To ensure that it can meet the burden of proof that its water fees comply with Article XIII D of the California Constitution, Downey should be able to provide, upon request, documentation that all transfers out of the Water Fund are for water-related purposes. Such documentation should be sufficiently detailed and understandable to the layperson.
The City's annual budget review and approval process at an open Public Hearing is the vehicle by which the City approves proposed expenses and transfers related to water and other City funds on a Fiscal Year (July 1 to June 30) basis. The City recently completed its annual budgetary preparation process for the fiscal year 2013-14 on June 11, 2013. The City utilized this process for the purposes of implementing your audit report recommendations of sufficiently documenting transfers out of the Water Fund and establishing that they are for water-related purposes.
Among the documentation and tasks completed as part of this process, which have also been emailed for your information, are the following:
13/14 Budget Study Session - Agenda (6/7/13)
13/14 Budget Study Session - Presentation (6/7/13)
13/14 Budget Public Hearing Adoption - Agenda (6/11/13)
13/14 Budget Public Hearing Adoption - Minutes (6/11/13)
13/14 Budget Public Hearing Adoption - Water Fund Transfer Item (6/11/13)
13/14 Budget - Utilities Division Description - Adopted by Council 6/11/13
13/14 Storm Water Eng & Mgmt 72-3182 Budget - Adopted by Council 6/11/13
13/14 Storm Water Eng & Mgmt 72-3182 Expenditure Detail - Adopted by Council 6/11/13
Note: the City is still printing the budget document. Therefore the City will provide final formatted versions for the bottom three draft budget documents adopted by Council on 6/11 upon final printing.
Although the City of Downey (Downey) has not changed its practices since the time of our audit, we consider this recommendation to be fully implemented because Downey provided water rate payers with an opportunity to better understand the rationale for these transfers. Ultimately, the water fee revenues that Downey collects must reasonably represent the cost of providing water services to its customers. If rate payers decide to challenge the water fees, it will be up to Downey to demonstrate that its water fees comply with the California Constitution.
Downey indicated that it intends to implement the recommendation via its annual budget preparation and approval process. Downey scheduled a public hearing to approve its fiscal year 2013-14 budget for June 11, 2013.
If it believes that the mechanisms available to consumers in southeastern Los Angeles County to protect against unreasonable rates or rate increases are not sufficient, the Legislature should consider enacting additional consumer protection mechanisms. Mechanisms to consider include ratepayer advocacy positions similar to those used by the CPUC and LADWP.
Agency responses received after June 2013 are posted verbatim.