Sonoma’s water fund fiasco

In February of this year, we were the first to report citizen Chris Petlock’s comments and questions to the Sonoma City Council about water rates and money transfers from the City’s Water Fund to its General Fund. Subsequently, the City made light of his concerns; then Pubic Works Director Dan Takasugi wrote a memo stating the transfers were proper and the city’s water rates were properly calculated.

Petlock persisted in his quest to understand the rates and transfers and requested financial data from the city to get the facts he needed, but the City was unable to provide that data. He turned to the City’s audited financials, but they raised more questions than they answered.

Despite his concerns, the matter was never placed on the regular council agenda. Meanwhile, City Manager Carol Giovanatto and Dan Takasugi retired, and Finance Department Manager Deanne Richards resigned, the three city employees with firsthand knowledge of the workings of the Water Fund and city finances.

The City’s Water Fund operates as an Enterprise Fund; it’s budget, operations and finances are governed by state law regulating utility-type functions of government. Those laws are quite specific about how rate-payers are charged and how funds are handled. Rate payers are supposed to be charged only for the cost of providing the water itself and the operational expenses of that fund. Petlock’s concerns were that Sonoma’s water rates are more than 20% higher than other similarly sized cities, and the audited financials indicated to him that improper transfers to the General Fund were being made in very large amounts.

Though the audited financials indicate transfers were for “water projects and related activities,” the city has been unable to document them.

Suddenly, last month, after emerging from a closed session (a meeting not open to the public), Mayor Hundley announced the city had decided to order a new water rate study and to immediately halt transfers from the Water Fund to the General Fund. This action raises further questions, namely what information was presented to the City Council that would prompt such actions, and why was this information never discussed in public? The Brown Act requires city business to be conducted openly unless it’s a matter of pending litigation, personnel or property negotiations; the California Attorney General’s office states “…it (closed session) is not to be used as a subterfuge to reach non-litigation decisions.” No lawsuit had been threatened or filed, filed; why the secrecy?

If the city did something wrong, the citizens deserve to know.

Recent comments from current City Manager Cathy Capriola indicate that if it’s verified the city has violated state law and collected and transferred money improperly, the water fund and its rate payers will be repaid. But why didn’t the city know it was violating the law? If money was improperly used for non-water fund projects, who’s responsible? These are important questions and the rate payers and citizens deserve answers.

The amount of money in question is very large, and potentially goes back to 2012 when the water rate structure was adopted; it could be as much as $6 million dollars. While it’s good the city finally paid attention and moved to correct its mistakes, it’s terribly disappointing that city financial and operational management have been so weak that a concerned citizen is the one who must bring it all to light.

–Sun Editorial Board