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The Seattle City Council is expected Tuesday to approve a surcharge on city water customers to help cover the cost of a $22 million court-ordered rebate to water customers.

The rebates are for fire hydrant costs that were wrongly charged to water customers. Fire hydrants are a basic city responsibility and have to be paid for from the general fund, the state Supreme Court has ruled.

Arthur Lane, a former Seattle city attorney who, together with Rud Okeson, filed about a half-dozen lawsuits against the city in recent years to protect the rights of ratepayers, called the council’s move “interesting.”

“It’s really ironic to say the least. I think that it is something we have to explore,” Lane said Friday.

Lane and Okeson won rebates for Seattle City Light customers several years ago in connection with the way streetlights were paid for. They have also challenged taxpayer spending for public art, and Seattle City Light reimbursements in connection with carbon footprints.

As a result of the latest court decision, anyone who was a Seattle Public Utilities water customer between March 2002 and December 2004 is due a refund under a court order issued in October. But current water customers will be the ones paying the bill.

Eligible water customers will get their full rebate in May or June. The surcharge and tax will be spread over 21 months.

By increasing the utility tax to cover the rebates, the city doesn’t have to spend money from the general fund, which covers most other city services.

The plan, proposed by Mayor Greg Nickels, comes at a sticky time. The city just approved a water rate increase in the fall, and council members aren’t anxious to add a new tax on top of it.

However, new revenue projections are expected in a few weeks, and it isn’t looking good. At least $25 million might have to be cut out of the general fund budget in the spring.

Six council members attending Friday’s Finance and Budget Committee meeting approved the plan to impose the surcharge. Councilman Bruce Harrell opposed the plan.

He said he wants the council to be more proactive in its approach to the budget and finding solutions.

“The easy thing would be to pass it on to the citizens. I suggest we slow it down and buy ourselves some strategic time,” said Harrell.

He suggested the council take more time to figure out how to pay the bill.

“I am trying to get them to protect the citizens in the tough economy,” Harrell said later.

More than $4 million of the lawsuit cost is for lawyer fees and interest that accrued while the city appealed the court decision.

Harrell said when the city was discussing water rate increases in the fall, the lawsuit and rebates didn’t come up.

To keep the surcharge amount slightly lower, Seattle Public Utilities will cut about $1.5 million from its budget, likely by freezing hiring in some positions and reducing some conservation and other programs temporarily.

“Calling this a rebate is not accurate,” City Council President Richard Conlin said. “The only party benefitting from this is the law firm that is going to get $4.2 million. “I have a hard time cutting $4 million out of the budget to pay these lawyer fees.”

P-I reporter Kathy Mulady can be reached at 206-448-8029 or kathymulady@seattlepi.com.

(Original Article Here)