Sanitary District Frequently Asked Questions
Last updated 3/19/2024
The City of East Palo Alto (City) has prepared the following FAQ in response to misinformation disseminated from various sources concerning its application before the San Mateo Local Formation Commission (LAFCo) concerning the East Palo Alto Sanitary District (EPASD).
The City submitted an application to LAFCo to make the EPASD a subsidiary of the City. LAFCo unanimously (twice) approved the City’s application, so EPASD will become a subsidiary of the City of East Palo Alto if the LAFCo process’s protest period ends without a significant number of protests received.
As a subsidiary of the City, the EPASD would remain a separate entity from the City; however, the East Palo Alto City Council would govern EPASD instead of the EPASD Board of Directors. EPASD funds could only be used for EPASD functions, i.e., the City would not be able to use EPASD funds for programs or activities not related to the sanitary district. The rates that EPASD customers pay must be based on the costs of providing sanitary sewer service; furthermore, the costs that existing customers pay must be based on the repair and replacement costs of the existing system, and the costs for expansion of the sewer system to accommodate new development must be paid for by new users.
Despite these facts, individuals and groups who oppose EPASD becoming a City subsidiary are disseminating misleading information on social media, through mailers, and through a door knocking campaign to solicit written protests to LAFCo’s decision.
The following are factual accounts of LAFCo’s decision, why the City desires for EPASD to become a City subsidiary, and what some of the outcomes of EPASD becoming a City subsidiary would be.
What has the LAFCo (Local Agency Formation Commission) Board approved and how will it impact me?
During a November 15, 2023, San Mateo LAFCo meeting held at the East Palo Alto City Council Chambers, LAFCo staff provided a presentation (attached below) to the East Palo Alto community and LAFCo board recommending that the Board approve the City of East Palo Alto’s application to make East Palo Alto Sanitary District (District) a subsidiary district of the City of East Palo Alto. The LAFCo Board approved this recommendation unanimously. Once finalized, the East Palo Alto City Council will serve as the designated Board of Directors for the East Palo Alto Sanitary District. Further information on this decision can be referenced in the LAFCo Resolution. The details of this action can be found in the LAFCo Resolution (attached below): https://www.smcgov.org/media/146746/download?inline=.
The LAFCo reinforced this decision at a February 7, 2024, LAFCo meeting where it unanimously denied EPASD’s request for reconsideration proposal. (https://www.smcgov.org/lafco/event/special-lafco-meeting-february-7-2024).
Why does the City support the LAFCo board's decision to make the East Palo Alto Sanitary District a subsidiary to the City?
The City of East Palo Alto undertook the process of incorporation to assert greater control over its future, particularly concerning land use rights. The City supports the LAFCo Board’s decision to grant the application for incorporation because it removes a barrier to the City’s land use decisions. Every new development project, including much-needed affordable housing projects, requires a will-serve letter from the District to commence construction. However, because the City has seen substantial delay and inefficiency in the issuance of these letters, the City has placed its full support behind the LAFCo Board’s decision to remove this barrier. LAFCo’s consideration included the alternative proposal by EPASD and the Commission approved the City’s application as the superior alternative. The City’s application, as approved by LAFCo, included a plan for service establishing connection fees for new development that adequately recovers the cost of improvements related to new development.
The City’s decision to support the City’s subsidiary district application was not taken lightly. Long before the LAFCo Board’s decision, the City worked with the District to implement the vision of its future chosen by its citizens through their elected officials. As detailed in the staff report presented to the City Council on April 6, 2021
(accessible at https://eastpaloalto.iqm2.com/Citizens/FileOpen.aspx?Type=30&ID=3180), the City engaged in extensive collaboration with the District on development applications, including the 2014 General Plan Update and zoning updates that outlined the City's development plan. Notably, during that period, the District opted not to express concerns with the City's plan when the General Plan Update was approved in 2016. The District was given an opportunity to comment on the City’s General Plan Update similar to every other interested party. However, the District choose not to speak up until 5 years later, long after the process concluded. The General Plan Update was conducted over the course of several public meetings, and the City is aware of no evidence in the administrative record that the District ever having provided any comments or expressing any concern.
Despite the City’s efforts, it has seen a lack of progress and the barrier to the City’s land use entitlement process remains. The residents of East Palo Alto have elected their Council members to advocate for their preferences regarding land use in the City. The decision to incorporate the District as a subsidiary to the City is perceived as the most effective means of achieving alignment with the community's wishes in this regard. Now, the LAFCo Board’s unanimous decision signals its support of the City’s decision to move forward with the subsidiary district application.
Recently, the City was made aware of a social media post containing misinformation concerning the City’s alleged motive for supporting the LAFCo board’s decision. District Board President Dennis Scherzer had asserted on Facebook that “[t]he City wants EPASD’s money” or that “unlike the City, [EPASD] is solvent”. These statements are completely inaccurate.1 Contrary to Board President’s assertions, upon becoming a subsidiary district, all revenues, expenditures, assets, and liabilities of the EPASD will remain separate from City funds as required by State law and may only be used for sanitary sewer purposes. Further, the State Auditor has consistently designated the City of East Palo as “low risk” (92.79 out of 100) in its assessment of cities in California for “fiscal health,” a measure that includes an analysis of such fiscal categories as general fund reserves, debt burden, financial liquidity, and other fiscal metrics.2 Therefore, District Board President Dennis Scherzer’s assertion on social media are completely inaccurate.
