09-29-1970 - Regular Meeting - MinutesMINUTES OF THE ADJOURNED REGULAR MEETING OF CITY COUNCIL
CITY OF WEST COVINA, CALIFORNIA
SEPTEMBER 29, 1970
The adjourned regu,l-ar meeting of the City�Council was called -to
order by'kayot,Ken Chappell at 7:30 P.M., in the West Covina
Council ChaM"be.r,&-. -ThePledge of Allegiance was given,, and the
invocation was. given-- by -Mr. -Zimmerman, -Cit.-y-Engi-neer.
ROLL CALL
Present:
Mayor Chappell; Councilmen Shearer, Nichols,
Young, Lloyd
Others Present: George Aiassa, City Manager
George Wakefield, City Attorney
.Lela Preston, City Clerk, I
H. R. Fast, Public Service Director
George Zimmerman, City Engineer
John Lippett, Ass1t. City Engineer
Ross-Nammar, Admi-nistrative Analyst
PUBLIC HEARING
UMARK WATER SYSTEMS (Mayor Chappell, for the benefit of the
ACQUISITION� audience., briefly.summarized-what the Council
has been -considering for the past weeks in
regard to the possible acquisition of the
Umark Water Systems; further stating it was felt by City Councilmen
that a public hearing should be held for the citizens who might like
to testify to help in the final decision, but that by law this was
not required.)
Mr. Aiassa: Our first presentation will be from the staff
City Manager by the City Engineer, who will be followed by
the City Attorney expl-a-iningthe proposed
Umark Agreement. I
Mr. Zimmerman: Mr. Mayor and members of the City Council,
City Engineer earlier this week you were given a copy of the
staff report giving.the history 6f this area
with regard to prior.attempt to provide a water system, along with
the current actions -under this proposed acqui-s,ition.. (Summarized
items contained in the report dated September, 1970 titled Woodside
Village Water Service; slides of the area shown.and-explained as to
the water companies now giving service in the nearby areas; slides
also shown of the water system facilities. Went into a detailed
explanation of the.,schedule, ofactions that will be taken..if Council
approves the Umark-Ag-reement-).
Mr. Wakefield: Mr. Zimmerman has.outlined in general the
City Attorney salient points.of the,agreement. There are
some changes that have been made in the last
draft of the.proposal, which I would like to
comment on as I reach them in giving a brief summary -.of the provi.sions
of the agreement -itself.
As Mr.. Zimmerman has already.-indi.cated...there
are two essential portions of the backbone system whi,ch the.City
is would propose.to acquire under�thi_s_agreement. -First,.is.-the..
transmission line, estimateds-to-co,st one million dollars.. -The
second portion is the backbone. -system -which is.proposed.to be con-
structed over.a period from-1970 to 1975 and estimated in the.. .
Montgomery.r.eport to cost $3,124,00-0.- The--Uma-rk.lands.-l.ie.,,approxi�
mately half within -the C-ity � limits of West. Covd-na, and. approximately .
half in the City of Walnut.- The. agreement .. recognizes. this -f-act--and
authorizes the City of West Covina - in.fact the agreeme.nt...requires,-7
that the City take- such. �steps as - necessary to, -secure-the consent of
the City of Walnut in the actions contemplated under the contract.
- 1 -
ADJ. REG. C.C. 9-29-70
UMARK WATER ACQUISITION.
Page Two
The constitution of - t-he- -State - of Calif ornia
gives the rights to the City to service water outside of its..
boundaries as long as it does not service within the limi.ts.of,any
other municipal entity which,, has a, si.mi.lar utility system-, ,What
would be required..of the City of West Covina i,s-the consent.to the
encroachment of the area -within the area of Walnut City limi.ts
within the Umark- -21anned, Development in a water di,strict. asses,sment
maintenance district. If for any reason the City of'We,st Covina,is
not able to pr�oceed.to obtain the required consent from the..City of'
Walnut then -Umark reserve.s in, the agreement the right to -cancel the
contract at -the end..-o.f . a.- two-year -.period provided that it repay-to.
the City all of the co,sts,and.expe.nses-whic.h.the City has incurred. -
in connection with the.agreement. The.ag.reement,contempl.a.tas . 1.
beginning -Jajaaary-a'. 1571, at which time -the City would. take. over
those constructed-partions of the backbone systEim'and prior to that
time, to the extent it is.required, will beginthe serviceo.f.water.....
to the Woodside Village-Devel,opment..
