Sanitary district takes its case to court as dissolution looms

In a last-ditch effort to maintain control of the city's sewer system, the East Palo Alto Sanitary District claimed in an Aug. 16 court hearing that a recent decision to seek its dissolution was based on insufficient evidence and false assumptions.

Attorneys representing the county and the San Mateo Local Agency Formation Commission argued in a hearing in San Mateo County Superior Court over whether the commission acted lawfully and impartially when it voted last month to accept the city of East Palo Alto's proposal to assume control of the sewer system. The July 17 vote confirmed a previous vote that LAFCo, a county commission that handles boundary and jurisdiction issues, had taken in November 2023 in support of the consolidation proposal led by the East Palo Alto City Council, which the county strongly opposes.

After each side presented its arguments, Judge Roger Picquet announced that he would issue a ruling on the sanitation district's challenge to LAFCo's decision later this month.

Leah Castella, an attorney for the sewer district, argued at the hearing that LAFCo ignored key information in affirming its decision in favor of East Palo Alto's application, namely the district's recently approved capital plan and an adopted budget outlining the district's plans to modernize its aging sewer system.

“It is extraordinarily difficult to understand how LAFCo could ignore the evidence that effectively addressed all of the concerns that formed the basis of its decision at the original hearing and yet maintain its decision to grant the subdistrict proposal,” Castella said at the hearing, which was conducted virtually and streamed from a Redwood City courtroom.

She described East Palo Alto's offer to take over the district, which serves most of East Palo Alto and a small part of Menlo Park, as a move designed to satisfy developers by significantly reducing connection fees to the sewer system. The city and developers had argued over the past five years that the district's fees were exorbitant and in some cases arbitrary, with offers often exceeding $4 million.

Critics of the district say its conduct has jeopardized and at times prevented necessary developments, including the elementary school the Chan Zuckerberg Initiative wanted to build on Weeks Street and the nonprofit center proposed by the Sobrato Organization. The recently completed Light Tree apartment complex nearly lost its state grant because of negotiations with the district over connection fees.

But the district argues that the fees are necessary to expand the system's capacity so it can accommodate the growth the city is seeking, and if developers weren't required to pay for these upgrades, the onus would fall on ratepayers.

“This dispute is really about whether and to what extent ratepayers should bear the burden of increasing capacity,” Castella said. “Is it fair for developers to place a significant burden on ratepayers to increase the capacity of a system that is not necessary to continue to fund the service in its current form?”

Timothy Fox, LAFCo's attorney, rejected the notion that the board's decision had anything to do with the county's rate-setting practices. Rather, it was about assessing what governance structure makes the most sense to effectively deliver municipal services, he said. One goal is to ensure that elected boards responsible for things like meeting the state's housing goals are not “hampered” by decisions made by other boards that are not bound by the consequences of failing to meet those goals, Fox argued.

“We're not here to analyze how the sewer district should do its job going forward,” Fox said. “We're here to assess whether the structure in which these decisions are made, namely by an elected body that specializes in providing sewer services, is in conflict with another elected body that manages other municipal functions in largely the same geographic jurisdiction.”

Picquet indicated that he will announce his ruling no later than August 30. Until then, LAFCo's decision will remain on hold. If the court does not overturn LAFCo's decision, the sanitation district will become a subsidiary of the city of East Palo Alto.

The East Palo Alto City Council has committed to creating a five-member advisory board to help it oversee the sewer system. One member will be appointed by the Menlo Park City Council and another Menlo Park resident will be appointed by the East Palo Alto City Council. The city also plans to contract with the West Bay Sanitary District for sewer maintenance services.

The issue of political representation came up during the Aug. 16 hearing. Castella argued that Menlo Park residents would lose their right to elect officials to oversee the sewer system because they do not have voting rights in East Palo Alto. Attorney Michael Colantuono, who represents the city of East Palo Alto, countered that Menlo Park voters have other political tools. Menlo Park residents can donate to East Palo Alto candidates they support and seek a referendum. And given the relatively low turnout in council elections, council members would surely take notice if 20% of taxpayers raised concerns, he argued.

“You don’t have to be a majority of the electorate to have a significant impact,” Colantuono said.