Howard Jarvis Will Challenge Fullerton’s Illegal Water Tax

It looks like our city may be in for another lawsuit. Check out this letter that was sent from the Howard Jarvis Taxpayers Association just before Turkey Day (emphasis mine):

Mr. Joe Felz, City Manager
City of Fullerton
303 W Commonwealth Avenue
Fullerton,CA 92832

Re:  Water Department “In Lieu Fees”

Jack Dean, a friend of the Howard Jarvis Taxpayers Association, has brought to our attention that the City of Fullerton pads the rates charged to water customers in order to transfer funds from the Water Fund to the General Fund.  These transfers appear in the City’s Budget under Water Fund expenses and General Fund revenue as a 10% in-lieu franchise fee.  We believe the fee and revenue transfers are illegal.

If a private company provided water service to the residents of Fullerton, the City could charge the private company a negotiated franchise fee for occupying public rights of way with its pipelines.  That is not the case in Fullerton, however, as the City operates its own municipal water utility.  The rates the City may charge are governed by the California Constitution, which limits rates to just the amount required to provide service, and prohibits transferring rate revenue for use elsewhere.

California Constitution article XIII D § 6(b) states in relevant part: “(1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. (2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.”

We successfully litigated this issue several years ago in lawsuits against the cities of Roseville and Fresno.  The courts in those two cases ruled that a city’s utility enterprise can reimburse the General Fund for actual, documented expenditures incurred on behalf of the utility, such as the utility’s use of the City Attorney’s services, or the utility’s share of a common insurance fund.  However, the utility cannot serve as a supplemental source of revenue for the General Fund.  As the court in the Roseville case said:

“[T]he in-lieu fee violates section 6(b) of Proposition 218 in a more direct way. Roseville concedes that ‘[r]evenue from the in [-]lieu franchise fee is placed in [Roseville’s] general fund to pay for general governmental services. It has not been pledged, formally or informally[,] for any specific purpose.’ This concession runs afoul of section 6(b)(2) that ‘[r]evenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.’ It also contravenes section 6(b)(5) that ‘[n]o fee or charge may be imposed for general governmental services.’”Howard Jarvis Taxpayers Assn. v. City of Roseville (2002) 97 Cal.App.4th 637, 650.

By this letter we are formally requesting the City of Fullerton to stop charging the 10% in-lieu franchise fee, and to adjust its customers’ water rates accordingly.

If the City believes its 10% in-lieu franchise fee is legally defensible, then please consider this letter a request under the California Public Records Act for copies of the study(s) and/or accounting(s) that itemize General Fund costs on behalf of the Water Fund totaling exactly 10% each year.

Your response by December 10, 2011, would be appreciated.


Timothy A. Bittle
Director of Legal Affairs

The tax became a big issue back in July, when a guy named Jack Dean from the Fullerton Association of Concerned Taxpayers pointed out the illegality of this water tax to the council (during an attempt to double water rates.)

Well, it’s been four months now, and Fullerton residents are STILL PAYING that illegal tax on every water bill.

Of course Bankhead, Jones and McKinley are waiting for the city attorney to find a way to squeeze that tax through a legal loophole, instead of rescinding it and refunding the money they’ve been helping the city steal from taxpayers since Prop 218 passed fifteen years ago.

How about a refund?

More about ,

  1. #1 by truthseeker on November 28, 2011

    Wonderful news. Another chance for them to do the right thing. Lets see if they dig their heels in on this one too.

  2. #2 by Hick Jones on November 28, 2011

    Ah’m a’ gonna dig mah heels in deeper’n a Texas jackrabbit hole in winter! Doncha all know we need that money ta’ pay fer alla’ po-lice lawsuits comin’ aroun’ the bend? An’ fer Don an’ Pat’s penshuns too! An’ to pay fer our trips an’ fancy hotels rooms fer conventions. Whatch’all think we stick aroun’

  3. #3 by Hick Jones on November 28, 2011

    Ah’m a’ gonna dig mah heels in deeper’n a Texas jackrabbit hole in winter! Doncha all know we need that money ta’ pay fer alla’ po-lice lawsuits comin’ aroun’ the bend? An’ fer Don an’ Pat’s penshuns too! An’ to pay fer our trips an’ fancy hotels rooms fer conventions. Whatch’all think we stick aroun’ here foh’ anyways?

  4. #4 by Fred Alcazar on November 28, 2011

    Of course they won’t do the right thing. If forced they will do what they have to then blame the Recall for making them use reserves.

    Cut the 2.5 mil? No f-ing way!