The contract also recognizes,that the -supply..
of water which will be available.to the City for the,purpo.se.s.of ..
carrying out the contract will come from the middle feeder -line of
the Metropolitan Water -District (MWD) ' . As Mr. Zimmerman indicated
the City has been advised '_potable water is available currently
from the middle feeder line and will continue so long as we can
presently foresee.
After the date of the agreement, contracts
for the construction of additional units of the backbone system
will be awarded.by-Umark only with the City's approval and
awarded to the lowest bidder. The City will pay Umark's actual
cost of construction not only o.f the portions of the transmission
line which haCye bait n, -.bomplbted - -b-�it-,,:-,pluS;3.%i which represents 'an.
overhead fee. In addition to ar-tual cost the City. wil.l.-pay....UmArk.
for any land actuaLly,dedicated to the.City in connection with the
backbone system. Thi,swou1dinclude',-such items as the reserv.dir
site, the necessary -rights -of -way -fox acces.s to the site -for . .% �:
maintenance and similar items. The conttact provides that the'la'nid
will be sold.or conveyed -to the City at.its actual cost;not to exceed
$6,000 an acre.
Mr., Zimmerman has generally outl-ined.the.
method by.'.which the actual.cost-s of the system,would be,.,repaid to
Umark. I don't believe it is necessary. to repe.atj, except. to -paint.
out to the Council that one of the revisions..in.the current draft
has to do with.the situ.ati-on that will exist at..the,.end of the first
20 years. As Mr. Zimmerman indicated, any balance kemaining,and un-
paid at that time -would be computed and paid-in..fdve.annual. install-
ments from water revenue... .The. current draft. of the contract pro-
vides if there is any balance.unpaid at that time,, -and -again -the
amount of the payback -which. is, required. of the. City, i.s.. conti.nued at
50% of the gross receipts fromthe sale of-watex to.the Umark lands.
So the maximum annual payment would not at any time of the.5-year
period exceed 50% of the gross receipts, and if there is any balance
remaining unpaid - at, the. end . of the 5. years that- bal-ance- woul.d. be
forgiven.
There are -two other, additions..to. the, con�-
tract, one is the. section -added to -the. agreement. whi-ch..- provides,
that if extr.aordinary �expenses- are- incur -red- by -the-- Ci.ty,,. presently
unanticipated. in"connection -,with the -,executi-on,-of
in relation t�. it, Umark-wou-ld--at the. request. -of the �C-ity.,,reimhur-se-
the City for those extraordinary expenses- not. to -exceed. a t,ota1.-.-
amount of $100,,000. This reimbursement.provision is limited to
the extraordinary expenses- ..which �may -be- -incurred- during. -the f.ir,st-.
two years of the -agreement.
One other matter deserves -special mention;
from time to time we have discussed the limits of the service areas
of the other private utilities serving water within the area and
2
ADJ. REG. C.C. 9-29-70
UMARK WATER ACQUISITION
Page Three __
0
6
within the City of West Covina- It. is difficult to. determine..
with any degree of accur.acy-or confidence the exactlimits.-of-the
presently certificated service -areas of Suburban Water Company _ - ___.
and some of -the other private water - companies- serving ..,Wdthin...,the_..
general area. In order that it be clear that- the -contract. doe.s.-not
contemplate that the City will entrench upon the area of any.,water_
company there-has,been.added an exception to the do�scription..of_the
Umark lands contained -in Exhibit Aof the agreement. (Re.ad.Exhibit
A. I mention- this specif ically to. point out-. it is_ not. con-templ.ated. .
by the agreement that any,part of the water systems involved in this
contract will parallel -on. private service-- for -any area-pre.sen-tly.
within the certificated area -of an operating water-compan.y-..
I think those are the basic highlights of
the contract. If any member of the City Council has reference or..
questions to. any, part .of -the agreement, I will be happy �to explain..
Mr. Aiassa:
City'Manager
Mr,. Mayor - I think we should now- hear the.. .
presentation,by Mr.' Kerry Patterson for-Umark.
