Finding # 14: The original sewer rate study did not take into account unoccupied residences.
This is the 14th Grand Jury Finding against the “Ed” MacKay-led Rosamond Community Services district. When presented as a single finding, it appears quite benign; however, when discussed alongside Findings # 15 thru 18, one actually begins to internalize questions on a path toward enlightenment.
In June 2015, the Kern County Grand Jury highlighted something that has origins back to 2009. So let’s start when the original rate study was done that was completed in 2009.
This Kern County Grand Jury finding highlights the fact unoccupied residences were not included the study. Unfortunately, there is no record that will show specific reasoning for the matter in which the 2009 Sewer rate study was completed. Several attempts to locate anyone who can explain this oversight have failed; the oversight resulted in reduced sewer-rate based revenue for the RCSD. A result of the failure to address unoccupied residences also limited data analysis pertaining to unoccupied residences that later became occupied. I am not a mind reader, nor have I ever been an RCSD board member, therefore I can only imagine as to why the RCSD Board of 2008-09 did not consider vacant properties and the future impact in the form of lost revenue as part of the study.
The RCSD Board members in 2009 (responsible for the 2009 Sewer Study) consisted of: Mr. Byron Glennan, Ms. Kathleen Spoor, Mr. Robert Scherer, Mr. Daniel Landsgaard and Ms. Kim Lord. Of that group, only Mr. Glennan remains a board member.
I do see a familiar surname in that group from 2009: Landsgaard. In the spirit of the “smoking gun” I suspect that the answer falls squarely in the lap of the Landsgaard Family.
First, I will provide a little background concerning the sewer aspect of public works and utilities.
Unlike water, gas or electric service, a family is not billed based upon consumption. Consumers pay for the amount that they use, in addition to the cost of the product consumed has been integrated into the price for the cost of maintenance, equipment upgrades, replacement, and other hidden operating expenses.
A waste water (or sewer system) is very different as it does not deliver a product to a home, it is a receiving system that is in use 24 hours a day, 7 days a week and even though a dwelling might not use the system for a prolonged period of time due to work requirements, family vacations or being vacant (either on or off the housing market) the base cost is not for how much you use the system, but rather for having access to the system whenever you need it.
The sewer system has to be maintained, cleaned, upgraded and expanded; all of which require revenue (I will speak directly to the economic impact later in this section).
It can be said that sewer is a direct “output” (pun intended) of the water and other consumables that people routinely need to survive. That said, how exactly should a service provider calculate sewer rates?
In my research, I examined three cities. 1) Tallahassee, Florida 2) Davis, California and 3) Rosamond.
The city of Tallahassee, Florida encourages people to limit water use in the winter to lower sewer cost! This is because, each year, the city calculates residential sewer charges based upon residential water billing cycles during the four winter months of December through March. Because the city bills customer after they use water, which means residents need to watch their water usage from November through February.
The “upper limit” sewer charge, which is the highest amount charged in any month during the following 12 months, is established by using the second highest water consumption billed during those four winter months. Tallahassee conducts a sewer rate survey EVERY YEAR to account for buildings that were empty and became occupied over the previous year.
Why the four winter months? Typically, customers use large amounts of water during the hot summer months – watering lawns and gardens, taking frequent showers, washing cars, and so on. Customers usually reduce their water usage in the winter. So rather than billing based on heavy summer use, the city uses the winter months when water use should be a good deal less.
Why the second highest month? By disregarding the highest usage month in the winter, the city gives the residents a break to take into consideration unique “one time” events that would drive higher consumption rates. Thus, city uses the second highest consumption month to further ensure the lowest charge possible.
The city routinely tells its residents, “check your home now for water leaks, especially in sinks, inside and outside faucets, and toilets. Run full loads in the dishwasher and use appropriate load settings for your washing machine. It’s also a good idea to review how your family uses water because the more water you use this winter, the higher your sewer bill will be.”
Now Tallahassee, Florida sounds like a city focused on its citizens.
The city of Davis, California uses an approach similar to that of Tallahassee, In that they rely upon a base calculation that considers; 1) average water use in the winter months 2) the type of building being serviced or User Class 3) type of business or number of occupants in the building or Customer Category and they apply a “hundred cubic feet” or CCF count to determine sewer rates.
I could find no information concerning how often the city of Davis, California actually performs the sewer rate survey (I suspect as many municipalities in California, they do it on a five-year basis).
So, let’s bring it home to Rosamond!
As you read over the next few paragraphs, consider this. Since virtually every property in the district has access to water and sewer services, imagine the power that any one person could have if they sat on the governing body responsible for setting and adjusting rate fees, establishing guidance policies affecting the entire Rosamond community (to include present residents and those yet to come).