  5. #5 by Greg Sebourn on November 28, 2011

    A refund to the Water Fund would be a nice start.

  6. #6 by Travis Kiger on November 28, 2011

    Nah. The money was wrongfully taken to prop up employee compensation via the general fund. It never had anything to do with water at all.

    Give it back to the taxpayers. If Fullerton residents want to pay extra for water infrastructure, that’s a separate issue.

  7. #7 by Peaches on November 28, 2011

    Travis – are the water utility employees paid through the Water Fund as they are in Brea? They are the only employees who should benefit from the Water Fund. Documented costs for others should also be paid from the Water Fund.

    Is there any information showing how much money has been siphoned (sorry for the hose analogy) from the Fullerton Water Fund to Fullerton’s General Fund?

    Infrastructure would usually be a “capital expenditure” and/or funded by bonds, I think.

  8. #8 by The Fullerton Harpoon on November 28, 2011

    The 10% was originally justified as indirect costs of the City Manager and City Attorney; minor overhead for HR, some pro rated utilities in City Hall, insurance, a small piece of Worker’s Comp, budget and finance would be permissible. Cops, firemen, pensions, parks & rec, community development, planning? Not a chance. No way they can get near 10% in any objective study – which they never did anyway, and that’s what makes it illegal.

    Water employees no doubt charge direct cost to the Fund. The real question is whether or not direct or “indirect” costs for the City Manager and Attorney and Finance Director, etc. are already charged to the Water Fund.

  9. #9 by nipsey on November 28, 2011

    The lights are going to be on late at city hall, there’s shreddin’ of documents and cookin’ of books to be done.

  10. #10 by The Fullerton Harpoon on November 28, 2011

    No, Greg, the 10% didn’t come from the Water Fund. It came from the water consumers and went directly into the General Fund.

    A refund to the water users in Fullerton would be the best start. And let’s go back to 1996.

  11. #11 by Greg Sebourn on November 29, 2011

    The 10% is taken from the Water Fund. It is not directly billed to customers which is what makes the tax so illusive to rate payers.

    That is, I don’t think the Utility Department ADDS 10% to your water usage bill and then shows you just the gross cost.

    Rate payers have paid their bills believing full-well that all of the money was going towards paying for the water they used and the cost of the infrastructure. Then, when no one is looking, the City skims 10% of whatever the Water Fund has collected to help cover salary and pension costs in the General Fund.

    All along I have asked to see an itemization of rate payers’ water bills. I asked for this information during the Ad Hoc Water Rate Study meetings as well as informally. It seems to be impossible to quantify these figures which tells me that the City must do a better job with accounting and transparency.

    Until we see how the water rates are determined, we will not know if the 10% franchise tax is added to the total cost of operations or deducted from the total revenue collected.

    Although it might be deserved, a complete refund to rate payers is a pipe dream.

  12. #12 by The Fullerton Harpoon on November 29, 2011

    Yes, it’s confusing, but ultimately it’s the same thing.The 10% is skimmed off the water fund after the rates have been raised 10% to cover the in-lieu fee.

    The water bill includes the 10% but is not differentiated. The basic rate must cover the commodity and transmission costs; the added 10% goes on top of it.

  13. #13 by Anonymous on November 28, 2011

    Wondering…how much would a refund be if the citizens were to get one;
    collectively and individually….speculatively speaking..

  14. #14 by Water Water Everywhere! on November 28, 2011

    10% of your bill, less legitimate (minor annual costs). However, it may very well be the case that City employees already directly charge the Water Fund for their time. In which case the 10% is a TOTAL fraud and should be 100% refunded.

  15. #15 by just a guy on November 28, 2011

    A refund of 10% of my water bill for the last 15 years? That would be a nice chunk of change.

  16. #16 by admin on November 28, 2011

    $1000, $2000 bucks?

  17. #17 by Water Water Everywhere on November 28, 2011

    Hard to estimate exactly but the average has been $2.5 million a year. That’s 37 or 38 million dollars ripped off since 1996.

    That will look great on a campaign mailer: Jones, Bankhead and McPension steal $37,000,000 for their own stipends, perks and pensions!

  18. #18 by admin on November 28, 2011

    Funny, I had the same thought.

  19. #19 by Anonymous on November 29, 2011

    …and I’m pretty sure that $1,000-$2,000 would certainly be appreciated by any and all Fullerton parents who are out there buying their kids Christmas gifts, and trying to help their children pay for college tuition increases.

  20. #20 by Anonymous on November 29, 2011

    How many (households/water meters) are you guys talking about?

