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01-03-1966 - Special Meeting - MinutesMINUTES OF THE STUDY SESSION OF THE CITY COUNCIL CITY OF WEST COVINA, CALIFORNIA JANUARY 3, 1966 The study session of the City Council was called to order by Mayor Nichols at 7:35 P,M, RRO'LL 'CALL Present: Mayor Nichols, Councilmen Jett, Snyder, Krieger, Jett Others Present: Mr, George Aiassa, City Manager Mr, Robert Flotten, City Clerk 6 Admin, Assistant Mr. Herman R, Fast, Public Services Director Mr, Raymond Windsor, Administrative Analyst Mr, James Kay, Finance Director 'LEEDS, HILL & JEWETT REPORT City Manager, Mr, Aiassa: (Gave brief summary of this matter,)' We are trying to form some type of policy for the Council;. There is quite a bit of money involved in this report and they have definite recommendations, Mr. Barton is here tD answer any questions you may have regarding this matter, Councilman Snyder: These recommendations are still valid, is that right? Mr, Barton: Yes, They would be the same today, Councilman Jett: Mr, Aiassa, you mentioned about notifying Home Savings and Loan, Was any contact made with reference to this? City Manager, Mr, Aiassa: Yes, Councilman Jett: Would it be necessary now for us to notify them that we intended to purchase the water companies and form a municipal water district? City Manager, Mr, Aiassa: When Mr, Banks was here and he made that first presentation a year ago he stated this would be the quickest way for the City to acquire its main trunk line, et cetera, to a water system, Councilman Jett: I think in that recommendation they had stated we should notify 0 Home Savings and Loan immediately that we were intending to form the municipal water district and by this notification we could then tell Home Savings how to build their water system. We would then be able to acquire this without any cost to the City whatsoever, This could be made part of the development company. Would this still hold true at this date? -1- i C, Co 1/3/66 Page Two LEEDS, HILL 6 JEWETT REPORT - Continued Mr, Barton., From what I understand, there may be something that has transpired since we wrote this report with regard to Home Savings with which I am not acquainted, City Manager, Mr, Aiassa., A referendum was brought forth _ and their ordinance never passed so they have never developed their property so there are no plans for immediate development except a tenative map that is being asked for an extension, Mr, Barton., At the time we prepared this report we expected their development would go very fast and it would be unfortunate if they got private water companies in there and the City would have to acquire them if they were going to proceed with providing water to the City, Councilman Jett: If we extend the time for the tract map should we notify them to go ahead and put the system in and give it to the City? Mr, Barton., I think you had first decide . whether or not you are going to adopt the acquisition procedure and that would be part of the pro- cedure,, Councilman Heath: I think we have to acknowledge the fact that Home Savings ha.s been advised of our considering establishing our own water company. They were asked at one time whether they would work with us on a proposal similar to what was outlined by Mr. Jett, which would enable us to start our water company, I think if you look into it deeply you will find some amazing and shocking things as far as Home Savings is concerned, I think you will find that Home Savings are pretty well along on the formation and development of the work and water company for themselves and they will establish their own company and if they have progressed as far as I am led to believe, I doubt if they would entertain any action of ours, Secondly, I think you will find that Home Savings has been trying to peddle this property for the past year and if they are trying to peddle the property, I don't think that they would be interested in talking about helping the City establish a water company. I don't think we can go the route recom- mended in this study due to the information I have just outlined, Councilman Krieger; I don't follow that this report is many many pages long and only a very small portion of it is devoted to Home Savings and Loan, This .is only one small segment. We are talking about 19800 undeveloped • acres as compared tc 7,?00 acres of developed property in the City, The only reason the report alluded to this particular development at all was because it represented such a large land mass undeveloped which had no existing system and rather than get into the acquisition of a system that would be implimented in that tract to forestall this eventuality by entering into negotiations if it were our desire at the inception of such a program of acquisition. I think the question before the Council is not Home Savings and Loan. It is not the status of Home Savings and Loan. The basic question is do we or do we not as a policy of this City wish to impliment the recommendation that we acquire a municipally owned and operated water company, -2- C. Co 1/3/66 Page Three LEEDS, HILL 6 JEWETT REPORT - Continued • Councilman Jett- When Home Savings and Loan was first before us we discussed the probability of their putting in this water system and if we acquired it it would be dedicated to us because we wanted