Kerry Patterson Mr. Mayor and members of.the Council, I
Umark, Inc. represent Umark, Inc.., -and have furni-shed
12016 Wilshire Blvd., you with evidence substantiating.that I am in
Los Angeles fact an.authorized repre-sentative. There i.s
not much I can add to the two presentations
we have all heard. I think for the record I can testify to the fact
that Umark is in fact the owner of the subject property which is
illustrated on the maps on the wall and is in fact in the process of
developing and is in fact in the process of constructing portions
of the water system.described to you this evening. This construction.�
has been in contempl-ation of reaching -an agreement with a water server
before we had the occasion.to,requi,re.domestic water service.
Umark, Inc.1 is a wholly -owned subsidiary of
Trans -Union Land Development.Company, which in turn is a wholly owned
subsidiary of Trans -Union Corporation, which is a listed company on
the New York Stock Exchange and a very strong financial organization.
It has,already been..reported to.you-and I will
review briefly beginning last November,.approxim,ately.a month and a
half after we.purchas.ed,,the property, we.so'l-icited,the..interest..of
the City of. We,st Covina, and al.l...of - the other-- servicable- water.
suppliers to. this. property to consider and _discuss- -with-us. , the
probability of�sexvi,ng.this_property. Those discussions-,endur-ed on
many fronts with both private -and public -.utilities until late. Spring
when.as hasbeen.reported, we reached�-a..preliminary understanding
with the Rowland.Ar-ea County Water District and.terminated all
outstanding negoti.ations -af—that time,., Sub.sequent to..that. time,
your body reinitiated.di�scussion.s,.which-have.lelad to.the.propo,sal
before you thi,s evening. I can testify to you that Umark is ready
and willing to execute. this agreement if.. you so. approve. it. th1s,
evening.
Mr. Aiassa:, Mr. Mayor, we have three written communica-
City Manager �tions of protest which I believe,the-City.-.
Clerk:should acknowledge.
(Lela Preston, City Clerkoread the communir-ation.,s,receive.d-.from
John B. and Gracie E.. Abell, 1440.. E. _Herring; Mr. & Mrs.. -Donald. E..
Driever, 833 Portner Street; and Mr. & Mrs. E. M. Mason,
1449 S. Broadmoox -Avenue,-,- - -all.- opposed -to the acquisition . of- the ..... .
Umark Water System.)
THIS IS THE TIME .-AND -RLAGE..FOR� THE INFORMATIONAL PUBLIC. HEARING-,_.
Howard M. Downs I am an attorney specializing in water
Attorney company law and represent Suburban Water
Suburban Water Service Systems.
- 3 -
'ADJ. REG. C.C.; 92970 Page Four...
UMARK WATER SYSTEMS ACQUISITION
Gentlemen,, fir-st of all I am -very..apprec.ia-
tive of your willingness to hold a public hearing. It,-indic-ates-to
us that you are seeking the facts and that you acknowledge..youX__._._--
judiciary oblig-ations,to'askiessential.1y,what is the-key,.que.st.i.on ` -
is it in the public interest.of the citizens of this community for
you to accept this_agreement-at- this time and go into.the water --.-.-
business?,
Now we believe this is one of the.most,
important decisions you will be called upon to make -as members of the
C�ity� tblin'c-il. it poses this way - should.,.a.,
public body using public -funds., enter into an arrengement..whAE�m_a
private enterprise, privately owned, is willing.-and.able,to,,,,car.ry.,.-
out this service? Ecanomi-cally,, we are not talk,ing,about a-.�fbur-
or five million dollar deal but.,-. thirty million dollars which will
be facing this City -An deficit, in Lnterest,and inte rest, upon, - - _ �
interest. Legally, we have given opinions in which we -state that
this action by the City would be unconstitutional under Article 11,
Section 18Aof the California Constitution and moreover -you will be
facing extensive litigation under the anti -paralleling statute of
the Public Utilities Commission. Politically, you will be going
contrary to the wishes of the majority of the citizens of this
community and actually injuring those presently being served by
Suburban Water Servic es. We are going to take these four areas
and explore further:....Philosolbhi '
cally,Economically, Legally and
Politically.