    If my math is right I guesstimate around 19,000 households/water meters.

  21. #21 by nipsey on November 28, 2011

    Jack Dean has some crackpot positons re: imagined property rights and zone changes, but I’m happy to give him credit for bringing these guys in. Go get ’em.

  22. #22 by Rain on November 28, 2011

    This is a wonderful accomplishment by Jack Dean, one of the many excellent folks who live and work in our community, helping make it an excellent place to live.

  23. #23 by Fred Alcazar on November 28, 2011

    The anti-recallers are still defending this rip-off on their lame website.

  24. #24 by One for the books on November 28, 2011

    Fred Alcazar :
    The anti-recallers are still defending this rip-off on their lame website.


  25. #25 by epoc on November 28, 2011

    If this challenge results in a lawsuit it would greatly help the recall effort. A lawsuit would be the straw that breaks the elephants backs.

  26. #26 by Barry Levinson on November 28, 2011

    Let’s see those financial wizards, Jones, Bankhead and McKinley ( that staunch friend and protector of our city women folk), get themselves out of this one.

    Good job Jack Dean!!!!

  27. #27 by Jackalope on November 29, 2011

    Barry, I’m glad Jack Dean contacted Howard Jarvis with the information he must have learned from reading FFFF. I’ve been reading about the illegal water tax on this site since 2009.

    I’m surprised Admin’s 4F crew has not filed a law suit on this issue yet. I could use a refund right about now.

  28. #28 by Anonymous on November 28, 2011

    News Flash News Flash Urgent! Urgent!

    Hey fellow Raymond Hills residents and bootlickers. The Howard Jarvis Taxpayers association needs to be disbanded to save the water tax. Please sign up on the protect fullerton web site. As a reward for your support, a notice of supplemental asessment will go out before July as prop 13 will be repealed. Thanks for your continued support

  29. #29 by a bushala bully on November 28, 2011

    anonymous-put the crack pipe down, slowly

  30. #30 by Jimminy Christmas on November 29, 2011

    Put down your blue hair dye and join Larry Bennett, Dick Ackerman, Bill Gillespie, and Tony Florentine as they join with City Hall to preserve YOUR WATER TAX!!!

  31. #31 by Fullerton Rudy on November 29, 2011

    Lol, but not far from the mark. The anti-recall gaggle has everything 180 degrees ass-backwards. I can see it now: they’ll call it the “water fund bonus.”

    Molly McNoodle and Jan Florby can sing the refrain.

  32. #32 by Anonymous on November 29, 2011

    The irony is the HJTA is a major legislative force that has erected a barrier between the northerners and the asessors office and yet the HJTA has the city in the crosshairs. Recall folks. Get on the right side of things. Come join us. It is never too late to do the right thing.

  33. #33 by truthseeker on November 29, 2011

    prior post is mine-I would also like a refund payable to me for the last 12 years that I have owned a home and paid into this scam plus interest that is owed. I think all the rest of you Fullerton residents and business owners should demand the same.

  34. #34 by Vernon Dozier on November 28, 2011

    City of Fullerton bankruptcy in 5…4…3…2…1.

  35. #35 by van get it da artiste on November 28, 2011

    oh no, not another costly lawsuit that will drain our town’s precious tax dollars away from our town’s deteriorating infrastructure. I wish our civic leaders past and present would do the right thing and at least use some of their money to defray the cost to us tax payers since they are the ones who caused this mess not us.

  36. #36 by Donkey on November 28, 2011

    HJTA could sue most of the cities in the OC then, because most of them use their water departments to help fund these RAGWUS crooks. :)

  37. #37 by RED HATTER on November 28, 2011


  38. #38 by The Fullerton Harpoon on November 28, 2011

    This is very instructive. The in-lieu franchise fee has been collected since the 70’s; as HJTA notes, it violates the State Constitution; more narrowly in violates Prop 218 which has been in place for 15 years.

    There is no excuse for this sort of blatant theft. The city managers and councils knew, or should have known. Since the garden variety councilman has the intelligence of a banana slug, I’ll put the blame where it squarely belongs – on the City Attorney. If he isn’t fired for incompetence or malfeasance immediately there will be yet another management failure by the soon-to-be recalled Torpid Trio.

    In fact, I think I’ll do a post about it.

  39. #39 by Vernon Dozier on November 28, 2011

    Can we sue Jones & Mayer for legal malpractice?

  40. #40 by Fullerton Rudy on November 28, 2011

    Recall game over.

  41. #41 by Fullerton Public Servant on November 28, 2011

    Post #3 hits the nail on the head. Another nail in the coffin for the anti Recall folks…….