a reservoir established on the highest point in the Home Savings property. Home Savings is a very integral part of this plan but naturally it is not the deciding factor by a long shot. Councilman Heath- I do believe that what is before should have a water company or not, us is first whether we feel we Councilman Snyder- I think we should look at the material before us. Councilman Krieger- I also have legal opinion on the question of severance damage and with respect to Suburban, I believe the statistics were that 67% of our water source in West Covina is supplied by Suburban but that only represented 25% of their activities. Mr. Barton- I believe those figures are correct. • Councilman.Snyder: I think this report demonstrates that it is feasible, that it can be done, and that it will actually be a benefit'to the City without costing the taxpayers any additional taxes. It is accepted practice. I think nearly 70% of water companies in the cities of California are municipally owned. I don't think there is any philosophical argument regarding the right of a city to go into the water business. Councilman Heath- I have made my stand clear many many times during my term on the Council. I am definitely opposed to the City getting into any operation that can be done by private enterprise. I do not think that a.city can operate any kind of a business more efficiently than a private enterprise because the city is not in competition and the people in private enterprise if they don't do a job they are let go. The City if they get into a job like this they have practically got a retirement. I am opposed to the City taking on any kind of a project that should be done by private enterprise and this is one I think should be done by private enterprise. Councilman Krieger- Let's direct our attention to a report we have spent $25,000 for. Now these people who are the experts in the field tell us that this can be done more cheaply by us than it is being done by the private water companies. What statistics can you bring before us to show us this is not the case? Councilman Heath- All you have to do is go through the water company office and then come back and go through any of the governmental offices and find out how efficient the government works. Councilman Krieger: This report doesn°t direct itself to conjecture. It talks about facts and figures. It says a rate reduction of ten to twenty percent from the charges could be made as one alternative for -3- Co Co 1/3/66 LEEDS, HILL & JEWETT REPORT - Continued Page Four accumulating such surpluses. Let's just talk about a recommendation that suggests to us that we can save the people that we represent ten to twenty percent on their existing water bill. If this is a possibility, why should we reject it because of some basic philosophy we may have accrued as to public versus private enterprise? Councilman Snyder: Some 70a of your cities in California feel they can do it cheaper than private enterprise. Now we are paying taxes for MWD which are not applied on your water bill with private enterpirse. They won't be applied on the City owned either. At least you are getting more of a direct usage with this money spent with your own water company than you would with Suburban. Councilman Jett: This is not a competitive business. The water company has a monopoly. They have a franchise, so it is not a competitive business. With this in mind, any company could come in and start their own policies, their own rates subject, of course, to the approval by the P.U.C. There is a question I have that may be answered right here. In the event we did form this company to take over the water systems, who would manage a system like this and who would be in charge of it? Would they answer to the City Council? Would their be an election to elect a Board to form a district? How would this be . managed? City Manager, Mr. Aiassa: The Council can probably determine anything they want to do on this matter. Councilman Krieger: Item 2 of the recommendation said we should, assuming the basic decision is we should establish the policies and procedures concerning the proposed municipal water department. It can be on a staff level, supervised directly by the Council or there could be a commission to supervise the staff being subject, of course, to the Council. Councilman Jett: I think water is a specialized field and I wouldn°t want to see just anybody picked out to manage this. It should be somebody who knows the water business. City Manager, Mr. Aiassa: Most cities have their own water department. You can utilize the same staff to handle the billing and'posting. Councilman Krieger: I think it is particularly enlightening when you find that the water rates in the City of West Covina by the eight purveyors, • you have a low cost dollars per service per year, $47.20, and on the high side you have $90.60. That seems to be almost a ratio -of two to one. I think that is significant. There should be no basic differences put on the fact that these water companies although they have as Councilman Jett states a monopoly, they have a monopoly to earn money and they do earn money. (Read Statement on Page VI (1).) Councilman Heath: Where is this 20o savings going to be? -4- Co Co 1/3/66 LEERS, HI`LL.6 JEWETT REPORT Continued 40 Mr, Barton: Page Five It primarily comes