A $30 million lawsuit challenging the way Spokane charges county residents for city water is coming to a utility bill near you.
Superior Court Judge Julie McKay has approved a class-action lawsuit of about 5,300 Spokane County residents who get city water. That means the massive lawsuit filed in June 2017 can move forward. It seeks to compel city leaders to justify the much higher rates they charge county users for the same water provided to city residents.
After some legal back and forth, McKay on Friday ruled that the city must provide notices of the lawsuit in every utility bill it sends for the month of February. Everyone who paid the higher water rates will be a part of the class unless they sign documents opting out.
The suit was filed by civil attorneys Bil Childress and Bob Dunn, who has history of legal action against the Lilac City.
“The city says it costs more (for water) and that county residents need to pay for extra infrastructure. It makes intuitive sense, but it’s not true,” Dunn said. “It’s an argument the city has been promulgating for the last 20 years.”
Dunn said state law, of which several statutes apply, basically says the city can charge higher rates to customers outside city limits. But, those rates must be reasonable “and that there is a rationale for the higher rates. You need to do analytics to justify the higher rates.”
As part of the lawsuit, Dunn and Childress asked for the documents from the city that show how much it costs to pump water out of the aquifer, how much it costs for the pipes, the hookups and the cost of upkeep on the system.
But out of 4 million pages of documents provided by the city, Dunn said he only found one that mentioned a cost analysis for how water fees are applied to county users. It came 17 years ago from former city water director Brad Blegen.
“Rather than doing a very time consuming and costly rate study, a more intuitive approach has been used in adopting our present rate structure,” Blegen wrote in 2002. “This intuitive or common sense approach yields close enough results to indicate the fairness of our rates.”
When asked for any other studies done by the city to justify the rates to county users, spokeswoman Marlene Feist said she could not elaborate.
“Our attorneys are producing millions of pages of discovery,” she said. “For me to jump in and provide more details would be inappropriate.”
The city has hired former City Attorney Mike Connelly to defend the suit. Connelly now works for the law firm Etter, McMahon, Lamberson, Van Wert & Oreskovich. He did not immediately return a phone call Wednesday seeking comment.
Dunn said the American Water Works Association puts out a manual that shows what a city should do to determine water rates.
“You ask the city for analytics and you get people with deer-in-the-headlights syndrome,” Dunn said. “To falsely charge users for water service is fraud.”
The current class-action suit actually started with a separate suit filed in 2017 by Dunn on behalf of Fairways Golf Course on the West Plains, which had its water shut off over a $40,740 outstanding bill.
While that suit is continuing and is separate, the class-action suit challenging the fee structure for county water users also has some of the same plaintiffs, including club professional Kris Kallem and neighbors John Durgan and Tawndi Sargent. Durgan’s family managed the course for 15 years before the current owner took over.
Dunn said that after he filed the golf course suit, his phone lit up from residents all over Spokane County.
“They asked us, ‘Why don’t you look at our water bills?’ We had dozens of calls within two or three weeks,” he said. “Maybe there is something here we need to look at. They are getting 50 percent to 100 percent gouged for exactly the same city service.”
But several details of the suit remain to be determined, including how many years of water bills should be considered.
City attorneys want to limit the suit to the past three years of water bills, Dunn said.
“We are saying it should be a minimum of six years,” he said. “But, we think we get to go back to the day they defrauded county users 20 years ago. That fight hasn’t been teed up yet.”
Aquifer to tap
The city has six wells, all located near the Spokane River, that pump water out of the aquifer to serve all of its customers. It also has 11 booster stations that pump the water to users at higher elevations, like the South Hill and Five Mile Prairie.
The city has a network of large water mains that travel inside, and outside, city limits to provide water as far as the West Plains.
Dunn and Childress acknowledge that the city incurs cost to provide those pipes, wells and booster stations. But where the argument gets hazy is when county residents come within feet of city limits and they get charged the base rate that is 33 percent higher.
“All the infrastructure is inside the city,” Dunn said. “They didn’t have to build anything to serve the users in the county.”
One of the city arguments is it must charge higher fees to cover the cost of serving new developments in the county that want to tap into city water. Dunn said that argument is full of holes.
Childress said the city has long required developers to build water systems that meet city code. The developer pays for that infrastructure and then agrees to sign ownership of those pipes to the city once the water lines are hooked up.
At the end, the city has what it calls a General Facilities Charge. That is the fee the city charges developers, which sometimes can be as high as $250,000 depending on the size of the line and number of homes, for the coupler to hook the new pipes into the city water.
“And, city employees have to do the connection,” Childress said. Developers “have to pay the city for parts and labor” for the connection.
“So the infrastructure is already in place,” Dunn said. “Any new infrastructure is paid by the developer. So where are the analytics? Where is the rationale? It’s an outrageous scheme by the city.”
Separated by bills
In some areas of the South Hill, a fence separates those who pay city rates and those who pay county rates.
Following 53rd Avenue, an invisible city-limits line separates two houses from the rest of the cul-de-sac. One of those homes is owned by Stacey Howard.
“Our bills in the summer are high,” Howard said. “I had no idea I was paying more than my neighbors.”
The house next to Howard used to be owned by former Gonzaga women’s basketball coach Kelly Graves. His family moved four years ago to Eugene. He now coaches the No. 5 Oregon Ducks women’s basketball team.
Graves said he remembers his wife, Mary, complaining about high water bills.
“We weren’t making the money that we are now,” Graves said. “There were some $400-plus monthly bills. My wife called them and asked if we had a leak. They said, ‘No. Those are just your rates.’ ”
Graves’ home was purchased three years ago by Chris Dorsh. It has an 18-inch city water main that is located in the street just feet from his front door.
“I just assumed the water bill was so high because how much bigger this lot is,” Dorsh said. “But there’s an 18-inch water main in front of my house. Why would I pay the same as someone in the far reaches of the county?”
Just keeping his lawn alive “is such a big hit in the summer,” he said. “Now I’m the face of the lawsuit. I will not be opting out of that.”
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