  42. #42 by admin on November 28, 2011

    By the way, Friends, The Fullerton Harpoon nailed this one 2.5 years ago!

  43. #43 by One for the books on November 28, 2011

    Just finished watching archived city council meetings. If there was ever a need for a recall, it’s in Fullerton!! I’m starting to wonder if those guys even know what the police department is doing in the city.

  44. #44 by One for the books on November 28, 2011

    Admin – do you remember the guy standing across the street from the DA’s office wearing the straw hat and white shirt at the first protest? I was the one screaming at the top of my lungs, “DA do your job.”

    I’m curious to know, if you remember me, if anyone told you that I was a cop? Also, someone at the protest at the police station was going around telling people that I was the FBI. I really got a good laugh out of that one! It seems that some people were spooked about who was who in the crowd.

  45. #45 by admin on November 28, 2011

    One for the books, I vaguely remember a dude wearing a straw hat. I do remember it was a very hot and sunny day. But I don’t remember anyone telling me that a guy in a straw hat was a cop or anything like that. Chill Bro.

  46. #46 by Peaches on November 28, 2011

    Does this transfer of funds meet the accounting standards of GASB?

  47. #47 by Larry Bennett's Conscience on November 28, 2011

    Jeez, an illegal tax? Well I guess I feel real bad about that ’cause I’m such a staunch conservative and everything, but gee wilikers Dick Jones and Don Bankehead and pat McKinley are just such wonderful, stable, honorable men that I just have to…

    Aw the Hell with it. I’m leaving this fathead.

  48. #48 by Sunroom Desk on November 28, 2011

    Glendale City Council voted to stop transferring funds from its municipal utility to the general fund after months of petitioning during oral communications by citizen Harry Zavos.

    “Christine Godinez, Deputy City Attorney gave a brief overview of what took place at the City Council Meeting regarding the Water Rate transfer. Ms. Godinez referred to numerous revisions of the City Charter that were voted by the public, allowing the transfer to occur. Though the City may still transfer moneys from water surplus revenue according to the City Charter, Ms. Godinez stated that the City Attorney has made the determination and advised the Glendale City Council to halt the water surplus transfer to avoid civil litigation. Based upon the City Attorney’s study, the continued transfer to the General Fund is vulnerable to successful challenge under Prop 218.
    The Glendale City Council plans to eliminate the transfer except to the extent that the amount of the transfer was lawfully justified on the basis of the cost burden imposed by the water utility on the General Fund.”

  49. #49 by Sunroom Desk on November 28, 2011

  50. #50 by a bushala bully on November 29, 2011

    The 10% has nothing to do with the water.

    The city used the water company as a cover/guise to sneak an extra fee on the water bill to squeeze money from people for stuff they wanted-no one questioned the water bill because this ex-tree fee was not only hidden from view, but people thought nothing of the amount they were paying to the water company as Im sure 10% was only about a buck or 2 on an individual’s bill
    (adds up when you figure every person in the community that paid a water bill was getting charged an extra dollar or two)

    So the water company wont raise their fees-for what? the 10% wasnt for water and they cant transfer any percentage to the general fund so the council can pay salaries, pensions, buy raincoats or candybars

  51. #51 by Fred Alcazar on November 28, 2011

    “…copies of the study(s) and/or accounting(s) that itemize General Fund costs on behalf of the Water Fund totaling exactly 10% each year.”

    Exactly 10% each and every year. Wow, what a coincidence. A big ol’ Yexas sized coincidence gol- darn it!

  52. #52 by longtimefullertongirl on November 29, 2011

    well I do hope that all of us who live in Fullerton will get reimbursed for the money that was illegally taken. Maybe when some of the residents get news of this it will help them to understand better WHY THE RECALL IS SO IMPORTANT!!!!!!!!!!!!

  53. #53 by Anonymous on November 29, 2011

    How about a class action lawsuit against the city? We are all victims of an illegal tax, and the city won’t do anything about it as they are lining their pockets with stolen cash. Sue the bastards.

  54. #54 by Ahem on November 29, 2011

    Say, didn’t Chris Norby and Shawn nelson vote for this tax too?

  55. #55 by admin on November 29, 2011

    Yes, they did. My guess is both regret it now. The Three Hollow Logs regret nothing.

  56. #56 by The Fullerton Savage on November 29, 2011

    Both Nelson and Norby live in Fullerton. Has either called for it to be rescinded?

  57. #57 by Johnny Donut on November 29, 2011

    Great question. Nelson? Norby?

