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A lesson can be learned by the manner in which a similar problem was addressed by two different agencies – Dublin San Ramon Services District (DSRSD) and the city of Pleasanton.
The problem: DSRSD and Pleasanton both allegedly failed in their contractual and legal duties to fully compensate Zone 7 Water Agency by not reporting changes in the size and capacity of new water meters installed.
As a water wholesaler, Zone 7 sells treated water in the Tri-Valley to the cities of Livermore and Pleasanton, and DSRSD, and the cities and DSRSD pay Zone 7 based on the amount of water delivered.
The new, larger meters allowed more water to be delivered, but DSRSD and Pleasanton neglected to report the installation of new meters and the increase in water flow to Zone 7. Both agencies also continued to collect fees based on the smaller meter sizes, resulting in the undercollection and underpayment of fees to Zone 7.
This is where the tales diverge – dramatically and irreversibly.
In October 2024, DSRSD reported to Zone 7 that in 2012 the agency installed meters that provide a higher maximum continuous flow of water and “DSRSD may have collected and remitted to Zone 7 water connection fees in amounts less than what was required under the Parties’ 2003 Connection Fee Agreement …”
The representatives of DSRSD and Zone 7 collaborated on an agreement that includes a plan for DSRSD to decrease the flow of water through the meters and Zone 7 agreeing to amend its fee schedule if necessary.
The best part is that both parties agreed to look forward through constructive actions, not backward by placing blame or litigating over what is, arguably, owed to Zone 7.
In other words, DSRSD took the path of transparency and responsibility.
Pleasanton took a different, less transparent, possibly expensive path of trying to fight the reality of a problematic situation, forcing Zone 7 to file a lawsuit in January 2024.
And Pleasanton continues to fight accountability through litigation, which will likely cost millions of dollars in legal fees to defend a case that seems indefensible considering the documentation and evidence presented by Zone 7.
According to the 2024 complaint, Zone 7 was informed in June 2022 by former Pleasanton employee Dan Repp (who is suing the city for wrongful employment termination) that larger meters which allowed increased water flow were installed on new and existing residential and commercial properties between 2015 and 2016.
In other words, Pleasanton had not been collecting or paying for the increased water capacity the new meters allowed since 2015.
Zone 7’s estimate of what Pleasanton owed for the increased water delivery between January 2015 to July 2022 was more than $18.5 million.
In California, in order to sue a municipality, a legal claim must first be filed and a response received. Zone 7 submitted its claims on Nov. 18, 2022. On Dec. 3, 2022, Pleasanton sent a letter to Zone 7’s legal council and returned the claim because it fell outside the statute of limitations of one year of the “event or occurrence”.
Actually, though, Pleasanton’s rejection was, well, rejected. We assume the rejection was because the claim was filed within a year of notification of underpayment.
On May 31, 2023, Zone 7 and Pleasanton entered into an agreement that paused the statute of limitations for 120 days, so the agency could still sue outside of the year statute if necessary.
According to the complaint, there were several extension agreements. Apparently, Zone 7 had had enough of the delays and filed its lawsuit before the expiration of the final agreement.
So, DSRSD owned up to errors made years earlier – whether knowingly or by bureaucratic negligence under another general manager – and came away with an agreement that excludes a monetary settlement and avoids “the time, burden, expense, distraction, uncertainty, and inconvenience of litigation”.
When Pleasanton was alerted to a potential problem, perhaps staff should have asked for time to research if the city did in fact under-collect and under-pay more than $18.5 million in fees for approximately seven years – whether knowingly or by bureaucratic negligence under another city manager.
Instead, Pleasanton City Manager Gerry Beaudin and the City Council in 2023 chose to kick the can down the road through legal maneuvers and delays, and now Pleasanton is involved in what could be a very expensive lawsuit.
In addition to the $18.5 million-plus in fees owed, Zone 7 is asking for interest and its legal fees to be paid by Pleasanton, if the agency is successful in its lawsuit. A hearing is set for July 22; a jury trial is set for Aug. 25.
Why Beaudin and the former council, leading a city reportedly facing a $10.4 million budget shortfall in fiscal year 2025-26 and a $12 million shortfall in 2026-27, decided to let this fester to the point Zone 7 wants a jury trial is a mystery.
There are obviously better ways to handle situations like this. We hope Beaudin, his staff and the current City Council will take a lesson on transparency, accountability and leadership from DSRSD and work to get this lawsuit settled before it goes to trial.
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And yet the very elaborate and detailed new water rate study publicly presented to the mayor and councilmembers just a couple of weeks ago still bases the new proposed structure on the 5/8 inch meter when in actual fact, all connections are 3/4 inch ones. At least those with the newer “smart” meters. How does that get to be “defensible”?
Let’s hear what our city leaders (from the effected period) have to say about this snafu. Ignorance is not bliss.
This mistake (whether it was intentional or unintentional) should be charged against the city not the current residents. Many residents have moved and that money cannot be clawed back and current residents should not be burdened by this mistake. Also are we currently paying for the correct water usage? Would the author of this article please clarify?