A lawsuit filed by a former city councilman against Petaluma over wastewater fees so far has cost the city $33,000, but both sides cite progress in the 11-month dispute.

City Manager John Brown declined to discuss the issues in detail because the litigation is still pending. But he acknowledged the city has changed the way it funds storm water maintenance costs as a result of the issues pressed by Bryant Moynihan.

Legal briefs are tentatively due in December in Sonoma County Superior Court, but Moynihan said the two sides are working on a mediation schedule that could forestall a full trial.

Moynihan's suit claims that the city since 2004 has wrongfully diverted at least $4.7 million from the wastewater fund, which comes from ratepayers' bills, and spent it as part of the general fund. He wants the city to repay the wastewater fund and pay his attorney's fees.

After much public prodding from Moynihan over the past couple of years, the city conceded that its practice of using wastewater funds to pay for some storm-water management functions was improper.

The city had contended that diverting storm water from the wastewater system provides at least an indirect benefit to the wastewater fund because diverted rainwater doesn't have to be treated at the city's sewer plant.

But court rulings have said that if a benefit isn't tied directly to the fund, fees or taxes to pay for it must be approved by voters. In response, the city will remove about $600,000 in storm-drain maintenance costs from the wastewater budget this year.

"We're making the adjustments to make this as clean and as clearly defined as possible," Brown said. "This isn't about hiding anything."

Councilman Mike Healy said Moynihan's contention that the wastewater fund should be repaid for charges made from 2004 through last year is unrealistic. He said the legal claims before are barred by the statute of limitations.

Moynihan, acknowledging growing expenses for the city for his suit, said his attorneys have proposed mediation in an effort to settle the case before trial.

"We've made progress, slow progress," he said. "It's unfortunate, because they could have saved time, expenses and attorneys' fees if they had just said they were doing it wrong and &‘let's fix it'."

Through mid-October, the city's law firm, Meyers Nave, has billed the city $30,750 in legal fees and just over $2,100 in costs to defend the suit, City Attorney Eric Daily said.

Still at issue are other functions that the city argues are legitimately tied to the wastewater enterprise fund but that Moynihan argues are improper. He contends that the city has used the fund to pay for functions that ought to be paid for by the general fund.

Brown wouldn't confirm mediation discussions, but said he continues to examine accounting concerns.

"If further fine-tuning is necessary, I'm happy to do it," he said. "It's not good to have costs associated with it. I'd much rather not have a court case, or be able to say to a judge, &‘We recognize we need to do it and have done it.'"

(You can reach Staff Writer Lori A. Carter at 762-7297 or lori.carter@pressdemocrat.com.)