  58. #58 by Ghost of Kerry Fox on November 29, 2011

    So they too were lied to by the City Attorney. Maybe Norby and Nelson could be excused because they held real jobs at the time. I know many people voted for those three retired rinos because they ran on their ability to spend more time on council business. It just so happens that the two pensioned cops were benificiaries of the ripoff and Heehaw is a good Repuglican who goes along with anything that the Dick Attorney Jones tells him cause he got a good name and he’s an attorney and everyone knows that attorneys always do what they get paid to do.

  59. #59 by Wrong Guy on November 29, 2011

    Three Hollow Logs. lol
    Just for kicks, I was wondering if you (Admin) could compile a list of all the nicknames you have come up with so far for the (watch this) ‘Three Desimating Dinasours’.

  60. #60 by Wrong Guy on November 29, 2011

    Don’t forget “Three Petrified Fossils”.

  61. #61 by Erin on November 29, 2011

    …..and the saga continues…

  62. #62 by One for the books on November 29, 2011

    Erin :
    …..and the saga continues…

    “Now, don’t jump to conclusions.”

  63. #63 by Erin on November 29, 2011

    One for the books :

    Erin :
    …..and the saga continues…

    “Now, don’t jump to conclusions.”

    hahahahaha, I jump for no one!!

  64. #64 by van get it da artiste on November 29, 2011

    irony is the Fullerton’s civic leaders gouge its residents and small business owners with an illegal water tax while I watch Raytheon drill a decontamination well at the end of my street. My acquaintance friend who litigates EPA laws with Los Alamos says it is not uncommon for contaminants to spread wider and further when it is being removed from artesian water reserves. Often, it is better to let it only contaminate locally. (sucks to be me) Yet, Fullerton civic leaders don’t give a hoot over this big property tax revenue pollute(Raytheon).

  65. #65 by McDidkhead on November 29, 2011

    Say, didn’t the City just approve another massive subdivision in Amerige Heights? I wonder if those homes will be safe.

  66. #66 by Reality Is on November 29, 2011

    Consider it free drugs? LOL :)

  67. #67 by truthseeker on November 29, 2011

    Everyone in this city needs a reverse osmosis system in their home for drinking water-best 200 bucks you will ever spend

  68. #68 by Reality Is on November 29, 2011

    Isn’t the approval of the 10% public record? Can’t you get and post the minutes from the council meeting where it was discussed and approved? Or was it something put on a ballot and voted on by the people, and you are claiming that was illegal? If it’s all really illegal, just very odd it would have ever been approved and if it was, how it was written up to be considered legal.

  69. #69 by Johnny Donut on November 29, 2011

    Try reading the letter, dumbass. It explains the situation very succinctly.

    Nevermind. You won’t read it. I’ll sum it up:

    The fee became illegal in 1996. Staff and council did nothing.

    They were confronted with the illegal fee in July. Staff and council still did nothing.

    Try to keep up.

  70. #70 by Reality Is on November 29, 2011

    LOL dumb ass. Love it. Love you too.

    Didn’t feel like going back that far. You did a great job of educating this dumb ass and I appreciate it.


  71. #71 by Plain Cake on November 29, 2011

    Why would you Paw-Haaaa-Sib-Lee think that it would be odd for anyone connected to fullerton government to pass something thats illegal? we’re talking about Pat Mckinley, Bankhead, F Dick Jones etc. etc. encouraged by the council attorney who is obviouly dirty too.

    Thats what we’ve been saying all along-shit that is illegal is being done subrosa (under the rose) by these throbbing weiners

    It would be odd if they passed something that was legal

  72. #72 by Night School on November 29, 2011

    For anyone else, like me, trying to get up to speed about in-lieu franchise fees, here is some basic information written by HJTA back in ’97:

    “In lieu” franchise fees are a unique form of revenue created by local governments as a form of hidden tax. The theory is as follows: Because a municipality could contract out a service and charge a franchise fee, it should be able to charge an “in lieu” franchise fee on its own enterprise activity departments. For example, in addition to collecting fees for refuse collection, a city may also demand that its solid waste department set its rates at a level to generate excess funds over the cost of service for a direct transfer into a general fund. (emphasis added)

  73. #73 by Fred Alcazar on November 29, 2011

    Yep, that’s it.

    Let Ackerman and the idiot Larry Bennett defend that!

  74. #74 by LaRoo on December 2, 2011

    And too boot…you cannot go online to pay or view your water bill like it states in their recording. The web URL ( they provide pops up invalid web address. Does any FFFFer’s know of another way to access your water bill sans calling Corruption Hall?

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