Run would no
U_ q
IL -
:) Z X 14 longer be transferred, at far below market value, to the District's broadband unit. Instead, the
Z 6 • 15 District proposed to lease the Fiber Run to the broadband unit, but at a lease charge based on the
000
i- N o
< 00 16 Fiber Run's book value. The District estimates that the book value for leasing the Fiber Run is
(L
N
F- M 17 only $9,529 per year. The minimum fair market value of such a lease would be more than eight
Z
Lj Z
_j 18 times that amount, or nearly $83,000 per year. Therefore, for the same reason that the original
0
U 19 Proposal provided an improper subsidy, the amendment fails to eliminate the subsidy since, like
20 the originally proposed transfer(which the District concedes was improper), the current version
Z 21 of the Proposal requires the District's existing ratepayers to subsidize the new services by as much
0
22 as $73,47 1.00 per year—i.e., the actual lease value of the Fiber Run lease in excess of the lease
23 at book value—for the entire lease term. Only a transfer at fair market value protects the
24 existing water and electric ratepayers.
25 (b) Acknowledging the validity of Cebridge's concerns regarding the
26 availability of tax-exempt bond financing for the Proposal, the District amended its agreement
27 with Eagle so that Eagle will no longer provide telephone services. However, the amendment
28 fails to eliminate the underlying problem. The TDPUD Proposal now is silent as to who, if
11859,001.0008,d 16
COMPLAINT&PETITION
S
1 anyone,will provide these services, and yet the District's financial projections underlying the }
2 Proposal rely on revenue from these services as a necessary component of the Project's financing. t
3 Under the amended agreement, therefore, one of two equally unacceptable consequences must
4 result: either (i)the bonds the District proposes to issue in conjunction with the Proposal will not
5 be tax-exempt, since some third parry will have to provide telephone services as previously x
6 contemplated under the Business Plan; or(ii)the Business Plan cannot be funded on a fiscally
7 solvent basis, since telephone services will not be provided, and revenue from such services are
m
v 8 necessary in order to meet the Business Plan's financial projections.
9 3 L Prior to the October 14, 2004 continued hearing on the Request,the Committee
0
am
-' a 10 considered the Request as well as the District's modifications to the Project,including those
J U
_m
ID 11 described above. The Committee drafted "Findings and Determinations" that purportedly
Q m 01
M � m 12 addressed the objections raised by Cebridge in the Request, and prepared a Committee
,azm
r M 13 Recommendation to LAFCo that recommended that LAFCo confirm its original decision in
aLLa
a
� m x 14 approving the Proposal, adopt the Committee's findings and determinations, adopt amend
a
i o • 15 versions of Resolution 04-09 and 04-15, and execute an amended Certificate of Compliance. The
i- No
a W m 16 Findings and Determinations failed to consider or find, among other things, whether any current
ark
Pi co 0) 17 need exists for the proposed services. A true and correct copy of the Committee's findings and
Z0
w m 18 determinations are attached hereto as Exhibit F.
J o —
m V
U m 19 32. On October 14, 2004, LAFCo held the continued hearing on the Request. At that
he Committee Recommendation, adopted the Committee's findings
20 hearing, LAFCo accepted t
21 and determinations, adopted amended versions of Resolution 04-09 and 04-15 (the "Amended
0
22 Resolutions"), and determined that it would execute an Amended Certificate of Compliance.
23 true and correct copy of the proposed amended version of Resolution 04-09 is attached hereto as
24 Exhibit G. A true and correct copy of the proposed amended version of Resolution 04-15 is
25 attached hereto is Exhibit H. A true and correct copy of the proposed amended Certificate of
26 Compliance attached hereto is Exhibit L A true and correct copy of a recommendation of staff
27 regarding an amendment to Resolution 04-09 is attached hereto as Exhibit J. At the October 14,
28 2004 hearing LAFCO adopted Alternative I of the two amendments proposed by staff.
