Busy day in court for City of Oxnard vs. Aaron Starr Measure M wastewater case

By George Miller


Starr and City fight it out on the numbers, alleged harm to the city and Measure M financial justification

Courtroom scene of a previous hearing on this case. Photo by George Miller/CitizensJournal.us

On Friday, December 29, 2017, the City of Oxnard did battle vs local manufacturing financial officer, activist and Council recall initiator Aaron Starr. in Ventura County Superior Court, with Judge Rocky Baio presiding. At issue is the City’s assertion that Starr had/has no right to press the Measure M wastewater voter initiative to rollback Council-imposed rate increases of 88% over 5 years (passed November 2016), because they claimed that it would be injurious to the City.

The City and Starr had Oxnard CEO Jim Throop on the witness stand in an all-day marathon session, armed only with a pitcher of water, a calculator and his wits.


Oxnard’s Case

Plaintiff’s outside counsel Holly Whatley was accompanied by one of the city’s attorneys, Shiri Klima, who was silent. City Attorney Stephen Fischer also remained mute, right behind her in the public seating area. In the small audience were: Mayor Pro-Tem Carmen Ramirez, Councilman Bert Perello, Assistant City Manager Ruth Osuna, Treasurer Phil Molina and several activists and members of the press.

The legality of Measure M was never even discussed in this day’s session. Instead, the emphasis was on the numbers of whether Measure M was justified, whether the wastewater fund was really running at a deficit and really in default on bond covenants- Starr’s attorney Chad Morgan said yes on the first and no on the latter two, backing these up with facts and figures (see below). Whatley disputed him with the city’s own set of numbers,

In between long, mind-numbing recitations and debates on accounting numbers, procedures, bond covenants, letters of credit, swaps and credit ratings, were wildly conflicting numbers by the opposing sides.

Whatley attempted to establish that Measure M would first bankrupt the wastewater enterprise fund, then the city, since it would be obligated to backstop it and would also put the fund and city in default. She used what she said were forecasted numbers. She claimed that if Measure M was ruled legal, the city would be subject to returning $6.8 million in revenues to ratepayers.

They pointed out that the city’s wastewater situation and Measure M had helped put Oxnard on the rating agencies’ credit watch list. They also maintained that the wastewater plant could not be properly maintained and operated under Measure M.


Starr’s Case

During the day, Starr’s counsel Morgan was frequently conferring with his client Starr and significant other Alicia Percell, who were obviously influencing the strongly numbers-oriented arguments presented.  Remember that Starr’s “day job” is a high-level financial executive.

Morgan laid out actual, as opposed to forecast, revenue and expense numbers, which were starkly different from the city’s forecasted numbers indicating financial meltdown. Various combinations including with and without depreciation (which should NOT be included in covenant numbers) and infrastructure fees (which Starr and legal precedents say are illegal) indicated that Wastewater actually had a significant surplus.

He also pointed out gross mathematical and procedural errors in the city’s numbers presented. For example the claimed amount that might have to refunded was calculated wrong. Taking the 35% increase and reducing that number by 35% does not bring one back to the original number. It should have been about $5 million, not $6.8 million.

Morgan sometimes made his points in a rather humiliating manner, making sure that Oxnard CFO Throop had a calculator, then having the CFO actually make the calculations to prove himself wrong, using defendant Starr’s assumptions, the city’s actual wastewater numbers and the bond coverage rules and data.  At one point, Thropop said “I wish I could have one (calculator) that worked better,” provoking much mirth in the courtroom. This was seemingly having a strong effect on observers. The question was how was the judge affected.

Morgan established, that with these numbers and by using proper calculation rules, that bond covenants would not be violated. Also, depreciation and infrastructure fees were improperly considered in bond coverage calculations and should not have been, understating funds available by millions of dollars.

City’s outside counsel Whatley took another shot at that and the revenue vs. expense numbers, but was only partially able to recover the city’s lost credibility inflicted by Starr/Morgan’s attack.

Morgan also pointed out that city had been in default of RBC covenants before but not called by the lender. He further pointed out that the latest rate increases mandated a cut from previous rate hikes, which put the city in potential default of the new letter of credit effective 1/1/18. But the issuer JP Morgan went ahead with it anyway.

He challenged the city’s estimate of $2.07 million in monthly operating costs as unsupported, which the city did not seem to defend at the session.

Wastewater is paying some of the Advanced Water Purification system costs, which should actually be borne by the Water Enterprise Fund, according to longtime city watchdogs like Larry Stein, who have been saying that for years.

The 111 findings of external auditor Edie + Payne’s single audit indicate that the numbers being relied upon might not have been very trustworthy.


