Customers with 1 inch meters will see their meter fee reduced $9.08 to $32.49; 3/4 inch meters will be billed at $19.45, a reduction of $6.84.

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1 WATERLINES Special Update Board Lowers Meter Fees No longer saddled with a 36% conservation mandate from the State Water Resources Control Board, the YLWD Board of Directors voted unanimously to reduce the Basic Service Charge for all customers. Customers with 1 inch meters will see their meter fee reduced $9.08 to $32.49; 3/4 inch meters will be billed at $19.45, a reduction of $6.84. The new lower rates come with the anticipated increase in annual volumetric water sales after the Board loosened watering restrictions and suspended Administrative Penalties last month. The monthly basic service rates were calculated with forecasted increases in water sales to remain revenue neutral. The rate reduction comes in spite of the fact that costs for both groundwater and import water have increased. Old Service Charge New Service Charge 5/8 and 3/4 Meters $26.29 $ Meters $41.57 $ /2 Meters $79.77 $ Meters $ $ Meters $ $ Meters $ $ Meters $1, $ District Wins Referendum Suit Judge Robert J. Moss has ruled in favor of Yorba Linda Water District in the case filed against the District in January. Not only did the Judge rule that the District was lawful in rejecting the referendum but also acknowledged the declared state of emergency and the effects of the unprecedented state mandated water rationing on the District. Read Judge Moss ruling inside.

2 Dear Valued Customer, We are relieved to report to you that the lawsuit, which was filed against the District this winter, has concluded. Thankfully, the District won. The ruling by the Honorable Judge Robert J. Moss, validates our actions as being justified, legal and necessary. To that point, we have included the entire court document for your review on the interior of this mailing. While this victory is indeed a valuable one for the District and other water providers in the State, you should know that the cost of defending against the lawsuit alone totaled over $250,000. Again, these costs are paid by you, our customers. Defending against this lawsuit was vital to prevent defaulting on our bond obligations. Had the rates been defeated via the 218 process, the District would have defaulted. Had we lost the court decision, the District would be insolvent. The past year has been a roller coaster. We made the dramatic shift in our rates not because we wanted to, but because we had to in order to meet our financial obligations. Our bond holders require that for every $1 of expense we have, we collect $1.10 in revenue. That.10 is not profit; it goes to debt service, depreciation, capital improvements, responsible reserves, and repair and maintenance of $811,000,000 of infrastructure (water and sewer). With people s water use becoming more efficient, less revenue comes in from consumption, so more must be shifted to the Basic Service Charge or you run a deficit. But, when the State came in and ordered an immediate 36% reduction in water use, the consequences were crippling. It was a difficult decision to raise the Basic Service Charge, but it was the responsible decision for our Board to make. Now, after successfully lobbying the State to drop the 36% conservation mandate for our District, in anticipation of higher water use, we have lowered the Basic Service Charge for all customers. It should give you confidence to know that as soon as we were able, we did our best to reduce the financial impact caused by the State regulations on you, our customers. I actually wish we could have lowered rates more, however the lawsuit filed and other actions taken against this District have cost you, our customers, hundreds of thousands of dollars. In addition to the flood of public record requests and legal fees to defend against the lawsuit, the District lost an opportunity to refinance our bonds, a move that could save us millions into the future. The accusations of illegal activity by some in the community continue to take a toll on this agency. The orchestrated hostile actions of some against the District have made employees retire early, quit, and seek employment elsewhere. The professionals that operate one of the most complex water delivery systems in Orange County are invaluable to you and your family s health, safety and quality of life. Thank you for your support and we hope that Judge Moss ruling gives you every assurance that we re on your side. Sincerely, Marc Marcantonio, General Manager

3 SUPERIOR COURT OF CALIFORNIA, COUNTY OF ORANGE Central Justice Center 700 W. Civic Center Drive Santa Ana, CA SHORT TITLE: Ebinger vs. Yorba Linda Water District CLERK'S CERTIFICATE OF MAILING/ELECTRONIC SERVICE CASE NUMBER: CU-JR-CJC I certify that I am not a party to this cause. I certify that the following document(s), Minute Order dated 07/25/16, have been transmitted electronically by Orange County Superior Court at Santa Ana, CA. The transmission originated from address on July 25, 2016, at 11:41:39 AM PDT. The electronically transmitted document(s) is in accordance with rule of the California Rules of Court, addressed as shown above. The list of electronically served recipients are listed below: BELL, MCANDREWS & HILTACHK, LLP BHILDRETH@BMHLAW.COM KIDMAN LAW LLP SGUESS@KIDMANLAW.COM Clerk of the Court, by:, Deputy CLERK'S CERTIFICATE OF MAILING/ELECTRONIC SERVICE V3 1013a (June 2004) Code of Civ. Procedure, CCP1013(a)