17
11859.001,0008.6
COMPLAINT&PETITION
1 33. LAFCo's actions in adopting the Committee's findings and determinations, in
2 adopting the Amended Resolutions 04-09 and 04-15, and in executing the Amended Certificate of
s
3 Compliance were in violation of the terms and conditions set forth in its own Resolution 01-01, in
4 that LAFCo again failed to adequately consider the factors required under the Act and the Policies
5 to be made and considered prior to denying the Request, including whether: (a)the broadband
6 services under the Proposal are being offered as utility services that the District is authorized
7 under law to provide; (b) the proposed bond financing will qualify for tax-exempt status; (c) the
m
8 new services currently are needed; (d) the District can provide the new services on a fiscally
v
9 solvent basis; and (e) the District's ratepayers are not being, or will not be, forced to subsidize the
am
-' a 10 new services through the below fair-market leasing of the Fiber Run or otherwise.
J U M
. l0
N 0 m 11 34. Alternatively, if LAFCo did make the required determinations and consider the
Q N 0
m d co12 appropriate factors when considering the Request and adopting the Amended Resolutions and
,aZ _
> X 13 executing and issuing the Amended Certificate of Compliance, it did so (a) in a manner that was
UL 4 a
a 14 arbitrary, capricious, lacking in evidentiary support, contrary to established public policy and/or
x o • 15 unlawful, and/or(b) in a manner that fails to demonstrate a rational connection between: (i)the
� No
a
w m 16 factors to be considered and determinations to be made; (ii) the decision to deny the Request and
1 0 17 to affirm its approval of the Proposal; and, (iii) the purposes of the Act and Policies.
I- . m
z � -
m - 18 35. Further, LAFCo's adoption of the Amended Resolutions and execution an
Jo -
m � ?
O ' 19 issuance of the Amended Certificate of Compliance violated applicable law, including the 1985
Um
p 20 Act, LAFCo's own Policies and prior resolutions, and other applicable laws, statutes, rules and
w
i 21 regulations, in that those actions: (a) authorized addition of services that a public utility district is
0
22 not authorized under law to provide; (b) authorized bond financing that will not qualify for
23 tax-exempt status, although such status is necessary to achieve the funding required for the
24 project to be completed; (c) authorized addition of services without currently and independently
25 determining that the new service functions are needed; (d) authorized services that the District
26 cannot provide on a fiscally solvent basis; and, (e) authorized addition of services although it is
27 reasonably likely that existing ratepayers and/or taxpayers will have to subsidize the provision of
28 new services. Further, LAFCo's actions were improper, not valid, and voidable because LAFCo
18
11859.001.0008.d
COMPLAINT&PETITION
1 took such actions while operating under a conflict of interest between LAFCO and the District
2 and its ratepayers, in that LAFCo was party to the Utility Indemnification Agreement under
3 which it shifted the risks and costs associated with its improper actions back to the ratepayers
4 who is mandated to protect.
5 FIRST CAUSE OF ACTION
6 (Action by Interested Person to Determine Validity of Proceedings)
m
7 36. Cebridge realleges and incorporates by reference the prior allegations of this
8 Complaint as though fully set forth herein.
9 37. Cebridge is an interested person within the meaning of Code of Civil Procedure
am
_J 10 Section 863, in that: (a) it, including its predecessors-in-interest, has been a long-standing
.10
m00 11 provider of cable television and other broadband services within the geographical jurisdiction of
U -
Q N N
m 6 co the District whose continued business and operation will be unfairly, improperly, and unlawfully
'b z _
13 disrupted if LAFCo's approval of the Proposal is validated; (b) it is a ratepayer within the
LL
Z)
N a 14 geographical jurisdiction of the District whose rates for water and electrical services will be or are
x o ' 15 threatened to be substantially affected if LAFCo's approval of the Proposal is validated; and, (c) it
UOo
F N p
< a 16 is a taxpayer within the geographical jurisdiction of the District whose tax liability will be or is
N N 17 threatened to be substantially affected if LAFCo's approval of the Proposal is validated.
