HILLSBOROUGH — The town of Hillsborough is defending its water rate structure system against several wealthy residents who have filed a lawsuit, claiming the city’s tiered water rates and penalties are illegal.

Nine residents of the town of Hillsborough, an area where the average home is valued at more than $4 million, filed a suit in mid-November in San Mateo County Superior Court against the town. Among the residents involved in the suit are technology investor Dave Marquardt, known for his million-dollar investment in Microsoft during the 1980s, as well as former Goldman Sachs executive Eldridge Gray.

The suit alleges that the town’s tiered water rate system and penalties for excessive water usage go against California Proposition 218, which was passed in 1996 and mandates that the price of utilities must be in line with the cost of providing the service.

The town of Hillsborough maintains that its water rates are in compliance with state laws and that the drought penalties are no longer being collected, according to one of the attorneys defending the town in the suit.

“The town believes that its current and proposed water rates comply with two constitutional mandates - Article XIII D, section 6, commonly referred to as Proposition 218 and Article X, section 2 of the California Constitution,” Kimberly Hood, one of the town's attorneys, told the Northern California Record. “The town is also in the midst of completing a comprehensive and independent water rate study to analyze the town’s cost of service and proportionately allocate those costs amongst customers in compliance with Proposition 218."

The town of Hillsborough, well known for its multi-million-dollar beautifully landscaped homes, was ordered to reduce water consumption by 36 percent after the state’s drought conservation mandates were put in place in 2015.

“The drought penalties are no longer being collected, but are separate from the town’s water rates and consistent with state law authorizing volumetric water penalties during periods of drought,” Hood said. “The town imposed volumetric penalties in response to regulations imposed by the State Water Resources Control Board, which required the town to reduce its water consumption by 36 percent compared to its 2013 water use, or face potential state fines of up to $10,000 per day."

Hood said that the town’s costs of service are not allocated based on areas.

"Rather, the cost of service study analyzes what it cost the town to provide water service and the appropriate rates to fairly and appropriately allocate the costs of providing water to customers,” said Hood. “The higher the costs of service associated with higher water consumption and the basis for the increasing tiers are discussed further in the town’s water rate study.”

Hood said the latest draft of the town’s water rate study (cost of service study) is available to the public on the town’s website www.hillsborough.net/249/water.

The suit likely will be scrutinized by other water providers across the state who also had to institute drought policies stemming from California’s state mandates to conserve.

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Superior Court of California County of San Mateo
400 County Center
Redwood City, CA - 94063

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