Turf Rebates – one country club got $1.9 million – the rebates amount to a transfer of wealth, he said – they often go to the rich, who can afford to pay for new cars, pricey solar panels and landscape contractors

During the brief heyday of Southern California’s turf removal rebate program, 17 Orange County country clubs, cities and homeowners associations got rebate checks of more than $100,000 for tearing out turf and replacing it with drought-tolerant plants, according to records.

The country clubs were part of a flood of rebate applications from homeowners and businesses that drained several hundred million dollars from the Metropolitan Water District’s reserves in a matter of months, leading the district to institute caps on maximum rebates and, eventually, shut down the program for lack of funds.

The six-figure payouts – in the county’s largest payout, one country club got $1.9 million – were funded largely by unexpectedly high water sales in recent years and came in the form of bills collected from homeowners, businesses and public agencies from Los Angeles to Santa Ana to San Diego.

The turf removal rebate program was lauded as a way to get Southern California unhooked from its water addiction. Lawns suck up vastly more water than what water officials dub “California-friendly” landscapes of succulents, desert plants and native shrubs, and replacing them was seen as key to surviving the current, four-year drought.

Though the program existed for years, interest in the program skyrocketed after Gov. Jerry Brown declared California was in a state of drought in January 2014.

And it made a major splash in early 2015 – a trajectory that correlates with the severity of the drought, the public’s awareness of it and the amount of money available for those willing to sacrifice their yards.

In 2010, when the program was young, payouts for Orange County homeowners and businesses were $1 per square foot. For the first nine months of 2013, the rate was lowered to 30 cents per square foot. But in October 2013, it increased to $1, and in May 2014, it increased to $2.

The Municipal Water District of Orange County (MWDOC) uses Metropolitan funds to operate the program for all of the county except Santa Ana, Anaheim and Fullerton, which go directly through Metropolitan.

Since starting the rebate program, MWDOC has processed rebates for the removal of 9.5 million square feet of turf.


In January 2014, MWDOC was getting 10 rebate applications per month. By September, it was getting 800 per month. And by April 2015, it was getting 1,600 a month, said Joe Berg, the director of water use efficiency at MWDOC.

To keep up with demand, Metropolitan added $350million to the conservation budget in May of this year, bringing the total conservation budget for all of Southern California to $450 million. Of that, $390 million was devoted to turf rebates.

By early July, officials had shut down the program because demand outstripped even the increased amount of cash.

“Frankly, we weren’t prepared for that incredible increase in participation,” Berg said. “When the program exploded in participation, it was not financially a sustainable program for us. We could not rebate our way out of the drought. We needed to put in some cost controls.”

And that’s what MWDOC and Metropolitan did. Before May, homeowners and businesses could get as much rebate money as they had approvals. A handful of Orange County country clubs and golf courses wrangled payouts of hundreds of millions of dollars in exchange for ripping out hundreds of thousands of square feet of turf.

A few homeowners also collected outsize payments: more than 25 Orange County homeowners received checks for more than $10,000 each.


In May, officials instituted caps of 25,000 square feet per year for businesses and 3,000 square feet total for residences.

The nearly $1.9 million payout for El Niguel Country Club, with its lush golf course tucked in a Laguna Niguel valley featuring more than 7,000 yards of terrain, three lakes and a rambling creek, was by far the highest rebate in Orange County. It accounted for more than 10 percent of the rebate money paid out to county homeowners and businesses.

El Niguel General Manager Eric Troll did not respond to messages seeking comment.

No other business in Orange County collected more than $1 million. The next highest was just over $500,000. The highest residential rebate here was about $32,000.

Homeowners were issued 10 times as many rebates as businesses. But the businesses collected more money total – more than $9.9 million compared with just over $7 million. The average commercial rebate was also more than 14 times higher than the average residential rebate.

In Orange County, 345 commercial rebates were handed out, and the average was more than $28,800. Homeowners got roughly 3,500 rebates, with an average of $2,014.

After El Niguel started its headline-making renovation, MWDOC’s phones started ringing off the hooks with applications from other golf courses. Some didn’t apply in time to get rebates.