Phil-o8opbically-V we affirm that a public body
using public funds should not step into an area of private enterprise
where you have a private water company able to serve.- The record is
very clear here. The private owned utility in this area operates at
less cost, more efficiently and at better rates tha ' n do �he public -
owned utilities. There are many reasons for this. Among them the
growth of the political system within the City - unchecked by
PUC regulations, unchecked by economic forces affecting privately
owned utilities. We have the fact that the municipal -owned
utilities are affected by other objectives than the desire to
provide quality water service at a reasonable cost. Such objectives
as providing a subsidy to a given developer, as in this case; ---or
provide subsidy to other governmental agencies - also as in this
case. There are a number of dilemmas which eventually arise in
a situation of this type and if You do not keep control of the
water company -and -the water department of the City then all of
these factors may run rampant and you aria really nctconducting
your judiciary duty. But if you do control then that means you
are responsible for the policy and for the budget and for.the
rates set/and you have opened Pandora's Box to considerable political
pressure when you are serving part of the City and not all parts.
And when you are serving and helping gome� developers but not other
developers. When you have a rate discrimination set up in which the
customers in this part of * the City are being c*harged more than the
customers of Suburban Water. Suburban is ready and willing to serve
that fact has been communicated on numerous occasions to the
representatives of Umark. I have a letter dated June 19, 1970, when
we communicated an offer to them. A clear offer and they come back
and say they are not going to deal because they have a deal from
Rowland County Water District. Then we do not hear.from them and
then this pops up without,prior information. We told them, we
communicated wit� them and we are willing to sit down and
negotiate and they say they'are thinking about it. No further
response. We attempt to reach them and we can't.
Yesterday we sent them a telegram advising
them we are ready to talk, we have arrangements to serve this area
at less cost and the public will benefit,by it. We can make this
telegram a part of the record, if you see fit.
- 4 -
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITIbN
Page Five
In short you have here a company that has
proven its efficiency and service to the general public interest.
When you have that, we say philog.5pfiieall"y-'-'-the-,fir.st7-propoati.en
must be affirmed and that is when you have 8 a private'utility
ready and able to serve you shouldn't a publicly owned body
with public funds, attempting to serve that same area.
Economically, I would call your attention
to a couple o - f ' key facts,. in history, not pointed out as part of
the report of the City. Inparticular the PUC did accumulate data
from the Home Savings & Loan upon the economic desirability of
serving this area by a separate company then called West Covina -
Walnut Water Company and in the decision of the PUC #72794 on
July 8, 1967, they reached certain findings. Eventually the idea
was dropped but before coming to that the PUC issued certain findings.
Finding No. 2 stated Suburban Water Systems is an experienced public
utility under the jurisdiction of this Commission and furnishes
water service to some 26,000 residents (and that is now up to 45 or
46,000). So they fou ' nd Suburban was well qualified to serve.
They concluded - Finding".No. 10 - Suburban's proposal to -serve the
Home Properties is mare economical than West Covina -Walnut;
Suburbanl.s rates for water -are lower, Suburban's sources of water
supply are more numerous, more ample, and more dependable than
West Covina -Walnut and Suburban's cost of producing water to the
area is substantially -lower than West Covina -Walnut.
Whatever may have been the financial problems
of that date we have no question now but that the PUC will approve
Suburban serving this area upon any sort of fai*r arrangement that
may be proposed. What we have here is a Public Utilities Commission
saying it is not economically feasible to have a separate water
utility serving this area under -its particular conditions. it is
not economically ' feasible.to do so based upon days of hearings and
economic study- You-ake asked, however, in effect to go against
that decision and rule.somehow this is economically feasible on the
basis of reports not made a part of this record. If there is a
feasibili�ty study here of revenues and -..what will happen',; we have
never seen it. If there is, it was not posted with the City
Manager and we have had no opportunity to examine it and I am at a
loss to understand why it did not fall -within the scope of the
resolution of the Council to have all documents made available.
But setting that aside and just analyzing these costs, we believe
you should start by noting these factors:
The fact that you can buy something at cost is no bargain.
(Related an example) Any intelligent businessman says what is
it going to cost long range? What are the,operating costs of
such a system?
And it's there we want to focus. Before doing so I want to note
several large holes in the cost presented by the James R. Montgomery
study. In terms of construction cost they say it will reach
$3,100,000 for the backbone facility, plus $1,000,000 for the Azusa
transmission lines, plus 3%, plus 7.2% interest on their money.