1 When asked to retract this inaccuracy, the District responded through its attorney by refusing to correct the misinformation and instead implied that Board President Scherzer has a constitutional right to spread such misinformation.
2 The California State Auditor has since ceased this analysis of California Cities, citing a new prioritization of state funding. See California State Auditor - Local Government High Risk Dashboard (archive.org) (Last Accessed 2/1/2024).
How will my bill be impacted by the City taking over EPASD?
Despite rumors that the City would increase EPASD annual bills from $600 to more than $1,200, the City would only raise rates by an amount that is necessary to adequately provide sanitary sewer service safely and sustainably. At the February 1, 2024 Board Meeting, EPASD directed their General Manager to begin the rate increase process (https://www.epasd.com/home/showpublisheddocument/6963/638427358532870000). At the LAFCo meeting, EPASD repeated their commitment to the rate increase (https://www.smcgov.org/media/147774/download?inline=). The City does not currently have the authority to raise rates until the LAFCo issues a Notice of Completion finalizing its approval of the City’s application. Even when that happens, any rate increase must comply with Proposition 218 requirements, including notice and a public hearing, and will rely on rate study that takes into account various factors such as the cost of proposed improvement, etc.
Any estimates of what the City’s proposed rate increases are estimates, rely on data prepared by EPASD’s own consultants, and are remarkably consistent with actions taken by the EPASD to raise or prepare for the raising of rates. More specifically, as part of the City's application, the City's engineering support consultant (Freyer & Laureta, Inc.) proposed in the report that the Annual Sewer Charge be set at $690 per Equivalent Dwelling Unit (EDU) for Fiscal Year 2022/23. This new rate is exactly what the District originally recommended to set as evidenced by the District's own Rate Study. After that, the rate would increase by 5 percent per year based on current economic conditions and additional annual capital needs. These increases will allow the City to address financially the extensive deficiencies identified in District's Closed Circuit Television footage caused by years of deferred maintenance. Therefore, any suggestions or assertions that final approval of the City’s application to absorb the EPASD as a subsidiary of the City will lead to markedly increased rates on existing ratepayers is simply false, based on currently available information.
Will developers be required to pay their fair share when the City takes over?
Yes. The District and the City agree that developers must pay their fair share. The City and the District are both required by law (“Mitigation Fee Act”) to ensure these fees bear a reasonable relationship to the costs of providing the service. Stated another way, existing law (Mitigation Fee Act) prohibits anyone—the City or the District—from charging connection fees that exceed the cost of providing the service without going to the voters.
At the same time, if the District ultimately becomes a subsidiary of the City, the City would be charged with finding a solution to the District’s decision to defer years of maintenance. Mere maintenance repairs are likely no longer an option; real and substantial repairs would likely be required. Although much has been made of connections fees, these fees only deal with expansion of the existing system. In contrast, the current rates paid by existing ratepayers do not take into account the needed repairs to the existing system that are necessary whether or not new development occurs. That’s because the District has admitted it has not yet adopted a comprehensive Capital Improvement Plan (CIP) that takes into account the current condition of the system, which only recently came to light. A CIP would fix existing infrastructure deficiencies caused by years of deferred maintenance. Regardless of which local government entity has control over the current system—the City or the District—the existing system will have to be repaired and/or maintained which must be financed by some combination of public financing, rate increases for existing ratepayers, and connection fees related to new developments.
The City will follow the Mitigation Fee Act and charge a fair fee that will recover all costs to the system caused by the new development, and adopt a CIP to address any deferred maintenance. The public, including ratepayers, will have opportunities to provide feedback throughout these processes.
Who will operate the EPASD?
The City Council would indeed govern the EPASD, but the City intends to contract with West Bay Sanitary District for operations services. Operations includes: project management and reporting; collection system operations and maintenance preventative maintenance cleaning; collection system operations and maintenance high frequency (hot spot) cleaning; collection system operations and maintenance camera inspections; sanitary sewer overflow response (spill response); capital asset database support; inspect and support services; underground service alert markings; inspection services for sewer connections and administration of fats, oils, and grease compliance program; public outreach support.
This is similar to the current management by the Sanitary District, which has only one (1) employee (according to its FY 2023-24 budget) and uses contracts for all operations. The cost proposed by West Bay to provide those services match closely to the current budgeted contract costs for the District.
Will EPASD be governed by the West Bay Sanitary District Board?
No. The East Palo Alto City Council would govern EPASD. All decisions about the Sanitary District (including sewer rate increases) would be made by the City Council, local residents elected by the citizens of East Palo Alto.
Next Steps
The next step is the LAFCo Protest Hearing, scheduled for May 22, 2024 (https://www.smcgov.org/lafco/event/protest-hearing-lafco-file-no-22-09-m...). At this hearing LAFCo staff will collect the final set of protest against the approved action of having the East Palo Alto City Council become the governing body for EPASD. Following the collection of protest ballots and potentially at a future meeting (no later than June 22, 2024), the LAFCo Executive Officer shall make a finding about if the number of protests submitted and not withdrawn are sufficient to block the approved action.
