Council Votes Preliminary Approval of Water Rate Increase; CDC Parents Plead for Lease Extension

By GEORGE BROMLEY
Falls Church Times Staff

June 28, 2011

The Falls Church City Council unanimously approved the first reading of a controversial 8% water rate increase Monday evening.  Prior to the vote, several Fairfax County residents spoke in opposition, insisting that the increase was unjustified, due in part to earlier court rulings against the City.    

Dennis Hennigan, an attorney, said he did not see how a system that had been so profitable  now needed a rate increase. “Something does not add up here,” he said.  “Falls Church should be reducing its rates and returning its overcharges to customers.”  He added that he found it somewhat disturbing that the City showed so little deference to the findings of Virginia courts. 

Hennigan cited Judge R. Terrence Ney’s Jaunuary 2010 finding that Falls Church could not transfer profits from its water system to its general fund.  As only 8% of its customers reside in the City, most of the system’s revenue is collected from Fairfax residents, who derived no benefit from transfers to the general fund.  The judge ruled Falls Church’s practice an unconstitutional tax on non-residents and enjoined it from making further transfers. 

McLean Citizens Association president Ron Jackson criticized the water rate study the City used to justify the increase.  “We’re paying twice,” he said, claiming that the system’s reserves were already built up due to past overcharges to Fairfax customers.

Elaine Cerriano called on the City to give people more time to review the study and raise.  She asked for at least 45 more days and suggested the information be made available in county libraries. 

Larry Sexton of the Falls Hill Civic Association concluded his questions for the Council by asking “Do you think if you didn’t have a monopoly we’d still be your customers?”  Another speaker was even harsher, calling the Council arrogant and its actions unconscionable.

In response to the customers’ comments, Vice Mayor Dave Snyder stated that the City’s intention is to insure that the water rates are set so that the system will provide safe and reliable water to our customers, whether in Falls Church City or Fairfax County. 

“I will not be swayed by political arguments or arguments directed to keep our rates artificially low that the system suffers,” he said.  “Nor will I delay needed rate actions, even though politically popular, if those rate actions are essential to providing the quality of the water we provide all of our customers.”

Snyder said that the City was in full compliance with Judge Ney’s ruling and that the proposed rate increase is consistent with that ruling and not based on any such profit transfer.   He added that traditionally, such organizations that are running a risk have a right to a fair rate of return, and that he respectfully did not agree with the court’s decision. 

The vice mayor noted that the rate study had been posted on Falls Church’s website on June 1 and that copies have been provided to Fairfax officials and anyone who’d asked for it, but he agreed to furnish copies to libraries within the system’s service area.    

Snyder said the bulk of the rate increase is to fund reserves and that the monies received would remain in the water fund.  He also lauded the system’s water quality and its past performance during inclement weather, when it maintained its high standards while other systems could not.

Second reading of the ordinance is scheduled for July 11.  If approved, the rate increase, the first in six years, would take effect on August 1.

Child Development Center Parents Seek Extension  –  Over a dozen parents of children attending the CDC asked the Council to consider extending the Easter Seal’s lease on the property, which is scheduled to expire in November.  Speakers had high praise for the quality of care provided at the Center and the dedication of its staff.  Many were concerned that they would not be able to find an alternative if the CDC were to close on short notice.

A task force has been formed to address the issue.  Deputy City Manager Cindy Mester informed the council that it had met Monday afternoon and was scheduled to meet again on Thursday.  Staff will set up a website page on the topic that would appear on both the City and Schools sites.  Mester said the task force will ask the Council to extend its deadline to July 30.      

For nearly 50 years the facility has been leased to Easter Seals, who would prefer an extension until at least the summer of 2013.  Easter Seals would be willing to pay $50,000 annually for the space, currently leased at $1 per year. 

City Schools have asked to assume control of the property in July 2012 in order to house the preschool education programs currently located at Mt. Daniel.  This would also free space to permit the relocation of  the Falls Church Community Center preschool program

Economic Incentives Adopted  –  The Council also unanimously approved, 6-0, with Ms. Gardner absent, a resolution establishing a policy which will give the City the opportunity to provide new incentives for commercial redevelopment. The stated goal is to encourage new and sustainable economic development and private investment in targeted areas of the City and to create a better balance between the City’s residential and commercial tax base components.