If you read it more carefully you will find it tells you this -
the system is necessarily hooked up to the MWD feeder line and it
means it will have to be shut down several days each year for
maintenance, and if shut down there must be alternative sources
provided. The Rowland County Water District does not have excess
water for this use and in paragraph 7-4 of their study they come
up with this statement - that you will need reservoirs for .371,2-
million gallons to deal with this problem, but in the'cost studies
do they provide the'reservoirs for 37.'-2 million gallons? No,
the only costs given you for reservoirs was for 12,1-2 million gallons.
A cost study estimate for approximately $780,000, and not what
is needed to build the additional reservoir which paragraph 7-4
of the study indicates will be necessary, so under the figures of
the Montgomery Report an additional outlay by the City of
$1,500,000 will be necessary. That is no part of the $4,200,000
originally presented to you.. 5
I
ADJ. REG. C.C. 9-29-70 Page Six
UMARK WATER SYSTEMS ACQUISITION
This is an additional $1,500,000 to get the
system needed. Another item not thrown into the study is the cost
of easements, ---although acknowledged in the reports. The contract
says this - the maximum cost per acre shall be $6,000. You have
2260 acres and you have up to a maximum cost of $6,000 per acre
for easements and right-of-way paid to Umark - an additional
possible total of $1,356,000 in the contract you are possibly going
to be called upon to pay.
In order to facilitate the economic analysis
we would like to hand to you Tables 1 - 2 - 3 - 4 - 5 - 6 and
briefly summarize these tables for you. (Council received copies,.
Tables summarized.)
Table 6 deals with the question of tax
losses to the community. Suburban pays taxes - pr6perty taxes,
franchise taxes - the City does not pay taxes to itself. What does
it cost you as a City in tax loss between Suburban operating in this
area versus the City?
Mr. Wakefield: Mr. Downs, are these the taxes - just in the
City Attorney interest of clarity - that Suburban now pays
within the City of West Covina?
Mr. Downs: We used the construction cost figures as pro -
Attorney Vided in the Montgomery report to get the
Suburban amount involved, then we used the 25% of.
valuation and then the tax rate imposed on
Suburban. Land value and construction cost value we took from the
Montgomery report and we used the Suburban rate and we arrived at
these facts, the City over a 20-year period will lose $4,837,000
in property taxes and $332,000 in franchise taxes; a total tax loss
in excess of $5,100,000 if it has a city-operated.water utility
rather than a privately-owned,facility.
In shortwhen you total up the economics
of the situation:, Construction $4,300,000; reservoirs $1,500,000;
Land Cost $1,300,000; interest on principal $5,000,000; interest on
the interest $670,000; accumulated deficits $6,200,000; accumulated
interest upon financing the deficit another $5,$00,000 and a -*tax
loss to the community,in excess of five million dollarsl you have a
total cost to this community of $30,000,000 for the City to go into
the water system. You may want to discount the figures some but we
submit they are a hard core valid statement of the terms of the
impact if you go into this situation.
You are also discriminating. You serve one
area and not the other areas. You are not even helping the customers
in that area because they will be paying a higher rate. You are just
helping the. developer.
Councilman Nichols: A point of order. We are getting testimony
now that is involving opinion and not
supported by evidence and is not testimony
but is an emotional appeal. We are willing to give all the people
a chance to state their views this evening, but I don't think an
advocate should be given the entire evening to repeatedly appeal
on an emotional basis to this body.
Mr. Downs: If I were doing that I sincerely apologize.
I thought the point was made and substantiated
by the prior study. I will move on now from
dealing with the economics to the legal, dealing with the constitu-
tional provision. Let me simply say that under the constitution
a City is forbidden to incur an indebtedness or liability in any
manner exceeding the income in any one year unless you get a
majority vote of 2/3's of the voters, and that provision is
violated; and further, by the very factthat you incur indebtedness
wltw
ADJ. REG.�: C.C. 9-29-70 Page Seven
UMARK WATER SYSTEMS ACQUISITION
in connection with the anti -parallel law which is my next subject.
