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Utility Hearing Board appeal of Brian Sullivan re 1213 18th Street

Hearing Examiner #: HE-13-MISC-027
Planning #:
Incident #:
Filing Date:08/19/2013
City Contact:Matthew Stamps
Hearing Date: 09/18/2013
Description: Utility Hearing Board appeal of Brian Sullivan re 1213 18th Street
Decision Date: 10/02/2013
Decision Summary:Denied.

This matter came before the Bellingham Hearing Examiner for hearing on the 18th day of September 2013 on the Appeal of Brian Sullivan of the City of Bellingham Utility Hearing Board's decision denying his request to reduce or remove backcharges for water, sewer and watershed utility charges.
Testimony was received from Brian Sullivan, Appellant; and Josh Zender, Bellingham Finance Systems Manager. Assistant City Attorney Matt Stamps represented the City Finance Department. Brian Sullivan appeared pro se.
In addition to the Bellingham Municipal Code, the following documents were considered as part of the record: E-mail from Brian Sullivan dated 8/19/13; City of Bellingham's Hearing Brief dated 9/12/13; and Declaration of Joshua Zender, CPA, in Support of the City of Bellingham's Hearing Brief dated 9/12/13.

Brian Sullivan established a customer account for City of Bellingham water and sewer services for his home located at 1213 18th Street in Bellingham on May 4, 2006. This was the first time Mr. Sullivan had owned a residence and applied for water and sewer service. He received water and sewer service at that residence continuously from May 4, 2006. Billing statements were sent to Mr. Sullivan from the City Finance Department every other month. The first seven billings sent to Mr. Sullivan indicated a credit balance resulting from a payment of $106.50 on May 4, 2006. The first statement shows a water base rate of $12.00 and a storm water charge of $12.50. Each subsequent statement showed a charge for storm water only. Beginning with the September, 2007 billing the statements showed a total amount due ranging from $10.50 to $16.94 through the May 2013 billing. Mr. Sullivan paid the amounts due shown on the statements.
In June 2013, while performing account audits as part of a quality review process, the Finance Department detected errors in the billings for Mr. Sullivan's account. The Department determined that he had been charged only for the stormwater fee and not for water, sewer and watershed fees. As a result of this audit the Department determined that Mr. Sullivan had been undercharged each billing period going back to the establishment of the account in May 2006. The Department sent Mr. Sullivan a letter June 25, 2013 describing the error and advising him that he would be billed for the backcharges for the previous three years, from June 1, 2010 to May 31, 2013, after applying a three-year statute of limitations and existing City policy guidance. The total amount due for this time period is $2,454.63.
City water and sewer rates are set by City ordinance. BMC 15.08.250D(1) and (8) establish the current base rates for water and watershed utilities. The current rate for unmetered water is $32.66 per month for a single-family residence. A separate fee of $12.00 per month is charged all single-family residences for Lake Whatcom watershed land acquisition and preservation. Ordinance 2007-12-107 established the utility charges for the years 2008 through 2012. The rate for unmetered single-family residence water service in 2012 was $29.96 per month. In 2011, the single-family water rate was $27.72. The 2010, water rate was $25.47. In 2009, it was $23.23 and in 2008 the rate was $21.81. The watershed rate for the years 2008 through 2012 was $5.00 per month. Current sewer rates are set forth in BMC 15.12.180. The flat rate for 2013 for single-family residence customers is $33.97 per month. Ordinance No. 2007-12-108 established sewer use rates for the years 2008 through 2012. The 2012 rate for a single-family residence was $33.23 per month. In 2011, the sewer rate was $31.20 per month. The rate was $29.30 in 2010, $27.51 in 2009 and $25.83 in 2008.
Mr. Sullivan appealed the backcharges to the City's Utility Hearing Board, pursuant to BMC 15.04.120, on July 8, 2013. The Board convened on July 31, 2013 to consider the appeal. After considering the testimony received at the hearing and the billing records the Board concluded that State law required the City to collect the backcharges and therefore, the City could not reduce them. The Board advised Mr. Sullivan of this decision by letter dated August 6, 2013.
Mr. Sullivan argues that he did not receive the same service as other single-family utility users since he did not receive accurate billing services. He states that he is now faced with a substantial bill for the backcharges and continuing charges for utilities that are much greater than the amounts he was led to believe he would owe. He had not budgeted for these expenses since he had been billed an amount under $20.00 every other month instead of the current bills amounting to approximately $175.00 every other month. The City has offered to provide Mr. Sullivan with a payment plan with no interest over a period of three years to satisfy the backcharges. Those payments would add about $136.00 every other month to his utility bill.
RCW 35.67 and 35.92 provide authority to cities to operate water and sewer utilities. These statutes require that rates charged for the utilities must be uniform for the same class of customers or service and facilities furnished. Washington appellate courts have ruled that these provisions require the municipal utility provider to collect undercharges notwithstanding equitable defenses such as those offered by Mr. Sullivan. The case cited by the Department, Housing Authority of King County v. Northeast Lake Washington Sewer and Water District, 56 Wn. App. 589 (1990), is on point. In that case, the utility district had undercharged the Housing Authority for more than four years until an audit revealed the District's error. The Housing Authority argued equitable estoppel because it had passed along the utility costs for which it was billed to its tenants and it would be unable to collect the backcharges from former tenants who were the users of the services. The court determined that the public policy against rate discrimination bars the use of equitable defenses to the collection of utility backcharges. The court also found in this case that collection of undercharges would be barred by legislatively imposed limitations, such as the statute of limitations which bars actions if not commenced within the statutory timeframe.
The Washington State Constitution, Article VIII, Section 7, prohibits the gifting of public funds. Waiving payment for utility undercharges which the City is required to collect would be a gift of public property and is prohibited by the constitutional provision.
BMC 15.04.120 provides for appeal of decisions of the Utility Hearing Board to the Hearing Examiner. The Hearing Examiner's authority pursuant to BMC 15.04.120 is to review the decisions of the Board and to determine whether the Board acted appropriately in accordance with provisions of the ordinance and other applicable law. The Board is charged with considering objections made by the Applicant and correcting, revising, raising, lowering, changing, or modifying the charge or fee, or setting aside the charge or fee, as deemed appropriate by the Board and as allowed by law. Neither the Board nor the Hearing Examiner may reduce or set aside charges which the City is obligated by law to collect.
The City is obligated by law to collect charges for water and sewer services actually used by the consumer in accordance with the rates established by ordinance. There is no dispute in this case that the sewer, water and watershed services were actually received by Mr. Sullivan or that the amount sought by the Department is not a correct reflection of the rates applicable to those services for the time period in question. Although imposition of the backcharges clearly imposes a financial hardship upon him, the City is obligated to collect the amounts which it erroneously failed to charge in a timely manner, subject to statutory limitation of actions. Mr. Sullivan did receive inaccurate billing services, however those are administrative actions which are ancillary to the utility services covered by the rate structure adopted by City ordinance. Inaccuracies in the billings do not place a customer in a different rate class. Mr. Sullivan's rate class is flat-rate single-family residential service. The rates are adopted by ordinance and codified in the Bellingham Municipal Code. They are not subject to waiver by the Department, the Board or the Hearing Examiner.
The appeal of Brian Sullivan from the decision of the Utility Hearings Board regarding the charges for water, sewer and watershed utility services for the property at 1213 18th Street in the amount of $2,454.63 is denied.

ENTERED this 2nd day of October 2013.
Bellingham Hearing Examiner
Dawn Sturwold