Just a handful of country clubs getting massive payments is “exactly what we want our caps to avoid in the future,” Berg said. He added that the rebate program will likely come back in a different form.

“We have a very limited budget and we want to stretch that budget over as many people as possible. We don’t want to give the majority of money to just a few sites,” Berg said.

There are advantages to offering fewer, larger rebates, however. It takes less administrative time and money to process fewer applications, and a gallon of water saved is a gallon saved, regardless of where.

But when more people get more rebates, it expands exposure to alternative, drought-tolerant landscapes, water district officials said. When a batch of homeowners gets rebates and plants succulents and other less-thirsty plants in a visually appealing fashion, their neighbors might be inclined to redo their own landscapes, with or without a rebate.

That’s exactly what happened in The Reserve, a gated community in San Clemente where MWDOC studied the impact that offering landscape rebates had on the community. Several years after a limited number of homeowners were given the incentive to redo their yards with drought-tolerant plants, neighbors had followed suit without an incentive.

And while payouts in the hundreds of thousands of dollars may be shocking to budget-conscious ratepayers, they aren’t a handout, said UC Irvine professor of planning, policy and design Dave Feldman. Golf courses and country clubs have paid water bills for years, likely at very steep, tiered rates. The rebate money comes from a pool that includes those water bills.

“You’re not just returning money. You’re returning money in a way that’s going to have a lasting and durable impact,” Feldman said.


Any way you cut the checks, given California’s long love affair with water-sucking grass, the breakup is bound to be expensive.

“You have to start somewhere. We’ve invested in a certain kind of aesthetic in the region for many, many years, when water wasn’t such an inhibiting factor as it is today,” Feldman added.

The next step, he suggested, might be finding ways to open the turf rebate program to low-income homeowners. Currently, homeowners must first pay contractors to redo their lawns – the rebate comes later.

The turf rebate program has not been without its critics. Brett Barbre was one of several Orange County representatives to the Metropolitan board to vote against increasing rebate funding in May.

A staunch conservative, Barbre said he opposes rebates for other environmental causes such as electric cars and solar panels. The rebates amount to a transfer of wealth, he said. They often go to the rich, who can afford to pay for new cars, pricey solar panels and landscape contractors.

The rich also happen to be the patrons of exclusive country clubs.

“I just think it’s wrong to be going to a private country club. That’s not a proper use of ratepayer dollars,” Barbre said. “I think it’s going to be eye-opening for people when they see where the money is going,” he added.

Additionally, the water savings brought by turf rebates cost more per gallon saved than other rebates, such as toilets and showerheads, Barbre noted. Water experts say, however, that water-efficient appliance rebates have nearly run their course in California.

“There’s a sense that a lot of the water savings for indoor has already been picked,” said Matt Heberger, a research associate in the water program at the Pacific Institute, an environmental group in Oakland. “That’s why these turf replacement programs are attractive.”

Contact the writer: aorlowski@ocregister.com Twitter: @aaronorlowski

San Juan Capistrano water customers to get refunds for tiered rates

San Juan Capistrano, California –

Water customers in San Juan Capistrano who were charged under a pricey tiered system declared illegal can get their money back under a new refund process.

Anyone who paid for water under the top three of four tiers between Aug. 28, 2013, and June 30, 2014, is eligible for a refund or credit on future bills under the system approved Tuesday night by the City Council. The period covers from when an Orange County Superior Court judge ruled the tiers to be illegal to when the city implemented new prices last summer.

The new rate system includes tiers, but they’re not nearly as steep before: top users paid $11.67 per 100 cubic feet of water under the old rates; they pay just $5.15 now.

How much the refunds will cost the already cash-strapped city is unclear. City staff are preparing a report for the June 16 meeting that will include a projection and information on a formal application process.

That prompted Councilman John Perry, one of two residents who sued before he was elected, to vote against the refunds because he wanted to know how exactly they will be calculated.

“By any measure, they deserve every penny extra that they are forced to pay by the city,” Perry said.

The refund process comes as people like Eric Krogius, a Cota de Caza resident who used to live in San Juan Capistrano, have filed small claims to recoup the money they paid for the heavy tiers.