The last sewer rate survey was conducted in 2009. Prior to 2009, RCSD had not incurred a rate increase since Fiscal Year 2003‐04. During the five years from 2004 and 2009 (according to the engineer’s report), operating costs increased such that revenue generated did not cover operating costs. Reserve funds were used to make up the short fall of revenue. In the eyes of the engineer, it became necessary to increase the revenue to cover the daily operating and maintenance costs, to begin funding a replacement program and to restore (depleted) revenue reserves.
In order to address the revenue shortfall, RCSD determined to undertake a rate study to analyze the revenue requirements of RCSD’s water operations. The objective of the study was to develop sufficient stable revenues to properly operate and maintain the water system, and to ensure a safe and reliable supply to accommodate current and future customers.
The art of rate design involves developing rates that are balanced between potentially conflicting objectives, the desires of the users and requirements of the law, in a manner that suits a particular community. The unique nature of a community and its customers must be considered when selecting a rate structure.
Oh well, those were pretty much words from 2009 and they sound eerily familiar five years later.
Let’s take a closer look at exactly what came out of the Sewer Rate Survey of 2009. Considering long-term impact, the Sewer Rate Survey of 2009 locked in annual increases EVERY YEAR for five YEARS.
That said, there has been no consideration for properties that were empty in 2009 and have had occupants in them since. By locking in the rates for five years, the RCSD was able to avoid the “work” of performing a Sewer Rate Survey every year. The negative impact of not performing a Sewer Rate Survey each year is the fact that residents miss out on the opportunity to have rates reduced as the course of water saving technologies that have been developed over that five years.
In doing research for this section, I ran across a Public Hearing Notice release by the RCSD in 2009, explaining the propose rate plan. Here goes, it states:
“Since the District does not measure Individual sewer users’ discharge, an indirect method has been adopted by the industry.
For all Customers, RCSD will use the monthly water used during the months of December through March of the prior fiscal year. The District will identify the two lowest months of water usage and average those two months. Because these months are normally the wettest months for the region and there generally is less outdoor irrigation, they are the best reflection of the amount of water being returned to the sewer by Customers.
The standard unit of measure pertaining to water consumption and sewer discharge is the “Hundred Cubic Feet (HCF)” measure; HCF equals 100 cubic feet which is equivalent to 748 gallons.
The HCF Charge component of the rate structure will then be determined on the basis of each Individual Customer’s water usage. For determining the HCF Charge for Residential Customers, water usage will be capped at a monthly maximum of 20 HCF (14,960 gallons).
The cap on maximum water usage recognizes that there may be some irrigation water used during the months of December through March which is not returned to the sewer. Water separately metered, used for irrigation, and not discharged into the sewer will not be included in the determination of the rate to be imposed for the HCF Charge for any customer.
There is no cap on water usage for determining the HCF Charge for Commercial Customers I and Commercial Customers II. The sewer service fees for Residential Customers and Commercial Customers I will be calculated as follows:
Base Charge times each residential unit or commercial unit for a parcel of property (a residential unit includes, but is not limited to, a single-family residence, an apartment within a master metered apartment building, a mobile home within a master metered mobile home park, and a condominium within a master metered condominium complex; a commercial unit Includes, but is not limited to, a commercial business within a master metered business park or complex, such as a strip mall);
Plus an HCF Charge calculated by dividing the monthly water usage by the number of units; and
Multiply the HCF water usage times the HCF water usage per residential unit for each parcel of property (not to exceed 20 HCF per unit for Residential Customers).”
The public notice, continues, “Commercial Customers II discharge stronger waste. In order to account for the additional costs of treating their wastewater, the rates for the HCF Charge for Commercial Customers II will be four times the rates charged to Residential and Commercial I Customers. The HCF Charge will be charged on all water discharged to the sewer based on the monthly metered water usage. Water separately metered, used for irrigation, and not discharged into the sewer will not be included in the determination of the rate to be imposed for the HCF Charge for Commercial Customers.”
In summary and in a feeble attempt to justify the FIVE –YEAR approach to residents, here’s the story they told residents in 2009!
“To mitigate the impact of rate increases for sewer customers, the rate increases will be phased in over a five-year period. The proposed rates will be in effect beginning on October 1, 2009, and will be increased each October 1st thereafter through October 1, 2013. The table below reflects the proposed rates for the Base Charge and the HCF Charge of the sewer service fees for residential and commercial customers for the next five years.”
|HCF Charges (Residential)||HCF Charges (Commercial)|
|OCT 09||$29.33||OCT 09||$0.11||OCT 09||$0.44|
|OCT 10||$29.33||OCT 10||$0.11||OCT 10||$0.44|
|OCT 11||$34.21||OCT 11||$0.12||OCT 11||$0.48|
|OCT 12||$36.97||OCT 12||$0.12||OCT 12||$0.48|
|OCT 13||$39.80||OCT 13||$0.13||OCT 13||$0.52|
Here are the facts:
This past spring, the RCSD decided to implement Resolution 2015-3 aimed at removing the sewer fee from the property tax and placing it back onto monthly water bills.