zU
w m 18 38. LAFCo has not brought an action to determine the validity of its actions in passing
-1 0 �
M
Um 19 Resolution 01-01 or Amended Resolutions 04-09 and 04-15, or in executing and issuing the
w 20 Amended Certificate of Compliance pursuant to Code of Civil Procedure Section 860 and
LL
z 21 Government Code Section 56103. Accordingly, as an interested person under Code of Civil
0
22 Procedure Section 863, Cebridge is qualified to bring this action.
23 39. Cebridge brings this cause of action in rem against LAFCo and against all
24 interested persons under Code of Civil Procedure Sections 860 through 870.5.
25 40. Based on the foregoing, Cebridge seeks and is entitled to a Declaration by the
26 Court determining that:
27 (a) LAFCo's adoption of Resolution 01-01 was not a proper exercise of the
28 powers and duties of LAFCo, was not lawfully adopted, and is not valid;
11859.001.0008A 19
COMPLAINT&PETITION
1 (b) LAFCo's adoption of Amended Resolution 04-09 was not a proper exercise
2 of the powers and duties of LAFCo,was not lawfully adopted, and is not valid;
3 (c) LAFCo's adoption of Amended Resolution 04-15 was not a proper exercise
4 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid; and
5 (d) The Amended Certificate of Compliance was improperly and/or
6 improvidently executed and issued by LAFCo, and is not valid.
7 SECOND CAUSE OF ACTION
(Action for Declaratory Relief)
a
v 9 41. Cebridge realleges and incorporates by reference the prior allegations of this
am
m 10 Complaint as though fully set forth herein.
U0) 11 42. As a potential competitor of the proposed business unit contemplated by the
'a z CD12 various written instruments (including without limitation the Proposal, the Business Plan,
} m 13 Resolution 01-01, Amended Resolutions 04-09 and 04-15, and the Amended Certificate of
w
o a < 14 Compliance), and furthermore as a ratepayer and a taxpayer within the geographical jurisdiction
U o o 15 of the District, Cebridge will be banned by LAFCo's approval of the Proposal under its current
1- 0
aa. v 16 terms, including by reason of the unlawful subsidy that would thereby be given, in effect, by the
I- M 17
District to a private enterprise.
Z 0
w ? N 18
o 43. An actual controversy has arisen between Cebridge and LAFCo in that the parties
tj m 19 contend as follows.
w 20 44. It is necessary and appropriate that the Court declare the rights and obligations of
z 21 the parties. An actual controversy exists between the parties, in that Cebridge contends, and
0
22 LAFCo denies, that:
23 (a) LAFCo's action in adopting Resolution 01-01, Amended Resolutions 04-09
24 and 04-15, and the Amended Certificate of Compliance violate applicable law, including the
25 Cortese-Knox Local Government Reorganization Act of 1985 (Gov. Code § 56000 et seq.),
26 LAFCo's own policies promulgated under the aforesaid statute, its own prior resolutions, and
27 other applicable laws, statutes, rules and regulations,by: (i) authorizing addition of services that a
28 public utility district is not authorized under law to provide; (ii) authorizing bond financing that
I I 859.001.0008.d 20
COMPLAINT&PETITION
........... ....... .. ......
I will not qualify for tax-exempt status, although such status is necessary to achieve the funding
2 required for the project to be completed; (iii) authorizing addition of services without currently
3 and independently determining that the new service functions are needed; (iv) authorizing
4 services that the District cannot provide on a fiscally solvent basis; and, (v) authorizing addition
5 of services although it is reasonably likely that existing ratepayers and/or taxpayers will have to
6 subsidize the provision of new services. Plaintiff seeks a determination from this Court that the
7 change of organization as approved is invalid and void. Further, LAFCo's actions were improper,
8 not valid, and voidable because LAFCo made them under a conflict of interest between LAFCO
9 and the District and its ratepayers as LAFCo was party to the Indemnification Agreement under
am
_J 4 10 which it shifted the risks and costs associated with its improper actions to the ratepayers who it is
U M
� .w
U) 0 11 mandated to protect.