This will be achieved primarily through land use planning and zoning that provides height and density bonuses for desired outcomes in designed areas. In some cases the City will encourage and accelerate new commercial redevelopment by considering public participation, including tax increment financing and partial and temporary abatement of business taxes.

City Attorney John Foster advised that the resolution essentially serves as a guide to the Council going forward and that it does not extend any rights to developers.

Appointments  –  The Council appointed the following citizens to unexpired terms on various City commissions, committees, and boards:

Robert Loftur-Thun to the Planning Commission:  (01/01/09) – 12/31/12
Julio Idrobo to the Housing Commission:  (01/01/09) – 12/31/11
Paul Baldino to the Citizens Advisory Committee on Transportation:  (02/01/09) – 1/31/12
Steve Selby to the Recreation and Parks Advisory Board:  (09/01/09) – 08/31/12
Ed Henderson to the Historical Commission:  (9/01/09) – 8/31/12

These officials were reappointed to their positions:  

Jeff Peterson to the Library Board of Trustees:  07/01/11 – 06/30/15
Jonathan Fritsch to the Architectural Advisory Board:  06/01/11 – 05/31/14
Mark Gross to the Fairfax-Falls Church Community Services Board:  07/01/11 – 06/30/14

Falls Church and Fairfax Water Differ on Rate Increase

By GEORGE BROMLEY
Falls Church Times Staff

June 17, 2011

The Falls Church City Council is tentatively scheduled to vote on the second reading of a water rate increase on June 27, having approved a first reading of an ordinance in March.  At the beginning of June the City invited Fairfax Water to review a study, prepared by an outside consultant, that recommended the rate increase. 

Earlier this week Fairfax Water’s chairman Philip W. Allin responded via a lengthy letter in which he requested that Falls Church not raise its rates.  Allin viewed the study as flawed and called on the City to “chart a better course.”  He concluded by inviting Falls Church “to discuss a new relationship that could result in mutual benefits for all of our customers.”

In response, City communications director Barbara Gordon issued a statement noting that “Over the past several months, City officials have suggested to Fairfax officials that we sit down together to talk about water service in the region and we are pleased that Fairfax Water is accepting our overtures.” 

“The City has been fully open and transparent about the proposed water rate increase, and provided a full copy of the water rate study to Fairfax Water, with a request for comment.  Having received the Chairman’s comments, we will review them carefully along with any other comments we receive prior to final adoption.  The City must raise its rate 8 percent next year to fund operating costs and existing and future capital costs.”

Falls Church has not raised its water rates since 2005.  Currently it charges $3.03 per 1,000 gallons.  According to Gordon, Fairfax Water has raised its rates 33 percent over the last six years.  Even with the proposed rate increase, the City’s water rates will be below average for the national capital region and lower than two-thirds of the public water utilities in Virginia.

The pending ordinance calls for gradual increases over the next three years: $3.27 per 1,000 gallons in FY12, to $3.53 in FY13, and to $3.82 in FY14.  Quarterly service charges and peak charges also would be increased annually over the three year period.  A typical quarterly bill, with no peak usage, would rise $2.04 in FY12. 

If approved by the Council on June 27  the new rates would take effect on July 1.  About 92% of the City’s 34,000 customer accounts are in Fairfax County.

City Council Votes to Deny Water System Refund Claims

By GEORGE BROMLEY
Falls Church Times Staff

May 23, 2011

The Falls Church City Council voted unanimously this evening to deny all claims for refunds received from water system customers for alleged overcharges.

“For the City to make any payment of public funds to to a private party outside the bounds of established law and precedent would be irresponsible,” said Vice Mayor Dave Snyder.  “The City has viable legitimate legal defenses to the claims of customers seeking refunds.  It is the Council”s responsibliity to protect the City’s financial interests on behalf of its water utility rate payers and the taxpayers of the City, and this motion does that.”

The vice mayor stated that after discussing the matter with the city attorney and outside counsel, the Council has concluded that there are important issues involved that have not been addressed by the courts which have important implications for the financial management of the City and for public service utilities state-wide.