Ng Thien Testimony

Ng Thien, interim Utilities Director and former Wastewater Manager, testified the previous day,. We weren’t there and haven’t seen any transcripts. From what we heard from attendees on both sides of this dispute, Thien, who has been in Wastewater utilities management for at least 10 years, described the facility as run down and needing much work, Starr’s counsel Morgan attacked some of Thien’s testimony as hearsay, because some of the determinations of facilities condition and needed work were made by consultants and other employees.


Huge disagreement on outcome of 11/21/16 Starr/City wastewater meeting

In November, 2016, Starr and some key city officials held a closed door meeting to go over the wastewater budget situation, getting down to the line item level.  Starr claims he got agreement on many of his points, including double dipping on things like inflation, scope of needed work, revenue and some capital expense items. He claims that there wasn’t much disagreement, but that then City Manager Gregg Nyhoff (recently resigned) terminated the negotiation process and froze him out of future meetings. Starr claimed to us that this was done when it became apparent that he had lost his lead in the ongoing vote counting for the November 2016 Council race.

In testimony on Friday, Throop now claims that he disagreed on many items. He had been with the city only two months at the time, Throop may not have been familiar enough with the situation to be on firm ground to dispute anything. In opposition. Throop maintained that he has had extensive experience with wastewater finances and requirements in former positions.

Starr claims that they already had gotten down the initial rate increase needed and were working on reducing it more, vs. the 35% which was approved.  The city would not give any numbers to Citizens Journal. But in a meeting we had with city officials not long after the Starr meeting, in a far less rigorous analysis, we concluded that an increase was in fact needed in that range.



In contrast, the city numbers were based on inaccurate forecasted activity and appeared to be cherry picked from a six month period, vs. a full year of actual cost data for Starr’s numbers. But one must consider that Starr’s numbers were also for a period of great austerity which did not allow for significant capital improvements or even some badly needed repairs.  In summary, Starr’s team appeared to demolish the city’s assertion that Measure M would have been an utter financial disaster and that it would have resulted in violations of bond covenants.

If the November 2016 negotiations had played out, there is a good chance that a compromise might have been worked out and that Measure M, all the litigation, lawsuits and recall campaign never would have occurred, at least not because of wastewater rates.

The city maintains that if Measure M is ruled to be on solid legal ground, they would have to refund $6.8 million to ratepayers, which would be a financial catastrophe, emptying out the wastewater fund and setting off a cascade of defaults, fines, refinancings, higher rates and further ratings downgrades to the fund and city. The city claims that Measure M is actually a zero percent rate increase, or 88% if it is ruled illegal. That may mean  they would have to start over with a new rate setting process.

While we aren’t attorneys, we have heard that the city argue that Measure M is illegal because it would prevent the city from properly providing services. Also, the fact that subsequent rate increases have been approved incorporating the 35% increase and increasing from that makes Measure M partially moot. So, we’re talking about the recalculated number of $5MM. A ruling upholding measure M would not automatically mean that the money must be returned by the city, but could trigger a lot of claims. But it would likely be far less than the 40,000+ ratepayers who would have overpaid $5mm.

So Baio may rule Measure M legal, illegal, or could he make a ruling which would involve a modified rate increase. Some knowledgeable people say that he couldn’t legally do the latter.



Judge Rocky Baio did not seem amused by the conflicting versions and urged the two parties to reconcile their numbers, While he did this rather amiably, he was serious about getting it done, He asked how he could be expected to make a decision given the discrepancies. Baio understands that he will be called upon to make a tough decision, as he already did when he granted  a temporary injunction against Measure M because of the looming financial threat to the city, but left open a path to disputing it in the trial, which is now finally coming to pass.

At the end of the session, Baio queried both counsels on future witnesses to be called, which came to an estimated total of five. He said he’d like to get that all done starting Thursday and hear closing arguments by Friday. Court sessions will be in room 20, in the Admin Building at the Ventura County Government Center at 800 S. Victoria Ave., in Ventura,


 Some previous articles:

Standard & Poors downgrades Oxnard (again) | Citizens Journal …


Sep 29, 2017 – He also handed out this written statement summarizing his points highlighted from the report, which were NOT Measure M or recall-oriented: 1. …. the Aaron Starr Lawsuits Against Oxnard forMeasure M (35% wastewater rate increase rescission) and utility Infrastructure Use Fees If Starr wins ~ 1) The rating …

Aaron Starr Serves Oxnard with a Prop. 218 lawsuit … – Citizens Journal


Apr 5, 2017 – Editor’s note: At your service! Aaron Starr has Oxnard served with lawsuit and residents served with cupcakes simultaneously. He says that the City has violated statutes and multiple legal precedents making it settled law that a city may not charge utility “infrastructure fees.” Aaron Starr of Moving Oxnard …

Aaron Starr wins another round against Oxnard utility rate increase …


Apr 15, 2016 – There are actually two cases: Oxnard vs Starr, to stop the initiative (Case 479-696) andStarr v Oxnard to compel the City to provide the title and summary to get the petition underway. An outside attorney for the City, Holly Whatley*, said there are legal precedents that a ballot initiative cannot deprive a city of …