This calls attention to the fact that Section 1501-1506 provides
that a privately -owned utility having built facilities in contem-
plation of moving into an area is given built-in protection when
you come along and parallel it. Section 1503 states - if you
construct facilities to provide or extend water service or provide
service - and the construction of the Azusa transmission -line under
the case law is a parallel of all of the facilities from all systems
along there. "Particularly si-nce you are deriving revenue from the
Azusa transmission line. Suburban for years has anticipated going
into this area and has acquired reservoirs, sites, provided
additional lines, engineering plans, etc., all of which have been
approved by the PUC and indeed its rates have been realized
by the assumption its lines will be used in this area. PUC in its
rates assumed that Suburban will go into this particular area.
I appreciate the subtlety of Exhibit ' A, but
it just won't work under the case law or the statutory law. The
fact you say you are not going to go into the service area of
Suburban doesn't help because you are running your lines through
that.service area and you are going to grab some of your revenue
from Suburban's service area. And in constructing parallel in that
area you have the effect of diminishing the value of the reservoirs
and all the other facilities set up in anticipation of this area
coming under their service. Gentlemen, you are facing litigation
in the amount of one million dollars under Sections 1501-1506.
Mr. Wakefield: Mr. Downs, are you aware of any case that
City Attorney would support your contentions?
Mr. Downs: Yes, in fact I just concluded a case -
Cucumonga Water Company against the
Rochester Water Company, tried in the
Superior Court of San Bernardino County. I have the complete file
in my briefcase which I will present you with. We obtained
injunctions initially, compromise offers were in the neighborhood
of $50,000 and the jury came in with an award of $287,000.
One final comment, and'gentlemen,.I much
appreciate your patience. Politically, it seems to me that the
polls which I am familiar with show that this'community is generally
opposed to going into the water business and 'When you consider the
potential liability, the risk and what you are,doihg in relation
to this development - the potential lawsuit, the potential
constitutional problem and when you consider you have many thousands
of residents of this City presently being served by Suburban who are
..adversely affected in that Suburban could achieve greater
operating economy if allowed to expand to develop
,,their rates would
come down. You are affecting those forty thousand citizens
adversely by setting up a benefit to a given area and with all of
the attendant economies and risk - as well as legal problems -
gentlemen we believe it is your judiciary duty seeking the public
interest to reject the proposal -
Vern Austin I have some questions that I would like to
P.O.Box 709 address to Mr. Aiassa. Can you give a firm
West Covina figure of the cost to purchase this system?
Mayor Chappell: Your questions will get answered after the
public;hearing portio n is closed. :
Vern Austin: I would like firm figures of the cost to
set up the development to operate the system.
The cost to maintain. The rates to be
charged to customers. The revenue to be received and the amount of
tax revenue loss to the City. The cost to become a member of the
MWD to operate the system. Then I would like.,to know the exact
expertise of the developing of this system?
7
ADJ. REG. C.C. 9-29-710
UMARK WATER SYSTEMS ACQUISITION
Page tigh-t
Councilman Nichols:
informational nature,
great detail, and if
to the microphone, a
cluded.
Mr. Austin:
Councilman Nichols:
Mr. Austin:
Mr. Mayor - the point I would like to make.
In the process of giving testimony if each
individual*in turn raises questions of an
desiring clarification of those points in
this is repeated when each individual comes
hearing of this nature could never be con -
Fine, just answer the questions now....
This is a matter where the Council is
interested in your personal views as to how
you feel about it.
Those are my personal views.
Councilman Nichols: We want you to give us your views as to how
you feel about the city going into the water
business so we may better determine the matter.
If you desire to sit down with staff members and fully inform
yourself with the many thousands of details that we have studied
over these past months they will be glad to assist you, but I
personally don't feel that the function of the public hearing is
an attempt to go into that depth for each member that comes to the
podium.
Mr. Austin: I believe all the citizens appreciate the
chance to give our views, so I would go along.
I would like to ask the City Attorney is it
correct that the PUC has to be asked for permission for this purchase?
I can't make any further statements until I get an answer. After I
.,get the answerthen I have a statement.
