From the SacBee Saturday, February 13, 2010
Sacramento city officials acknowledged Tuesday they misused utilities funds to pay for general government expenses.

... The 1996 voter-approved initiative bars local governments from using ratepayer funds such as water and sewer to cover general government expenses...

Marty Hanneman, the city's utilities director, addressed the City Council on Tuesday night, outlining a number of steps the city has taken to address Proposition 218 violations and proposing additional measures. He said there had been memos indicating possible problems.

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Councilwoman Lauren Hammond said she was upset the violations could have caused utility rates to go up for residents because the money for utilities was being diverted elsewhere. She said her own bills went from less than $79 in 2003 to more than $106 in late 2009.

"I have no confidence in your cost allocations. It's not personal. I just don't believe you," she told the utilities director. "Obviously the city of Sacramento has never complied with Proposition 218 … Something is seriously wrong here and we have not fixed it and management has not fixed it."

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City officials say they still don't know how much the violations cost ratepayers. The grand jury cited a 2008 consultant's report that found violations had cost the utilities funds more than $21 million since 1996.

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As a result, it's not uncommon for localities to stretch the limits of the law. "The issue goes way beyond the city of Sacramento," he said.