4 SUPERIOR COURT OF CALIFORNIA, COUNTY OF ORANGE CENTRAL JUSTICE CENTER MINUTE ORDER DATE: 07/25/2016 TIME: 11:26:00 AM DEPT: C14 JUDICIAL OFFICER PRESIDING: Supervising Judge Robert J. Moss CLERK: Betsy Zuanich REPORTER/ERM: None BAILIFF/COURT ATTENDANT: None CASE NO: CU-JR-CJC CASE INIT.DATE: 01/12/2016 CASE TITLE: Ebinger vs. Yorba Linda Water District CASE CATEGORY: Civil - Unlimited CASE TYPE: Judicial Review - Other EVENT ID/DOCUMENT ID: EVENT TYPE: Chambers Work APPEARANCES There are no appearances by any party. This Petition for Writ of Mandate came on for hearing on July 11, Having considered the petition and the argument of counsel, the court now issues its decision as follows: Writ denied. All requests for judicial notice are granted. The court has reviewed and considered all of the amicus letters submitted and overrules the objections thereto. FACTS: The facts are not in dispute. On September 17, 2015, the Yorba Linda Water District (hereafter "the District") passed Resolution raising water rates for ratepayers in the District. Thereafter, petitioners circulated a referendum petition demanding that Resolution be reconsidered by the District and repealed or placed on the ballot for the next regular election. The petition, with the requisite number of signatures, was submitted on October 14, The District declined to either repeal Resolution or place the issue on the ballot for approval by the voters. Petitioner has filed this petition for writ of mandate asking the court to order the District to either repeal the rate increase or put it on the ballot for voter approval. The consequences of granting this petition would be serious. The prolonged drought has resulted in severe water shortages in California. On January 17, 2014, the Governor of California declared a state of emergency as a result of the statewide drought. The California State Water Resources Control Board imposed an unprecedented water rationing plan which mandated a 36% reduction in water consumption on ratepayers in the District. As a result of the severe water rationing, the District's revenue from water DATE: 07/25/2016 MINUTE ORDER Page 1 DEPT: C14 Calendar No.

5 CASE TITLE: Ebinger vs. Yorba Linda Water District CASE NO: CU-JR-CJC sales sharply declined. At the same time, the District's operating expenses were largely fixed. Without an increase in rates, the District faced an $8 million shortfall in fiscal year 2016 and defaulting on debt obligations. If the petition is granted, Resolution would be ineffective unless and until it is approved by a majority of the voters in the next election. The District would be compelled to refund the revenues it has enjoyed since the passage of the resolution and may be unable to meet its existing obligation to provide safe, clean, potable water to the citizens of Yorba Linda. DISCUSSION: The District is a "county water district" formed and existing under the authority of the County Water District Act. Water Code et seq. The District is entitled under that act to make legislative enactments as it did in the passage of Resolution Under California Constitution Art. II, Section 9 voters have the power to approve or reject statutes passed by a legislative body through the use of the referendum process. Under California Constitution, Art. 11, Section 9, this right is extended to local jurisdictions. See, generally, Lindelli v Town of San Anselmo (2003) 111 Cal. App. 4 th 1099 at p Water Code makes it clear that ordinances passed by a county water district are subject to the referendum process. While voters have a right to challenge legislative enactments through the referendum process, that right is not unlimited. California Constitution, Art. II, 9 specifically precludes certain types of legislative enactments from the referendum process. Namely, statutes that are urgency statutes, call for elections, provide tax levies, or appropriations for usual and current expenses of the State. Also, while the referendum provisions of the California Constitution are generally to be liberally construed in favor of the power reserved to the voters, consideration must also be given to the consequences of applying the rule, and if essential governmental functions would be seriously impaired by the referendum process, the courts should assume in considering the applicable constitutional and statutory provisions that no such result was intended. Geiger v Board of Supervisors (1957) 48 Cal. 2d 832. Here the District argues that Resolution was both a tax levy and an urgency measure enacted to respond to the record drought conditions currently existing in California, and thus is not subject to the referendum process. While the court does not agree with respondent that raising of water rates is the equivalent of a tax levy, it is persuaded that Resolution was passed as an urgency measure enacted to avoid severe constraints on the District's ability to meet its fixed financial obligations during the current severe drought. This finding, coupled with the finding that the essential governmental function of providing safe, clean, potable water might be impaired if the referendum is allowed to proceed, compel the court to deny the petition. As the matter took less than eight hours and no request for statement of decision was made before the matter was submitted, no statement of decision is required. Respondent to prepare the order. Clerk to give notice by e-service. DATE: 07/25/2016 MINUTE ORDER Page 2 DEPT: C14 Calendar No.

6 Independent, Trusted and Reliable Service for more than 100 Years 1717 E. Miraloma Ave., Placentia, CA (714) Five Plants for Fire Prone Areas Extended drought conditions have turned fire season into a year-round danger. The threat of wild fires is especially real in urban wildland interface areas. The best defense to keeping your home safe is to consider plant selection, design and consistent maintenance of hillsides to comply with the Orange County Fire Authority (OCFA) guidelines. Landscapes should resist ignition and provide 100 ft. of actively maintained defensible space around structures and access zones, maximizing fire prevention and also allowing access by fire crews. During the cooler months, consider plants that are less likely to produce airborne embers. These plants include those with a high salt and/or water and low volatile oil content in their leaves like succulents. Avoid planting oily trees and shrubs, like eucalyptus and junipers, which can cause the opposite effect. Instead, consider the following plants recommended by the OCFA: 1. Bush Ice Plant 2. Coral Aloe 3. Wild Strawberries 4. Agave 5. California Sycamore For more information visit, ocfa.gov/rsg. Board of Directors PRESIDENT Ric Collett VICE PRESIDENT Michael J. Beverage DIRECTORS Phil Hawkins Bob Kiley Gary Melton GENERAL MANAGER Marc Marcantonio The cost of this mailing is approximately $0.46 per customer, to keep you informed. OUR MISSION Yorba Linda Water District will provide reliable, high quality water and sewer services in an environmentally responsible manner, while maintaining an economical cost and unparalleled customer service to our community. WE WELCOME YOUR COMMENTS! YLWD Public Affairs PublicAffairs@ylwd.com (714) twitter.com/ylwd OUR VISION Yorba Linda Water District will become the leading, innovative and efficient source for high quality reliable services.