U) U
< 0
6 12 (b) LAFCo's adoption of Resolution 0 1-0 1 was not a proper exercise of the
Z
13 powers and duties of LAFCo, was not lawfully adopted, and is not valid;
LL q
L. -
Z
X< 14 (c) LAFCo's adoption of Amended Resolution 04-09 was not a proper exercise
15 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
U 0 0
F_ N 0
< w 00 16 (d) LAFCo's adoption of Amended Resolution 04-15 was not a proper exercise
17 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
Z
ZM
18 (e) The Amended Certificate of Compliance was improperly and/or
0
19 improvidently executed and issued by LAFCo, and is not valid.
20 45. Cebridge is informed and believes, and thereon further alleges, that LAFCo
Z 21 contends that its conduct—including the considerations taken and determinations made, in
0
22 adopting Resolution 01-01 and Amended Resolutions 04-09 and 04-15, and in executing and
23 issuing the Amended Certificate of Compliance—was lawful, proper and a valid exercise of its
24 discretion; that Resolution 01-01 and Amended Resolutions 04-09 and 04-15 are valid; that the
25 Amended Certificate of Compliance was validly executed and issued; and that, accordingly, no
26 further action or proceedings need be taken by LAFCo for final approval of the Proposal.
27 THIRD CAUSE OF ACTION
28 (Petition for Writ of Mandate)
11859,001.0008.d 21
COMPLAINT&PETITION
s
1 46. Cebridge realleges and incorporates by reference the prior allegations of this s
2 Complaint as though fully set forth herein.
3 47. LAFCo is "an inferior tribunal, corporation,board or person" subject to the
4 jurisdiction of this Court's writ of mandate power under Code of Civil Procedure Section 1085.
5 48. By engaging in the above described conduct and omissions, LAFCo has failed to
6 perform an act or acts which the law specifically enjoins, including by abandoning its duties
7 under the laws, rules, policies and resolutions described above,by: (a) failing to make required
m
8 independent and sound determinations and findings; (b) adopting Resolutions 01-01, amended
c
9 Resolutions 04-09 and 04-15, and executing and issuing the Amended Certificate of Compliance
am
a 10 described herein; (c) accepting and entering into the Utility Indemnity Agreement; and,
SUM
m o (0 11 (d) granting final approval of the Proposal.
< M
to m 12 PRAYER FOR RELIEF
m
�
W
} rc 13 WHEREFORE, Cebridge prays for entry of judgment as follows.
U-
a
� m x 14 1. On the First Cause of Action, that the Court enter judgment determining that:
a
T o • 15 (a) LAFCo's adoption of Resolution 01-01 was not a proper exercise of the
Uoo
F M o
a w ro 16 powers and duties of LAFCo, was not lawfully adopted, and is not valid;
n m M 17 (b) LAFCo's adoption of Amended Resolution 04-09 was not a proper exercise
Z � ^
w Z 18 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
Jp -
m , a
O ' 19 (c) LAFCo's adoption of Amended Resolution 04-15 was not a proper exercise
Um
a 20 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
W
i 21 (d) The Amended Certificate of Compliance was improperly and/or
0
22 improvidently issued by LAFCo, and is not valid; and,
23 (e) Before issuing any future certificate of compliance regarding the Proposal,
24 the Business Plan and/or the terms and conditions of Resolution 01-01: (i)the new services
25 contemplated under the Proposal must be permissible utility services that the District is
26 authorized under law to provide; (ii) the bonds described in the Proposal must qualify for tax-
27 exempt status; (iii) the Business Plan must describe services that currently are needed; (iv)the
28 Business Plan must describe services that the District can provide on a fiscally solvent basis;
1]859.001 MOSA 22
COMPLAINT&PETITION
x
K
♦ i
f
I (v) existing ratepayers and/or taxpayers will not have to subsidize the broadband enterprise #
2 contemplated under the Proposal; and (vi)LAFCo must not be a party to any indemnification
t
3 agreement related to these matters with the District or any other parry.