Mr. Wakefield: The �answer is "no
Mr. Austin: That is not my impression. HoWever I could
be wrong. I would like the local water
company to answer this,.:, I believe it is
necessary to get such an application and I don't believe the program
tonight is laid out or given any information on it
and I don't feel the City should take on itself encumbering the
citizens of this City until it is thoroughly advised on these matters
and I don't believe it is. In addition to thatj'if the City Council
wishes to really carry through this hearing for its constituents
to me the most obvious thing is, 1 - turn it down if the water
company has offered to buy it; 2 - if not tu_rniftg-it-do*n, give the
citizens a right to vote as to what they are being encumbered with
and don't make a decision until they have a right to vote. Thank
you, Mr. Mayor.
Joseph Gi. Drake
I have one question I would like to
1002 South Donna Beth
direct to Mr. Nichols. . Mr. Nichols, I
West Covina
...have attended meetings here for 14 years
and anything that boosts my taxes becomes
an emotional problem
at my home, and I don't appreciate that kind
of a statement, sir.
Thank you.
Councilman Nichols:
Mr. Mayor - I had a question addressed to me,
if I may comment. I am sorry I caused
offense to you sir, it was not my intention
to do so, and if that
was your conclusion you have my apology.
Merrill Ahrendt
I must confess I am indebted to the Suburban
1641 South Sandia
�Water Systems for notifying me of this meet -
West Covina
ing.;, I am sure you gentlemen did legally
inform the people but'I didn't see it. The
only reason I have heard
put forth to disqualify Suburban Water
U.,
ADJ. REG. C.C. 9-29-70 Page Nine
UMARK WATER SYSTEMS ACQUISITION
Systems is that at one time they were in some financial. difficulty,
which I daresay is not unusual in business from time to time. if
they are indeed in financial difficulty and go bankrupt that might
be the time to acquire the water system at considerably less money.
Until I see more evidence that they are unqualified I would like to
inform you that I. personally oppose'the acquisition.' 'Thanks very
much.
R. J. Hauser The evidence I am about to give is based on
528 Truman Place serving 14 years on the Board of Directors
West Covina for an irrigation system. I also served 3
years as City Councilman - for the City of
Montebello. This was some.9 years agoibefore I became a citizen
of West Covina. When you go into an irrigation system anybody that
puts in mains and installs them they give them to the District -
they have to ded ' icate them in order for the customer to get water.
This'is a lot of money they are asking here and it is for only one
source of water going into this concern,the MWD. You become a
retailer for a wholesale water district and that is all you would
be, whereas if the private enterprise serves water they have a dual
system; a hook-up with MWD plus the wells and other sources of water
from areas adjacent to this. The facts are the water table in the
City is going down and the use of pumps can deteriorate and go down
also. The engineering facts are that the water inland as the sea
water encroaches the less use you can have of the water pumping out
of the ground. In the Montebello area 3781 above sea level the
sea water-Nould come in there and you would have to put yoir pump
3001 below sea level. I also know that the City of Downey and other
cities down by the ocean have already put all their pumping water
down so we are probably better off here in the City of West Covina,
and then they had to bring in the raw water and spread it underneatN
affd in the clay faults it causes problems. These are all engineering
facts. So, ' in view of the encroachments and the mains, I believe
this would relieve the developer:of quite�a'fihancial thing if the
City were to take this over and I don't believe we should do this.
I believe in home rule and believe the people should have something
to say on it on the basis of an election.' I would like to go on
record publicly that I am opposed to the City going into the water
business.
Hal Marron I live on:Knob Hill Drive in Azusa and I am a
property owner in West Covina and presently
in the process of moving back to West Covina.
My background is an engineer�and I have over:20 years in utility
business g over half of this With municipalities which own their own
water systems and do operate them. Gentlemen, this contract, as I
heard it tonight, is like nobody that I know of would ever accept
or negotiate on the part of a utility. First of all; you are paying
interest.per plant that is not used or useful to serve customers..
You are building ahead of need a great deal. Our PUC, and I have
been associated with companies that have had problems with them and
disagreed with them, but mainly they are there to protect the
consumer. They don't want to see a private water company get -beyond
their financial ability to back- up a deal that is going to be,-bdd,
so they have to raise rates in order to service the customers.
Mr, Downs made a very sterling presentation tonight but the PUC,
if they took a formula of how they would serve/they would take this.
backbone system and they would divide by the number of customers to
be served by it and that would be what would be reimbursed to the
developer -on a per capita service basis as they join the system.