Snyder said that the refund requests stem from an incorrect reading of a January 2010 Fairfax Circuit Court ruling in the case of Fairfax County Water Authority vs. City of Falls Church.  The ruling enjoined the City from transferring funds from its water fund to its general fund for purposes unrelated to its water system, including the management fee transfer for FY 09 and 10.  However, that ruling did not call for refunds.

“The City disagrees with the ruling as it runs counter to the City Charter as adopted by the General Assembly and to established practice across the state,” said Snyder.  “Nevertheless the City has complied with the ruling in all respects and remains in full compliance today.” 

“Never assume anything other than that we  put the highest priority on providing safe and reliable water to our customers on an equal basis, whether in the City or in the County,” concluded Snyder.

No other members commented on the motion, which was introduced by Councilman Ira Kaylin and seconded by Lawrence Webb.  Following the vice mayor’s statement, the Council voted to approve, 6-0, with Councilman Ron Peppe absent.

Currently, there are several cases pending in court where plaintiffs have requested refunds of water utility charges from Falls Church.  The City also has received letters from customers seeking refunds.  In addition to Falls Church City, the water system serves a wide area of Fairfax County.  Ninety-two percent of its customers are County residents.

Fairfax Focusing on City’s Proposed Water Rate Increase

By GEORGE BROMLEY
Falls Church Times Staff

April 28, 2011

Last Monday the Falls Church City Council deferred final approval of a water rate increase until June 27.  The following day the Fairfax County Board of Supervisors authorized the Fairfax Consumer Protection Commission to undertake a comprehensive review of the City’s water rate making practices.  The measure was introduced by Supervisor Linda Smyth (Providence).  The Board’s action was preceded by two letters from Fairfax Water’s outside counsel Stuart Raphael to City Attorney John Foster, which suggested that higher rates would violate a judicial order and the City Charter.

“Needless to say, all of us who have residents who use Falls Church water are very much concerned,” said Ms. Smyth.  “We would like to get our consumer product protection folks starting to look at this to see  if it conforms to our principles of sound water rate making.”  She added that the Commission also would review the City’s water rate making study, which was prepared by an outside consultant.

Specifically, Supervisor Smyth asked the Commission to determine the basis for Falls Church’s rates, whether the City was in compliance with the rate making principles established by the Board in May 2010, the nature, location, and cost of any capital improvements made over the past five years and how those improvements were funded, and the location and cost of projected improvements.  She asked that the Commission report back to the Board by September 27.

Ms. Smyth’s motion was seconded by Supervisors Gerry Hyland (Mout Vernon) and Penny Gross (Mason), and then approved by voice vote.

Mr. Raphael’s letter of April 15 noted that the proposed rates include a 7.8% return on equity and questioned why this would not violate Judge R. Terrence Ney’s January 2010 decree and Section 13.09 of the Charter.  Mr. Foster responded that the return on equity would remain in the water fund.  However, Mr. Raphael rejected this view on April 23, maintaining that such a return could not be built into the rates and concluding that Fairfax Water was expecting to see a reduction in the City’s charges, rather than a sharp increase.

The City Council gave preliminary approval for the higher rates on March 28, calling for gradual increases over the next three years: $3.27 per 1,000 gallons in FY12, to $3.53 in FY 13, and to $3.82 in FY14.  The current rate is $3.03, which has been in effect since 2005.  Approximately 92% of the system’s customers reside in Fairfax County.  

According to City Manager Wyatt Shields, the City’s Public Service Commission met on March 23 and recommended the Council authorize the increase.  If approved at second reading, the new rate structure would take effect on July 1. 

Video of Supervisor Smyth’s complete statement is available for viewing on the County’s website (click on the meeting link and go to 3:02:35).  Fairfax Water’s letters to the City and Mr. Foster’s response are posted on the utility’s website.

FC Water: Shields Discusses the Little City’s Big Utility

By GEORGE BROMLEY
Falls Church Times Staff

January 15, 2011

For the last four years Falls Church City’s water system has been very much in the news due to nearly continuous litigation.  The latest actions involve a series of refund claims from Fairfax County residents for alleged overcharges, brought about by a circuit court ruling against the City.  City Manager Wyatt Shields recently met with the Falls Church Times to discuss the court filings and to give customers some insight into the system’s operations.