1) When the rate study was completed in 2009 setting the current sewer rate it was based upon all dwellings connected to the system paying the rate 12 months a year.
2) With the sewer rates placed on the monthly water bill that sewer rate will only be paid as long as that dwelling is getting a monthly water bill.
3) If that dwelling or rental unit is vacant any time during the year than the sewer rates are reduced for every month that this occurs.
4) It is estimated the empty dwellings or rental units are costing the RCSD approximately $150,000 in lost revenue every year.
5) By having the sewer fees on the property tax it ensures that the RCSD will collect all of the revenue necessary to maintain, upgrade, expand and replace the sewer system.
6) If Rosamond goes back to having the sewer fee placed on the water bill than the RCSD will start losing at least $150,000 every year. The long-term unintended affect is that over-time sewer rates rise (as operating costs outstretch RCSD coffers) and homeowners, will end up paying every month to subsidize those who enjoy the income of rental units but no longer have the responsibility to contribute to RCSD when rental units sit empty.
So, at the end of the day, who benefits from the current Sewer Rate being locked in and not considering vacant housed and buildings? The people who benefit most are those who own a lot of rental properties or houses. Going back to the beginning of this Finding, I didn’t have to look very hard for a very evident beneficiary.
You see, there was a member of the Landsgaard family on the RCSD in 2009.
I contend to you (it is my opinion) that the Landsgaard clan is the number one beneficiary of this issue for which Daniel Landsgaard fought tooth and nail to have implemented back in 2009.
In 2009, the argument was for a locked in rate.
The argument today is to remove the Sewer charges from the property taxes and have each resident pay the fees directly to RCSD. By taking this action, Mr. Landsgaard and his cronies on the RCSD Board have managed to provide a windfall in avoided taxes and fees to Kern County and as previously mentioned, this decision has cost RCSD over $150,000 each year since 2004 in lost revenue due to empty houses not being subject to the assessment.
By now, I am sure there are questions running through your mind. I will now introduce a series of seventeen questions. I refer to them as, “Internalized Questions”. These are questions that you probably already know the answer to, but are actually waiting on some else to ask. Therefore, I will ask them for you.
Internalized Question # 1:
The following question isn’t an unfounded question based on a rhetoric. It’s a question that begs for an answer and that each of us should ask Mr. Landsgaard.
Mr. Landsgaard, “How many rental units do you, your family members, family trusts, friends, and business associates have in the community of Rosamond that will benefit financially from by removing these sewer liabilities from your property taxes and placing them squarely upon the shoulders of your renters, leasing agents and other tax payers?”
Where there’s smoke, there’s usually fire.
In performing a basic internet search, I was able to find the “unofficial” answer to my question. I found 75 properties accounting for more than 221 acres of land within the Rosamond Community Services District boundaries (see images 11 – 14, below) associated with the Landsgaard family name, trusts, friends, and business associates (as listed on the Kern County tax rolls). This information is sourced from public record data via http://www.kerndata.com/
I am sure there are more, I just have not had the time nor resources to complete the search; as with each turn, I discovered no less than 5 corporations linked to the Landsgaard family name: They are: 1) Mouth of Hidden Valley, LLC., 2) Aero Sports Skypark Corp., 3) Avico Inc., 4) Karl’s Hardware Inc., and 5) Rosamond Prop, LLC.
It is my opinion that the actions of the RCSD Board have benefitted a handful of powerful people in very influential positions. In effect, RCSD has created a system the subsidizes those (business people) who have rental units by forcing homeowners and other community entities into pay their share, in addition to, offsetting the net loss of over $150,000 per year in uncollected sewer fees.
Now back to the original finding, there is a reason that the Kern County Grand Jury felt in necessary to highlight the fact that the “original sewer rate study did not take into account unoccupied residences” and it is my opinion that those in power are reluctant to cut the purse strings and do the right thing for the community.
Image 11 - 14: List of 77 properties (221 acres of land) associated with the Landsgaard family name, trusts, friends, and business associates. All listed on the Kern County tax rolls within RCSD boundaries.
====================== Finding # 14 states: “The original sewer rate study did not take into account unoccupied residences.”
The RCSD’s official response to Finding # 14: “The Board agrees with this finding.”
To read the next section click here: The Midnight Writings: Finding 15 – “Sewer and Lawyers”