Residents gather allies to buy Cal Am

Group says public ownership will bring down cost

By JIM JOHNSON

Monterey Herald, January 23, 2011

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Making its pitch for a public purchase of California American Water, a group of community leaders is mak­ing the rounds of local governments and public agen­cies on the Peninsula in search of backing for its proposal.

The group, led by community activist Ron Weitzman of Carmel and calling itself WaterPlus, is also consider­ing forming a new water agency to back the purchase of the private firm, and could soon begin circulating a peti­tion calling for a ballot mea­sure by November's election. A draft of the petition calls for replacing the Monterey Peninsula Water Management District with the new agency.

Weitzman and WaterPlus argue that buying Cal Am would save Peninsula cu­tomers the cost of paying for shareholder earnings. Other savings would come from paying lower interest rates available to public agencies on borrowing for capital projects such as the pro­posed seawater desalination and San Clemente dam removal projects.

They also argue that cus­tomers would retain more local control and oversight if the water system were pub­licly owned.

Weitzman said he knows the public purchase effort won't be easy, especially going up against a "formid­ble opponent" such as Cal Am, but he remains optimistic because it has been done before. His motivation, he said, is simply to offer the Peninsula a chance to own its water system as do the Northern California comm­nities of Felton and Montara, which both undertook suc­cessful public purchases of Cal Am.

"We know it's going to be difficult, but we're determined and we're hopeful," he said. "If (the customers) don't want to buy it, at least they had the opportunity."

Cal Am officials argue that the group's cost projections are unrealistic, and doesn't take into account the legal costs of pursuing a hostile purchase of a company that doesn't want to be bought. They also pointed out that the group's timing is particularly unfortunate, with recent progress made on major water infrastructure projects, especially the desalination plant.

The desalination project, approved by the state Public Utilities Commission, would be delayed and endangered by any purchase attempt as a state-imposed deadline for cutting pumping from the Carmel River approaches, they say. "I don't think it would be a good thing for the Monterey Peninsula and our customers," Cal Am spokeswoman Catherine Bowie said. "This would be an enormous additional expense without additional benefit. This whole effort could be a major distraction and is very divisive in the community, and we need to be coalesced around a solution (to the state order). It doesn't pass the common sense test."

Besides, Bowie said, local voters rejected a previous attempt to purchase the company.

WaterPlus includes a collection of prominent locals, many of whom also belonged to the group known as Monterey FLOW (Friends of Locally Owned Water) that backed the earlier effort to purchase Cal Am. In addition to Weitzman, the new group includes such well-known figures as Nader Agha, Harvey Billig, Bob Massaro, Dick Rotter and George Schroeder, among others.

The previous effort floundered in the middle of the last decade after the failure of a ballot measure, dubbed Measure W, that asked voters to approve $550,000 to study a takeover of Cal Am. The water company spent heavily to finance the campaign against the measure.

This time around, Water-Plus is taking its case to a variety of organizations, including the cities of Monterey, Pacific Grove and Sand City, as well as a group of Peninsula city managers and the Peninsula water management district. Presentations are also planned for the cities of Carmel and Seaside, and eventually the Board of Supervisors.

Weitzman said the goal is to get the word out as broadly as possible.

"We wanted to be completely upfront about this," he said. "We don't want to broadside anyone."

At the core of the presentation is the proposition that Peninsula water customers would actually pay less on their water bills if they were to purchase Cal Am, under the WaterPlus group's calculations, than they do now to offset the company's shareholder earnings. According to Weitzman, the cost to purchase Cal Am's "shareholder equity" of $49.2 million — the portion of the company's $102 million base worth not devoted to debt — at a 5 percent interest rate would result in a $6.60 charge on the average monthly water bill. Conversely, Weitzman argues that Cal Am currently charges customers an average of about $10.45 per month for shareholder profit.

Weitzman said a public purchase would also save money elsewhere, including the cost to customers of taxes and company shareholder earnings on capital improvements — crucial at a time when water bills are poised to skyrocket — while the system's operations would continue essentially unchanged.

He said the group backs the desalination plant proposal and would simply replace Cal Am as a partner in the project agreement, heading off any major delay.

George Riley of the Citizens for Public Water said the advocacy group is helping WaterPlus with its public purchase effort, and suggested this might be an opportunity to eliminate the "fragmentation" and "duplication of effort" around local water management in addition to potentially cutting costs. Riley said there is still some disagreement on the details of the effort, but this is an ideal time to start looking at such a bid because of the number of expensive water projects in line.

"There are more reasons now to look at this than five years ago," he said.

The group's pitch seems to have attracted the most interest at the city of Monterey, which has formed a subcommittee of council members Frank Sollecito and Nancy Selfridge to study the bid. City Manager Fred Meurer has scheduled a Feb. 18 meeting to allow WaterPlus and Cal Am to make their arguments to the subcommittee and a group of Peninsula city managers.

Selfridge said she has attended WaterPlus meetings and is a supporter.

"I am excited about (WaterPlus) because they are truly a grassroots group that is just now taking on this effort to purchase Cal Am," Selfridge said. "Frank and I hope we see something happen where we actually have a new water agency."

Fellow council member Libby Downey said she also supports the concept of a publicly owned water system, and suggested that it might allow local elected representatives a "real vote" on the desalination plant project advisory committee rather than a strictly advisory role. But Downey said she doesn't want such an effort to delay the desal project and needs more information before she could offer her full support.

"I see value down the road," she said.

Meanwhile, WaterPlus has submitted its draft petition to LAFCO of Monterey County, which executive director Kate McKenna said is conducting a legal review to determine its potential role and jurisdiction in an attempt to disband the stateestablished water management district. Mckenna said a report should be available by next week.

Weitzman said a copy of the draft petition had also been sent to the water management district for its consideration.

Water district general manager Darby Fuerst said he's concerned about the breadth of the new agency's powers, given that it wouldn't have been established by the state, and its ability to continue the district's various efforts aside from monitoring Cal Am.

The plan, Weitzman said, is to begin the petition drive in a month and finish gathering signatures, including at least 10 percent of all registered voters in each jurisdiction within Cal Am's Monterey district service area, by mid-May.

Following a public hearing, LAFCO could then request that Monterey County Elections place the issue on the November ballot, which would also include a slate of candidates for the new water agency's board of directors.

Weitzman said he'd prefer the water management district board back a public purchase bid, whatever the motivation.

"Persuade comes first, and if that helps convince them to support a public purchase, then that's fine," he said.

Jim Johnson can be reached at 753-6753 or johnson@montereyherald.com.

Copyright © 2011 The Monterey County Herald.

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