The City of San Juan Capistrano (City) was sued by its ratepayers regarding a tiered rate structure developed by the City’s previous rate consultants. The plaintiffs were concerned that the previous rate structure did not meet the cost-of-service test per the requirements of Proposition 218. The courts determined the administrative records were not sufficient to establish a clear nexus for the rates.
The City selected Raftelis to assist with resolving this matter. One factor in the City’s decision for selecting Raftelis was the rigorous nature of our approach for defensible rate structures. In the case of the City and other agencies, a common practice has been to base tier prices on multipliers. This leaves agencies exposed to courts opining that their multiplier approach violates the “arbitrary and capricious” provision of Proposition 218.
In resolving the City’s matter, Raftelis implemented its approach for satisfying a clear nexus for the rates – there needs to be a clear justification of the tiers and pricing. Raftelis achieved this nexus by developing rate components which were used to justify the various tiers for the proposed rate structure. Raftelis’ work withstood the rigorous scrutiny of several City Council meetings, including a multi-hour discussion confirming the defensibility of Raftelis’ cost-of-service approach. The rates were approved and adopted in 2014.