from the tax setup, Councilman Heath: Is it correct that in this case the water could be free from taxes? By the same token, doesn't it take a certain amount of tax.value off of the market also? Councilman Krieger: They have allowed this in their projection, Councilman Heath: If we take over a water company that the equipment was taxed at a certain amount of money -- Mr, Barton: The income tax is the most important single tax involved, Councilman Krieger: You have a later report than the '57 report by the Board of Fire Underwriters? That one said the arterial system in the central business district is fair to poor, (Read literature re this matter,) Councilman Heath: We have made loops and I feel . sure I have heard Chief Wetherbee say that we have all the systems looped in the City that we need looped, • Councilman Jett: How would you integrate the loops between ten different companies? (Drew sketches on board and explained same,) I think the Suburban would carry pretty much the entire business area, Councilman Heath: How many personnel do you feel it would take to establish this water company to serve this City? Isn't there a ratio of one employee to a thousand citizens? Mr, Barton: I don't believe most water systems are that high, Councilman Snyder: Under the private ownership you can't force looping between companies now but if you had it it one integrated system you can get a more efficient system and more looping, I think we should do this if it can be done without any increase in taxes and could possibly in the long run forestall increase in water rates and possibly at least hold the line and accomplish some reductions, I don't think you could promise anybody immediate reduction. Certainly some of these people are paying a much higher rate than some of these other companies would require, Mr, Barton: Our study was based on projected rates under present ownerships. That doesn't mean if you do adopt a water system that you -will be able to reduce rates but you may not have to raise rates, -5- • C: • Co Ca 1/3/66 LEEDS, HILL & JEWETT REPORT ® Continued Page Six Councilman Krieger: I thinkthisis going to become increasingly important when this basin is adjudicated, which I think is in the offing,, When I first came on the Council almost two years ago and you were kind enough, Councilman Snyder, to ask me to serve on the water committee, there were two questions that seemed to be important, and one was the need and necessity and ultimate responsibility of this Council to provide a supplemental water supply to this City,, I am pleased that that responsibility has been on meo I think this is the second chapter in the book and I think it is of equal importance that this Council takes a position consistent with our responsibility to the people of West Covina and making sure that water is not only available in the future, but that it is. distributed to them at the lowest possible rates with uniformity of service with the other benefits that have been commented on,, Councilman Heath: It has been brought up that we are going to benefit our fire rates,, As I understand it, we are about as low as we can possibly go in our rates right now. The next step would have to be an alarm system to put us into a lower classification,, If this is true, I don't see how by going into a water company and adding more loops, I d6n'tthink us owning the water company is going to drop our insurance rates,, Councilman Snyder: You don't have any guarantee at your next writing that you won't get raised on your fire insurance,, Councilman Heath: I can't see how we could possibly operate.this water company without adding to the City staff anywhere from 50 to 70 employees and I am not in favor of building up an empire in the City staff,, It has been proven to us when we were studying the budget that the increase in personnel in the City staff does riot increase in proportion to the population of the City. As the City increases, your city personnel increases at a faster rate,, This adding 50 or 70 more employees is just upping that number of people on the City staff that much more. I think we can do just as well to stay out of the water ®m.pany and tend to a service for our people and not run a water system, trash collection, electric power, et cetera,, Let the City stay out of this,, Let them act as a service,, Councilman Snyder: If my understanding is correct, the added personnel would be paid for out of revenues from the water company,, City Manager, Mr,, Aiassa: Councilman Snyder: for the City, Everybody will come along. I fail deterring factor because Councilman Jett: additional personnel,, from the water system,, personnel, we are also any cost,, That is correct,, Any empire that anybody is building here is being built here is going to leave sometime,, New people to see how the increase in staff is a it would be paid for out of the water revenue,, I don't see how we could possibly take on a water company without It is going to be paid for out of the revenue Although you might say we are adding to our increasing our income sufficiently to offset '. 