Krogius, who is U.S. Rep. Mimi Walters’ brother, said Wednesday he doesn’t plan to drop the claim he filed last month in Superior Court. And he said he still wants the money back he paid under the tiers prior to Aug. 28, 2013. His court hearing is scheduled July 13.

“I’m going to take it all the way to the end, and we’ll let the judge decide if they can arbitrarily decide that that’s the date,” Krogius said.

The city already is in a tight financial position. Years of unrelated litigation drained funds so much that when an appellate court in 2010 ordered the city to pay $6.35 million to a landowner over a development dispute, the city paid for about half of it by increasing property taxes in 2011 for the next 10 years.

City documents presented to the council Tuesday say the water rate refunds will increase a deficit in the city’s water budget that’s already expected to be at least $1 million by June 30, which is the end of the fiscal year.

It’s not the first time San Juan Capistrano’s water revenue hasn’t kept up with expenses: The city has supplemented that aspect of the budget for years. One of the biggest financial factors is a struggling groundwater recovery plant for which the city owes more than $40 million. Jim Reardon, who also sued the city, and Perry have long said they believe the water rates were artificially inflated to cover the enormous cost of the plant.

But city documents didn’t show how the rates related to the actual cost of water in San Juan Capistrano. That’s where the city ran into trouble: Proposition 218, enacted by voters in 1996, requires all government fees be set in accordance with cost. Reardon and Perry had long told the council the city water rates didn’t do that.

The 4th District Court of Appeal’s April 20 affirmation of the August 2013 Superior Court ruling attracted international attention and was criticized by Gov. Jerry Brown. The court was careful to emphasize that tiers in general aren’t illegal, but arbitrary tiers are.

But so many municipal agencies use tiered systems that the ruling has caused a scramble to ensure compliance and fend off more litigation. Last week, a class-action lawsuit was filed in Marin County over the tiered water rates there.

Contact the writer: 949-492-5122 or mcuniff@ocregister.com On Twitter: @meghanncuniff.


Water customer Eric Krogius used to live in San Juan Capistrano – he wants his money back – and So Do We – Let’s Sue City Hall

San Juan Capistrano, California –

Victorious San Juan Capistrano water users want a refund

Water customer Eric Krogius used to live in San Juan Capistrano, and he wants his money back.

The homeowner and securities specialist paid huge water bills under the steep tiers recently declared illegal by the 4th District Court of Appeal, and he recently filed a claim in Orange County Superior Court to try to recoup the thousands he once thought were gone for good.

“I think it’s got the makings of a great class action,” Krogius said.

But San Juan Capistrano city officials aren’t ready to talk refunds. The City Council – now dominated by four people who support the lawsuit, including one of the men who sued – has yet to decide whether to appeal the April 20 ruling to the Supreme Court. It has until June 1 to do so. Mayor Derek Reeve expects a decision “probably this week.” The Council is scheduled to consider the case in a closed session today.

“If the council does not appeal and thus accepts the judgment, I anticipate some form of refund policy will be developed and announced soon thereafter,” Reeve wrote in an email to the Register.

That would open the door for a flood of requests – first in San Juan, and later in other agencies that can’t prove a leak-tight link between what it costs to provide water and what they charge for it.

“Could that create chaos? It certainly could,” said Ryan Cogdill, an attorney for the Howard Jarvis Taxpayers Association, which backed the challenge to San Juan’s rates. “That’s a risk agencies run when they try to impose costs they can’t justify.”

The city of Fullerton knows this story well.

More than 40 years ago, Fullerton tacked a 10 percent “in lieu franchise fee” onto water bills. That raised millions over the decades – more than $27 million since 1997, according to city figures – but the fee wasn’t tied to any specific cost of providing service. That ran afoul of Proposition 218, the Howard Jarvis Taxpayers Association warned, threatening to haul Fullerton into court in 2012.

Fullerton didn’t fight the way San Juan did. Instead, Fullerton essentially acknowledged that the 10 percent figure was pulled from a hat and hired a consultant to do a full analysis of water utility operations. It calculated how much it costs for everything from office space, electricity and personnel to operating stations, pumps and wells.

