April 5, 2014    Monterey Herald, Monterey, California

Ron Weitzman: Measure O far from a distraction

Recently, opponents of Measure O, the initiative on the June 3 ballot mandating steps leading to the purchase of Cal Am by the local water management district, have criticized the measure's proponents for creating a distraction from community efforts to seek a needed new water supply. WaterPlus is one of the community groups most deeply involved in these efforts. Our primary concern is to achieve the least costly water supply possible that can meet all our community water needs, even in times of drought. From our origin in Monterey FLOW, we have been pursuing this goal for almost 10 years, longer than most of the 19 parties participating in the Public Utilities Commission proceeding on Cal Am's water supply proposal. So why do we, different from some other parties to the proceeding, support Measure O?

The reason is that, in our view, Measure O is far from a distraction. In fact, we see Measure O as almost necessitated by Cal Am's proposal. That is because of the tremendous difference in cost to ratepayers of the project proposed by Cal Am and a project of equal capacity owned and financed by a public agency. In a Herald commentary late last year (Dec. 9), I showed that this difference could be as large as $1 billion over the loan payoff period.

If the water management district owns Cal Am, the company will have no reason to own and finance a water supply project. Either the water management district will do that or it will purchase the new water needed from the Marina Coast Water District. Cal Am agreed to that purchase in the regional desal project. A judge recently ruled the agreement is still valid and, if it continues to be valid, any new owner of the company will have to honor it. In that case, Marina Coast, an experienced and efficient public agency, will develop the project at the least possible cost to ratepayers. That is the option WaterPlus prefers.

Cal Am has failed in its court challenge of the agreements underlying the regional project. If Monterey County should abandon its plans to pursue that challenge or if its statute of limitations has run out, then purchase of Cal Am by a public agency would not be necessary in the view of WaterPlus because, in that event, Marina Coast would be the developer of our new water supply regardless of the passage of Measure O. Still, many others may see the public purchase of Cal Am as insurance.

Monterey Peninsula mayors have contended the state will not relax its cease-and-desist-order deadline for extracting water from the Carmel River if our community shows disunity in its pursuit of a new water supply by supporting Measure O. The state has never said it would relax the deadline under any conditions, and if the ratepayers support Measure O, the mayors should fall in line, not vice versa.

How much would condemnation cost? WaterPlus has obtained an estimate of $22,000 for an appraisal developed for eminent-domain proceedings. Add another $75,000 for the appearance of the appraiser in court. The purpose of the proceedings is to determine cost. An eminent-domain attorney consulted by WaterPlus has said attorney fees for the court case should amount to no more than $300,000. So the cost of the proceedings to the prospective purchaser should be in the order of $400,000, about $10 per ratepayer.

Is the cost of Cal Am prohibitive? As I indicated in a Herald letter last year (Oct. 16), the solid information available clearly says the answer is no. The only recent appraisal of Cal Am made known to the public, a professional MAI appraisal obtained by WaterPlus in late 2011, estimates Cal Am's debt plus equity to be $94 million, far lower than the $200 million or $300 million figures bandied about without reliable or responsible confirmation. The company has a debt of $59 million, which means its shareholder equity is equal to $35 million. That is the small amount a public purchaser would have to come up with to buy the company while assuming its debt at a much lower interest rate than the 6.63 percent the company is now charging ratepayers. The savings in interest and taxes, as well as company profit on the removal of the San Clemente Dam, would more than compensate for the $35 million.

Readers may find detailed calculations on the WaterPlus website: www.waterplusmonterey.com.

Weitzman, who lives in Carmel, is president of Water Plus.

# # #

Waterplus Monterey Home       Return to Previous Page