(Oxnard, Ca) Oxnard citizen and mayoral candidate, Aaron Starr, posted to his blog www.movingoxnardforward.org that the reason for the improved credit rating by Standard & Poors revised outlook for Oxnard’s Wastewater Revenue Bond To “Positive” From “Stable” was based on the city only owing $5M and not $8.5M as originally disclosed.
“The only positive development was that the ‘impact’ was established to be $5 million, not the $8.5 million that had been previously alleged,” stated Starr on the local blog. “The ratings improvement may seem counter-intuitive for the circumstances, until you remember that the city struggles with basic math – and that they gave both the public and S&P bad data. We demonstrated that during the Measure M trial. Now S&P has more accurate data, and they see it’s not what the city had previously portrayed.”
The Voice La Voz reached out to City Manager Alex Nguyen and Mayor Tim Flynn for comments and calls were not immediately returned.
In speaking with Tim Tung, the Primary Credit Analyst for Standard & Poors analysis, he stated, “Time has passed. There is a two-fold impact of litigation. 1- The completion on the rate setting process and 2- the implementation of increases (Referring to the 2017 rate increase that is in effect). It appears the downward pressure has subsided and there is now potential for upward mobility (in rates).”
Malcolm N D’Silva, the Secondary Contact from Standard & Poors, stated, “We believe that things have moved in the right direction for Oxnard and the lawsuit was not as impactful as previously thought.”
Background to Wastewater Issue in Oxnard
The City of Oxnard and what has become the coalition organized around Aaron Starr have weathered an epic battle between municipality and citizenry in what some perceive as a question of fiscal conservatism, responsible government, and transparency to the voters and ratepayers.
Beginning in 2016, the City of Oxnard engaged in an effort to raise rates on ratepayers with a Proposition 218 notice, which requires municipalities to notify ratepayers on an increase. The rate increase was expected to reach 87% over 5 years.
A typical utility bill in Oxnard includes three components: water, wastewater and solid waste. The amount of water one uses drives the wastewater portion of the bill. More water usage translates into higher wastewater charges.
According to calculations made by The Voice La Voz Newspaper, if the portion of the bill for wastewater only was $65 in 2016 and no major changes occurred to their wastewater use, in 5 years that same portion of the bill would become $121.59.
In Starr’s blog, he details the back and forth of his opposition along with an army of volunteers that fought the increase.
However, during this exchange, Oxnard decided to make a 2nd rate increase in 2017. This rate increase was creative in its announcement as it suggested the total increase was much lower than the numbers reflect in calculation.
During the legal battle with the city, a judge ordered that Oxnard could not move forward with its suggested rate increase but something of a lowered rate: 35%. At the time of the announced rate increase, the additional amount suggested was an increase of 5% to the 35%, a new increase of 42%. The city simply states the increase was at 5.25%.
This means that while Measure M won in court, the new rate for 2017 started with a base rate that was temporarily put in effect by the court during the lawsuit. That 35% was established as the base rate for the 2017 increase and was almost effective in enabling an increase near the amount suggested in the 2016 suggested increased that was repealed by Measure M. This loophole is what Aaron Starr says subverted the voter’s will as voted on with Measure M.
Impact of S & P Issuer Credit Rating (ICR) to Oxnard Ratepayers
In Tung’s ICR, he stated, “The positive outlook reflects our expectation that the wastewater system will likely post at least sufficient financial performance going forward, and that further rate increases will not be deferred or delayed. We could take a positive rating action–possibly multiple notches–if the city pursues its strategy to de-risk the wastewater system’s debt portfolio, or if the wastewater system is able to develop a track record of strong financial performance that we believe is sustainable with no further interruptions to the normal rate-setting process. We could revise the outlook to stable if the wastewater system’s rates continue to be challenged, or if financial performance returns to insufficient levels.”
Tung’s comments mean that Oxnard ratepayers would have to continue to pay the increases for the city to maintain or improve it’s credit rating. This suggests that at the end of the scheduled increases, likely more would be needed to meet growing obligations by the utility.
In Starr’s lawsuit on behalf of ratepayers, the city must now pay back the money it collected which has created a secondary issue as to how those funds will be returned. Starr has filed a class action suit stating those funds should be refunded. The city is currently requiring forms to be completed in order to receive the refund. Ratepayers only have 12 months from December 2017 to obtain their refund.
An additional issue is whether Oxnard ratepayers will continue to fight the city for essentially increasing rates to levels that Measure M voters adamantly opposed as evidenced by their vote and their tenacity to show up in great numbers at numerous event for months.
UPDATE: Clarifying language was added to the calculations for the wastewater increases for Figure 1 to explain that $65.00 would be the portion of the utility bill charged only for wastewater.
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