In the end, Fullerton wound up reducing the fee and refunding $3.3 million to customers. That’s a fraction of the excess it collected over the decades, but the statute of limitations only left Fullerton on the hook for three years’ worth of repayment.

San Juan – and every water agency that can’t clearly demonstrate the link between costs and rates – could find itself backed into a similar corner.

“It does seems to be the case that this ruling would mean refunds,” said Frank Wolak, director of Stanford University’s Program on Energy and Sustainable Development. “It’s unfortunate that so few judges understand basic economics.”

And Reeve’s statement indicates the city is preparing for refunds. While no decision on whether to appeal has been announced, city officials have taken a couple of steps that indicate they’re not interested in pursing the case further.

The council recently ended its contract with Michael Colantuono, the lawyer who’d fought the lawsuit since it was filed in August 2013, and directed the city’s contracted law firm, Best Best & Krieger, to handle the case as part of its standard litigation duties. And city attorneys sent a letter, saying they wanted to negotiate a settlement, to the lawyers who sued.

But who would be eligible and for how big a refund is unclear.

A claim filed last year by Newport Beach lawyer Gerald Klein estimated total refunds of $20 million to $30 million. Klein said at the time that the claim was the first step in a class-action lawsuit, but he hasn’t sued yet and recently declined to speak to a reporter about the case. Councilman John Perry, who sued with fellow Capistrano resident Jim Reardon, said he believes class-action firms don’t want the case because they can’t make enough money from it.

In court documents filed after the 2013 Superior Court ruling, Reardon and Perry’s lawyer, Ben Benumof, noted that the money owed to him – a Superior Court judge calculated it at $237,242 – exceeds the amount of money expected to be refunded to San Juan Capistrano ratepayers: about $150 per household for three years, which he called “a small return easily eclipsed by the attorney’s fees needed to prosecute the case on CTA’s behalf.”

The city has yet to pay Benumof anything. The City Council is to consider today how much to give him, Perry said.

Krogius calculated his request of $7,511.70 by subtracting the difference between the top tiers he paid – $11.67 – and the base rate that was the only non-tiered rate in place – $3.18.

But the court emphasized that tiers are still legal; it’s arbitrary tiers that are problematic.

San Juan Capistrano readjusted its rates in 2014 to greatly reduce the tiers, but they’re still in place – the top tier charge was slashed from $11.67 to $5.15; the bottom tier rose from $3.18 to $3.41. So theoretically, heavy water consumers like Krogius could still be charged more than the base rate. Just not as much as San Juan Capistrano originally charged.

And the court hasn’t said anything about refunds.

“It’s too amorphous,” said Larry Kramer, who served on the San Juan Capistrano City Council for four years before losing in the November election. “I couldn’t get an answer out of the city as to how it might work.”

There is, however, a checkmate possible in this game.

“Prop. 218 limits local government, not the state,” said Thomas J. Campbell, dean of Chapman University’s Fowler School of Law. “The Legislature could simply pass its own tiered-pricing law, trumping local units. The result would be a short-lived rebate to the plaintiffs, but a restoration of tiered pricing. It would not surprise me if Gov. Brown attempted such a step as part of his drought-relief package.”

Such a move would have to be uniform for all water agencies, he said – something like a surcharge on usage exceeding a predetermined level, with proceeds dedicated to a rebate for low- water users. That would avoid construing the state action as a tax increase, Campbell said.

Meanwhile, Krogius is scheduled to appear in court July 13 for his claim against San Juan Capistrano.

He decided to demand a refund after he and his wife, Kathleen, were turned down by City Hall staff. They’d paid huge water bills – sometimes upward of $800 a month – for their big home and lawn in San Juan Capistrano.

“We just thought it was the status quo and we had to live with it. And we did live with it,” Kathleen said.

They lived there for 16 years before moving to Cota de Caza earlier this year. They still recall receiving the first bill under the now illegal tiers, which were approved in February 2010.

“We couldn’t believe it when I got the first bill,” Kathleen said. “I thought it was a typo.”


Contact the writer: 949-492-5122, mcuniff@ocregister.com or on Twitter: @meghanncuniff