A class-action lawsuit was filed Tuesday against the city of San Diego, the Public Utilities Department and the city council, alleging the city misused taxpayer funds to pay for the city’s new smart water meters.
The legal action alleges the city’s Public Utilities Department fostered an "illegal financing scheme" by using municipal sewer funds to pay for the advanced metering infrastructure, also known as the “AMI smart water meter program”.
NBC 7 Responds has been investigating the smart meter program since last July and has revealed problems with meter installations and questions surrounding the financing behind retrofitted water meters.
The class action lawsuit is not related to a recent surge of complaints about high water bills.
Approximately $33-million dollars used to pay for the more than $67-million dollar meter project came from sewer ratepayers or the Municipal Sewer Fund, the suit claims. Attorney Paul Neuharth, whose office filed the case, said the city has 2.2-million sewer users and 1.3-million water users.
Neuharth told NBC 7 Responds that ratepayers who only have sewer services were forced to pay for metering equipment they will never use.
The lawsuit states that in March 2016, the Public Utilities Department determined the cost of the project and recommended the city apply for more than $42-million dollars of financing from the State Water Board’s Clean Water State Revolving Fund. That amount comprised 70% of the total project cost. The Public Utilities Department also recommended an additional $18-million dollars in funding from the Municipal Sewer Fund for the smart meter project.
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Then in December 2016, at an Independent Rates Oversight Committee hearing, Public Utilities Department staff reported half of the cost was going to be paid for by the Sewer Fund, rather than state financing. In addition, the project’s total cost increased by more than $7-million dollars.
The lawsuit claims these financing decisions violated Proposition 218, a state measure that requires public input on public spending for any items the money was not originally designated for. The suit also demands the city repay ratepayers for sewer funds used to purchase the water meters.
Neuharth told NBC 7 Responds this case highlights the need for increased oversight over how the Public Utilities Department spends taxpayer dollars. NBC 7 Responds found the Independent Rates Oversight Committee, created in 2007 to oversee the Public Utilities Department, has no staff or budget and committee members work on a volunteer basis.
NBC 7 Respond asked the Public Utilities Department, City Council Members and the City Attorney’s office for a comment, but none of them have responded to the allegations raised in the lawsuit.
“We will review the complaint and respond through the court,” City Attorney spokesperson Gerry Braun said in an email.