Litigation, Past and Present –  About a dozen claims for overcharges have been received from Fairfax County customers after the Virginia Supreme Court declined to review last year’s lower court decision that Falls Church was charging non-City residents an unconstitutional tax.  Letters requesting refunds also have been received from the Fairfax County Board of Supervisors and the Fairfax School Board.

Mr. Shields said that Falls Church would confer with Fairfax officials regarding the County’s claims.  Aside from this issue, the City continues to maintain a good working relationship with its much larger neighbor.

Falls Church has responded to the lawsuits by seeking relief via two petitions in Arlington Circuit Court (Read them here and here).  Mr. Shields pointed out that Fairfax Circuit Judge R. Terrence Ney’s January 2010 decision against the City made no reference to overcharges or refunds, only that it could not transfer water fund profits to its general fund.  He said that the City is in full compliance with that ruling, which has no state-wide application.  Nineteen Virginia jurisdictions’ utilities continue to earn a return on their operations.

The city manager said he was not surprised that Falls Church’s insurance carrier, the Virginia Municipal League Insurance Programs, had recently filed suit, claiming that coverage for the Fairfax customers’ overcharge claims was not due.  The carrier filed a similar action in 2009, regarding coverage for legal representation.  Falls Church prevailed in that case and the carrier paid all costs incurred during both trials with Fairfax Water.

Under the terms of last February’s consent decree, the City no longer has an exclusive service area in Fairfax County.  However, Mr. Shields said no customers have been lost so far and that Fairfax Water has not secured any agreements to extend its water lines into territories traditionally served by Falls Church.  He believes this speaks well to the quality of service long provided by the City and to the smoothness of its working relationships with local developers.

The City continues to retain the services of attorney J. Patrick Taves as outside counsel.  Mr. Taves represented Falls Church during part of the appeals process last year.

A Long Tradition of Service –  In Mr. Shields’ view, the various legal squabbles since 2007 have served to obscure a larger success story, that of the Little City maintaining a major utility for generations.  The water system, which dates to the 1930s, is older than the City, which was not incorporated until 1948.

The City currently serves 120,000 people, nearly ten times its population, providing 17 million gallons of fresh water every day.  Nearly 500 miles of water mains furnish water to customers in Falls Church City and eastern Fairfax County

Mr. Shields touted the system’s low rates, which are among the lowest of the 17 systems serving the national capital area.  Currently, the average quarterly Falls Church water bill is $80.19.  Despite increased costs, the City has not raised rates in five years and, unlike some systems, charges the same rate for all customers.  While labor costs are higher in this area, the City’s rates compare favorably to most similar Virginia utilities.

Although neighboring Fairfax Water charges lower rates than Falls Church, according to Mr. Shields the City offers developers much lower connection charges.  For example, the City’s “hook-up” charges for a typical mixed-use development in the Merrifield area would be roughly $2 million lower than those charged by Fairfax Water.

The city manager said that Falls Church has invested heavily in the system in recent years, installing new meters and computer systems, to help provide a very high level of customer service.  Over 50 dedicated employees work diligently to maintain the system’s efficiency.

“One-Third of Our Operation” –  Mr. Shields referred to the system as one-third of our operation, viewing its importance as on par with the City’s government operations and its schools.  This seems unlikely to change.

Although the City considered selling the system in the late 1980s, negotiations with Fairfax County gradually were abandoned.  The 30 year boundary agreement lapsed in 1989 and neither party actively sought its renewal.  Since then the City has continued to improve the system’s infrastructure to enable it to assist in the economic development of the County.

Some commentators have suggested selling the system to another utility.  However, the city manager stated that such a sale would be a major step since it would require a public referendum.  That condition would appear to be a significant obstacle in any sales negotiation, given the uncertainty of the public’s final decision.

Clearly proud of the system, Mr. Shields and its employees appear to be strongly committed to serving customer and developer needs.  Although litigation may be ongoing, Falls Church seems determined to continue to defend and operate its utility for the foreseeable future.

Additional information on the water system is available at the City’s website.

WATER WAR: City Sued Over Insurance Coverage

By GEORGE BROMLEY
Falls Church Times Staff

January 10, 2011

The Virginia Municipal League Insurance Programs (VMLIP) has sued the City of Falls Church, maintaining it is not liable for coverage of the recent claims made against the City for water system overcharges.