0 • Ca C,, 1f3/66 Page Seven LEEDS', HILL & JEWETT REPORT Continued a Councilman Heath: Are we in a business to give a service or to make money? If we are going into this to make money I think we are in the wrong line completely,, Councilman Krieger: Sometime in the past the Council came to the decision that the Council could provide better police protection, which is a service, by having its own police department, so we stopped contracting with the County,, Sometime ago this City made the decision that we can handle our fire protection service better than the County,, We can cut our personnel right away if we want to,, These are all services,, Councilman Snyder: The main emphasis is not the making money but to increase the quality of our service, (Read section VII (6),,) Councilman Heath: If we are going to give better service then we must assume that the present service we have is terrible. If the service we have is so terrible, I think we should go to the P,,U,,C. And have them take the water company out of business and put someone else in,, Councilman Snyder: I don't think it is terrible,, Councilman Krieger: The report goes on to say that the possible disadvantage of acquiring the existing water company is that the City would be undertaking a responsibility that is now generally adequately provided by the existing water purveyors,, Councilman Snyder: I personally am for directing the staff to begin the steps to accomplish the recommendations of this report,, We cannot make a motion tonight because we are not in a regular session,, Councilman Jett: I think as the representative for the water committee for the City I made the recommendation that this should be made,, I haven't changed my mind a bit. I still think it is a benefit to the. citizens of West Covina to take over the water system,, Councilman Snyder: When you get into this argument of taking over private enter- prise, that is reaching far out because it is accepted policy for cities to be in the water business,, Water belongs to the public,, Councilman Heath: We ought to also include taking over the trash collection and possibly the supplying of electric energy, the supplying of gas energy, Let's extend it, If we are going to do a service to the City and this is the right way to do the service, let's extend it, Councilman Krieger: City Manager, Mr,, Aiassa: We can't do those things cheaper - than private enterprise,, The City of Pasadena is providing electricity for their citizens,, -7 C,, Ca 1/3/66 Page Eight LEEDS', HILL 6 JEWETT REPORT - Continued • Mayor -Nichols- I certainly would not choose to oppose the acquisition of a water company on the basis it is not a proper role for government to play because I would certainly be leaving myself vulnerable to the points that Councilman Snyder rightfully made,, On the other hand, it has been my experience and it is not unique with me that the expenditures of government tend to rise to meet income and one thing that has not been said here tonight is there is no overwhelming evidence that has been presented to me to this date that any of the municipalities surrounding us who have their own water companies are able to provide this essentially better service of which you speak. So, to me the question is will this really be in the interests of the taxpayers of this community; will the improvements in the water system in truth ulti- mately be greater than they would be under private ownership; and will they be greater at less cost than they would be under private ownership,, I think the only justification the public body can offer for assuming any service that is provided through the private sector whether competitive or not is the justification of better service at. less cost,, We have not seen that demonstrated ,, The City of Pomona has had its own water company for years and its rates are higher than the average rate for West Covina and its City tax rate is better than double of the City tax rate of West Covina,, I would like to have a lot more demonstration on competitive cost and rates before I could be convinced that the answer to all the sins of the water system will • be met by this City going into the water business. When a city takes over a water system, that water system can be, and often is, merged in the financial jungle of the entire city's operation and there is no regulatory body outside the City itself which will have any say on what those rates may be,, Often times, as has been intimated here, the fruits of any possible savings in the water company end up in some other aspects of the city government and sometimes it is hard to determine how efficient your water system is,, Councilman Snyder: I don't feel it should be merged into the whole City. This is not being decided tonight,, Councilman Krieger: I wonder what test we are putting people to as far as these studies and reports are concerned,, It seems to me you are basing your comments strictly on your own conclusions which could have been predispositioned before this report,, Mayor Nichols: Yes, indeed, and I think the conclusion of a good number of people in this room was made before the report was undertaken,, I am not disputing the report nor the conclusions therein,, Councilman Krieger: What is this test of overwhelming evidence?. What standards are we establishing for ourselves in these areas? What test are we putting these people through? Where do we say this is not an over- whelming weight of evidence? Councilman Heath: I think we should look into the report and find out exactly what better service