Oxnard staff proposes 6 Wastewater rate increase … – Citizens Journal


Feb 14, 2017 – Assistant City Manager Ruth Osuna released 6 proposed wastewater increase scenarios to the Utility Ratepayers Advisory Panel (URAP) on Monday 2-13-17. The City (City management, Public Works and Finance) has been working on these since last fall, but the rate-setting process went into high gear …

Oxnard Council to consider wastewater rate … – Citizens Journal


Mar 3, 2017 – SUBJECT: Proposed Wastewater Rate Increase (30/30/45) RECOMMENDATION: 1. Approve the City wastewater rate structure for a five-year period (July 2017-2022); 2. Authorize staff to proceed with the Proposition 218 public notification process; and 3. Set a public hearing on the wastewater rate …

Judge granted Oxnard stay on wastewater rate … – Citizens Journal


Jan 9, 2017 – At a hearing on 12-16-16, Ventura County Superior Court Judge Rocky Baio opined that he was inclined to grant a stay on implementation of Measure M, initiated by local financial executive and head of “Moving Oxnard Forward” Aaron Starr. It passed with a 72% vote and mandated rolling back the 35% …

Voters approve repealing Oxnard’s wastewater rate hike – KEYT


Nov 16, 2016 – In a previous statement the city said it is suing Starr because the repeal would put “wastewater rates too low, and forces the city to violate its contractual obligations.” The City of Oxnard‘s city manager Greg Nyhoff released the following statement on the passing of Measure M Wednesday afternoon:.

Court ruling on Measure M is small victory for Oxnard


Dec 13, 2016 – A judge granted the city a temporary stay on Measure M, meaning wastewater rates will increase in January. … Court ruling on Measure M is small victory for Oxnard. Wendy Leung … Baio on Tuesday said his role is to weigh the harm that could be caused to the city or to Starr and rate payers. He said in …

Wastewater rate struggle: will it be rendered … – Citizens Journal


Apr 13, 2016 – So why put $675,000,000 today in a totally centralized Oxnard wastewater treatment facility that might be outlawed well before 2040? The complete article is attached. Also notice the university engineering professors are saying cracked pipes, pipe replacement, facilities deterioration, and dumping …

Oxnard moves to block voter initiative to roll back wastewater rate …



Mar 24, 2016 – City’s press release explaining their attempt to keep initiative off ballot and including City’s attempt (3-23-16 request for declaratory relief) to tie up Aaron Starr of Moving Oxnard Forward ballot initiative to rescind wastewater rate increase of 69% over several years. – Aaron Starr response to this City ploy.

Oxnard sues Aaron Starr, the man who wants to repeal sewer rate …


Mar 23, 2016 – Oxnard has filed a lawsuit against Aaron Starr, the man who seeks to repeal the city’s sewer rate hike at the ballot box. … In the city’s news release announcing the lawsuit, Interim CityAttorney Stephen Fischer called Starr’s proposed initiative “illegal” because it would set wastewater rates too low and would …

Wastewater Rate Rollback Initiative Title and … – Citizens Journal


Oxnard caves on Starr utility rate initiative ballot statement. Wastewater Rate Rollback Initiative Title and Summary. | Back to Post | Next Image » · Donate to support Real News in Ventura County · 

Resident anger over Oxnard maneuver to shut down … – Citizens Journal



Mar 30, 2016 – Resident anger over Oxnard maneuver to shut down ballot initiative for wastewater ratehike rescinding. Banksters … Starr claims much of the planned work is unnecessary, premature orinefficiently planned/conducted and the increases are excessive at 88% … I’m not aware of any attempt to serve me yet.

Oxnard Utility Ratepayer Advisory Panel meets on … – Citizens Journal


Jan 29, 2017 – Oxnard Utility Ratepayer Advisory Panel meets on Wastewater, clashes with staff … It culminated in the passage of the Measure M rate rollback, and a pitched legal battle between the City and Aaron Starr of Moving Oxnard Forward. All this occurred … Much has still not been provided or is even complete.

Oxnard Signature Drive to Repeal City’s Wastewater … – Citizens Journal



Apr 30, 2016 – order arial,sans-serif; font-size: 12pt;”>Scores of Oxnard city residents began lining up at 8 am to add their signatures and help circulate petitions to place an initiative on the November ballot that, if passed, would repeal the recent wastewater rate increase. After the Oxnard City Council and City Attorney’s …

Oxnard wastewater rate battle: what are the REAL … – Citizens Journal



Apr 12, 2016 – By George Miller. Background. Oxnard recently approved a 88% increase in wastewater rates over a four year period. There has been much controversy over this. Some believe that the increase is unjustified and that the City’s accounting system is so bad that they don’t even know what it really costs.


George Miller is Publisher, Co-Founder of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard

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