4 2. On the Second Cause of Action, that the Court enter judgment declaring that: a
3
5 (a) LAFCo's adoption of Resolution 01-01 was not a proper exercise of the
6 powers and duties of LAFCo, was not lawfully adopted, and is not valid; r
s
7 (b) LAFCo's adoption of Amended Resolution 04-09 was not a proper exercise
m
v 8 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
option of Amended Resolution 04-15 was not a proper exercise
q (c) LAFCo's ad
v
am
J a 10 of the powers and duties of LAFCo, was not lawfully adopted, and is not valid;
—lure
o W 11 (d) The Amended Certificate was improperly and/or improvidently issued by
a m m mom 12 LAFCo, and is not valid; and,
,a Z
> rc 13 (e) Before issuing any future certificate of compliance regarding the Proposal,
U.
a x 14 the Business Plan and/or the terms and conditions of Resolution 01-01: (i) the new services
=o • 15 contemplated under the Proposal must be permissible utility services that the District is
I- Wo
a W w 16 authorized under law to provide; (ii)the bonds described in the Proposal must qualify for tax-
d a
N m 17 exempt status; (iii) the Business Plan must describe services that currently are needed; (iv)the
Z
W z 18 Business Plan must describe services that the District can provide on a fiscally solvent basis;
J 0 -
m V
o ' 19 (v) existing ratepayers and/or taxpayers will not have to subsidize the broadband enterprise
Um
w
20 contemplated under the Proposal; and (vi)LAFCo must not be a party to any indemnification
21 agreement related to these matters with the District or any other party.
0
22 3. On the Third Cause of Action, that the Court issue a peremptory writ of mandate
23 to LAFCo directing that, before issuing any future certificate of compliance regarding the
24 Proposal, the Business Plan and/or the terms and conditions of Resolution 01-01: (i)the new
25 services contemplated under the Proposal must be permissible utility services that the District is
26 authorized under law to provide; (ii) the bonds described in the Proposal must qualify for tax-
27 exempt status; (iii) the Business Plan must describe services that currently are needed; (iv) the
28 Business Plan must describe services that the District can provide on a fiscally solvent basis;
11859.007 0008.d 23
COMPLAINT&PETITION
r
1
I (v) existing ratepayers and/or taxpayers will not have to subsidize the broadband enterprise
2 contemplated under the Proposal; and (vi) LAFCo must not be a parry to any indemnification
3 agreement related to these matters with the District or any other party.
4 4. On all causes of action as to which Plaintiff prevails,that the Court award to
5 Plaintiff its reasonable attorneys'fees under Code of Civil Procedure Section 1021.5.
6 5. On all causes of action, that the Court award costs of suit to Plaintiff.
7 6. That the Court order such other and further relief as it deems proper.
m
" 8 Dated: October , 2004 COBLENTZ, PATCH, DUFFY &BASS, LLP
v —
v
9
a a 10 By:
J o n RICHARD R. PATCH
-0 Attorneys for Plaintiff
m 1 I CEQUEL III COMMUNICATIONS I, LLC
pp - OD12 dba CEBRIDGE CONNECTIONS
,a Z
m
>- 13
p= aa 14
N W
= 6 15
U00
F- N O
EL a 16
Nam 17
Z u
W ZN 18
J O _
m � a
om 19
U
T
20
W
LL
W 21
2
O
22
23
24
25
26
27
28
11859.001.0008.d 24
COMPLAINT&PETITION