The complaint [PDF], filed last Friday in Fairfax Circuit Court, argues that coverage is not due as the claims “arise out of the payment, repayment, assessment, or collection of any tax, fee, or charge” and that the policy expressly excludes claims “attributable to the City gaining a profit, advantage, or remuneration to which it was not entitled.”   These arguments are based on a January 2010 ruling, since upheld by the Virginia Supreme Court, that the City’s practice of transferring water system profits to its general fund was an unconstitutional tax on Fairfax County customers.

In late November, Fairfax County demanded that Falls Church return $127,877 in overcharges.  In December, two Fairfax apartment complexes filed suit for $96,558.  A writ filed on December 29 called for the Circuit Court to order the City to make refunds to all County customers.

This is the second action filed against the City by its insurance carrier.  In November 2009 Arlington County Circuit Court Judge Joanne F. Alper ruled that the Virginia Municipal Liability Pool (now the VMLIP) was obligated to defend Falls Church in the lawsuit brought by the Fairfax County Water Authority.

VML Insurance Programs provide coverage to over 460 local political subdivisions.  The Virginia Mutual League is a statewide, nonprofit, nonpartisan association of city, town and county governments established to improve and assist local governments.  All 39 Virginia cities are members of the League.

City Council Holds First Session of 2011

By GEORGE BROMLEY
Falls Church Times Staff

January 4, 2011

The Falls Church City Council held a brief public work session Monday evening, then withdrew behind closed doors to discuss legal matters pertaining to the City’s water system. This was the third time in less than a month that the Council has convened in camera  on the subject.  Several claims for overcharges have been filed against Falls Church by Fairfax County customers in the wake of a judicial decision that the system’s rates constituted an unconstitutional tax.

Most of the open session was devoted to aspects of affordable housing.  City staffers Pam Doran and Kevin Denton briefed the Council on the proposed Moderate Income Home Purchase Program (MIHPP), which would provide loan assistance to qualified first-time home buyers of up to 20% of the purchase price towards the purchase of a home.

Gateway project developer Akridge has offered Falls Church either  a cash contribution of $1.3 million or eight affordable dwelling units.  According to Ms. Doran, the cash would enable the City to provide loans for at least 14 to 20 households.  This assumes that not all of the loans would require the maximum loan amount. 

Ms. Doran cautioned that implementation of the program would be dependent upon the availability of sufficient staff resources.  Potential staff cuts would force Housing and Human Services employees to focus on existing programs.  Details of the MHIPP are available in this memorandum. 

The Council also discussed the FY 2012 budget calendar.  Town hall meetings were scheduled for Saturday morning, January 29, and Monday evening, January 31. 

Vice Mayor Dave Snyder chaired the meeting in the absence of Mayor Nader Baroukh.  Councilwoman Robin Gardner also was absent Monday evening.

WATER WAR: Fairfax Residents File Against City

By GEORGE BROMLEY
Falls Church Times Staff

December 28, 2010

A group of Fairfax County residents have entered a claim against the City of Falls Church for reimbursement of water utility service payments.   The complaint, filed yesterday afternoon by an Alexandria attorney in Fairfax Circuit Court, lists 20 individual plaintiffs and one business.

This is the third claim filed against Falls Church since the Virginia Supreme Court upheld Judge R. Terrence Ney’s January 2010 ruling that the City’s practice of transferring water fund profits to its general fund was an unconstitutional tax on Fairfax customers.  In late November, the County demanded that the City return $127,877 in overcharges.  Earlier this month, two Fairfax apartment complexes filed suit for $96,558.  

Yesterday’s complaint asks for an amount equal to not less than 15% of the aggregate amount of payments each claimant made to Falls Church for each of the calendar years 2007, 2008, and 2009, plus interest.  Under the statute of limitations, claims for 2007 must be filed by Friday. 

During the 2007-09 fiscal years,  the City transferred over $8 million in water fund profits to its general fund.  In compliance with Judge Ney’s ruling, Falls Church has returned the  FY 2009 transfer of $2.25 million to the water fund.

The total amount sought by the plaintiffs surely is well below either of the previous claims.  However, this might be only the first in a series of actions brought by Fairfax residents against Falls Church.  Ninety-two percent of its water system’s customers are in the County, maintaining around 35,000 accounts.

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