Foster Farms sues over utility hikes

LIVINGSTON — For the second time in less than a year, Foster Farms is suing the city of Livingston over utility rate hikes.

This time the company places the blame on City Manager Richard Warne.

According to Foster Farms' latest lawsuit, filed in Merced County Superior Court on Jan. 10, Warne broke the law by lying to Livingston's residents and attempting to cover up his mismanagement of city finances through the utility rate hikes.

"Warne directed and orchestrated misconduct that has led to a financial crisis in the city, with numerous funds operating at a deficit, which has now culminated in an effort to impose exorbitant rate hikes on the city's residents to counteract the misdeeds," the suit claims.

Despite the charges, Warne, the city's independent auditor and Livingston's finance director all said Warne hasn't mismanaged any of the city's funds.

"The allegations are false. It's just another effort by those that oppose the water rate increase," Warne said.

On July 7, 2009, the City Council voted 3-2 to pass a resolution that increased utility rates by 40 percent. The vote also included an increase of 270 percent over the next four years.

That same night, the city fired its former attorney, who said that to pass water rate hikes the council needed to have a supermajority, which it didn't have.

After the firing, a new attorney was hired whose legal opinion was that the city could pass a rate hike resolution with a simple majority, which it did.

The rate hikes have provoked public protest as well as two other lawsuits.

The latest lawsuit alleges that, to fill deficits, Warne commingled restricted funds meant for specific uses, such as water services, and failed to inform citizens of this fact, in violation of state law.

In numerous meetings, Warne has said the city needed to raise utility rates because it was borrowing from its general fund, not restricted funds, to pay for the deficits in restricted utility funds, such as the water fund.

Victoria Lewis, the city's director of finance, agreed.

"There is no commingling of funds," Lewis said.

The city's money is pooled in one bank account, said Livingston City Auditor Bryant Jolley. Those pooled funds are used to run the city. At any given time, one fund can be overspent, but the use of money from the pool to pay for that fund does not connote wrongdoing, he said.

"There's not a city in the state that doesn't do that," Jolley said.

Foster Farms' lawsuit asks the court for a full accounting of city finances from Jan. 1, 2006, to the present, which mirrors Warne's tenure with the city.

It also asks the court to declare Warne's use of restricted funds illegal, and for an injunction to stop such "borrowing."

Finally, the lawsuit asks the court to make Warne pay the city the amount he allegedly mismanaged as well as punitive damages to make an "example" of him, among other requests.