we are going to get,, There has been no specifics as to the deficiency in this report. I don't see anything in the report that tells exactly what better service you are going to get,, M C. Co 1/3/66 LEEDS,­HILL & JEWETT REPORT .m Continued Page Nine Councilman Krieger: The report points out several situations that we have in our City that I haven't heard anybody say we don't have. There is no one that can come forth and say we have a uniform rate structure in our City. Councilman. Heath: There is a high line and a low line in the City and the high line will take a heavier rate than the low line. Furthermore.' there is a -mutual company in the cities and other companies controlled by P.U.C. All factors -will justify a justification in the rate. Councilman Krieger: If you look on Table 2 there is one of the eight companies listed here that has a standard rate within this City, that agree within each others rates schedule. This is unrefuted. As far as a uniform standard of service in our City, I dare say if you have eight companies operating within this City you have eight standards of service operating within this City and you have eight policies and eight management bodies dictating what the level of service will be within this community. If we are looking for evidence, what type of evidence are we looking for? What are the standards? What are the tests we are laying down to determine this question? Councilman Heath: The statement has been made there is going to be better service. The burden is on the people who made the report. Councilman Snyder: The report lists them. Councilman Heath: I think to extend this conversa- tion further is just dragging the thing out. I think now is the time for action. Evidently there are three votes to go a certain way. Councilman Snyder: What gain did Leeds, Hill 6 Jewett have with coming up with a positive report? They had to go on the facts. They were impartial. It wasn't to their benefit to give us a positive report unless the facts were there to back it up. Mayor Nichols: I agree with you. They state it is feasible. I believe it is feasible. That doesn't mean necessarily that it is advisable. All they are saying is that it would be, a reasonable undertaking in weighing all other factors of political, philosophical from the standpoint of the City's intent to operate in a certain fashion it would be a good thing to do. We can't take a vote on this matter tonight. We actually adjourned the meeting. I feel . that everyone has had ample time to offer their opinion and philosophy. Mr.. Barton: If you decide to proceed with the acquisition, one of the important things to decide is whether it will be a bond issue or election before proceeding to acquire one or more companies or whether youwill proceed to acquire and then have a bond election. WE • ri U C, Co 1/3/66 -LEEDS, HILL & JEWETT REPORT ® Continued Councilman Heath: Councilman Jett: Councilman Heath: Page Ten Is there any chance of putting a general question on the ballot on this Councilmanic election? What would it be, should we go into the water business or not? That would be the essence of it, It would need more information, Councilman Jett: I wouldn't object to, having it a campaign issue, I think if you tell the people what you need and what you can do for them, they have proven to us in the last water election that if given the facts and tell them what is needed, they will vote for it, If they don't, there is no problem, You don't have to go any further, Councilman Heath: It wouldn't cost us anything to put it on the ballot, Councilman Snyder: It would seem to me to get Stone and Youngberg involved in this as soon as possible. Secondly, what if your bond issue is not enough to cover the financial cost? Mr, Barton: You have in a way a fortunate situation here in that you have numerous companies to acquire and if your bond issue were not enough to acquire all of them immediately, you could let it stand for a while and acquire some of the smaller ones as you could, Councilman Krieger: You have eight private utilities here that are going to be fighting for their very existence as it concerns the City of West Covina, These eight private utilities will exert every effort they can to make sure that the electorate hears one particular side of the .story, I hope if this is the way it .is ultimately framed to put to .an intelligent vote that both sides of this story will get out, Councilman Heath: Mayor Nichols: WELL PURCHASE AT CORTEZ PARK When will we take action on this one way or another? Probably at our next regular Council meeting on the loth, • City Manager, M_r, Aiassa: I think the Council might like to discuss this, Councilman Heath: City Manager, Mr, Aiassa: I would prefer to discuss it in a personnel session, It is quite complicated, m10® C Co 1/3/66 Page Eleven WELL PURCHASE AT CORTEZ PARK m Continued . Mayor Nichols: It would seem to me that this is an item that should follow or be concurrent with any action as to whether the City is going to go into the water business, Councilman Snyder: This could be done whether you go into the water business or not, Mayor Nichols; The Council will go into an executive session for discussion on this matter, (The Council retired for an executive session, Mayor Nichols: This meeting stands adjourned at 9:15 P.M, I] is