At this time the private utility would have to cough up the money
or finance it, as the case may be. In other words if you entered
into a deal and took the backbone system and I don't know how many
customers you expect to serve - and you divided it by the total
expected cost of the plant and say we will start incurring that
indebtedness and paying interest on that at such time as, -you
actually have a customer to serve, then you start talking a
business deal. If you;�cbme in here to serve the first ones you
are going to buy that'line down Azusa and I understand, a -.-,even
miJ-Li-om gallon reservoir to serve one custome-r-,.- We don'teven do
ADJ. REG. C.C. 9-29-70 Page Ten
UMARK WATER SYSTEMS ACQUISITION
that when the customer is a golf course, and -.that"zs more storage
than the City of Azusa has totalland we have in Azusa 10,000
services. So if you just look at it from that standpoint this is
in reserve for.the future and you start paying interest on it now.
If this was the West Covina -Walnut Water Company as originally
planned the PUC wouldn't let them earn on that plant that is not
useful and necessary to serve the customers it does have, and that
is the reason the West Covina -Walnut Company is not going ahead.
They couldn't * make 7.2% on their investment even if they were in
the utility business, they wouldn't be able to earn on it.
The second thing is even if you are financed
into it, experience has shown that any more than 22% of the gross
revenue going out for payback - and this is the standard agreement)
and this is the standard agreement PUC forces upon private customers,
is a hardship. So much of a hardship that the PUC has arbritarily
said that you cannot incur an indebtedness of the refund agreements
for more than 50% of your depreciating plant. So/in this case/
essentially anything more than 11% , and any tables or extensions or
operating costs will bear this out.
Suburban couidn't sell water as cheap as they
are doing if they built all of their plant today at today's
construction costs. The PUC has limited them to earning on the
historical cost of the facility, in other words what it cost 20 yecixs
-..ago -, will still deliver water today, s'o consequently they can only
earn on what it cost 20 years ago and not today at 7.2%.
I have been employed by cities and I think it
is fine, and if this was going to be a real asset to the City I
would say go into the water business. I am not connected with
Suburban and haven't been for 3 years, but I happen to be familiar
with this case because I testified for the.PUC at the time the
-West Covina -Walnut Company was,having their hearings in this Council
Chamber and at that time it took something like three weeks of
testimony for about 4 hours a day and you are trying to digest it all
and it is unfair to you gentlemen - something that will have
financial re'percustions'-In arshort amount:of time and without
expert testimony at the hearing.
I know tht hearing that went on beforeh
and it is available., PUC made a staff study of it and if you want
an unbiased opinion - it took a great deal of time to make that study.
was the developer I would be trying to
sell you this same thing�and the reason they are not interested in
going with Suburban or Rowland or anybody else is because nobody
else.will give them a deal like this. So look at it from cold hard
facts,and if you insist on going into it get some protection for
the City -and pot just for the developer. Thank you.
Tom Gillum I think with the exception of one or two of'-.,
1728 Avington you, you know that I have a great deal of
West Covina background in this total development, having
been on the Council. Let me say to you at
the time of the development of this property I felt the development
would be a great asset to the total community. During 'the pre-
sentation by the developer it was lightly skipped over in the area
of water utilities.
t I think there are a number of areas that
concern me. Politically - I think one of the things you have to
consider is that when you make a decision you have to ask - what
is the effect on the total community? What is the benefit to the
total community? This evening I heard from the proponents and
the opponents their side of the story but I haven't heard what'
is the benefit to the total community and I think this is something
you have to keep in mind this evening. A few years -ago this City,
- 10 -
ADJ. REG. C.C, 9-29-70 Page '.El-ev On
UMARK WATER SYSTEMS ACQUISITION
by a 13 to 1 margin, decided to join the Upper Metropolitan Water
District for replenishment water. Now anyone living within the
city limits of West Covina presently or in the future is subject
to this tax. Reading the contract they are asking Council to
approve, you are going to set up a Maintenance District based on
the assessed evaluation; you are going to be purchasing water from
the MWD which is $72.00 per acre foot for treated water and can go
up to $81.00 per acre foot in the future. People buying homes in
the District will be paying the following: They will be paying a
tax to MWD for' --replenishment water which, gentlemen, they will
receive no benefit from, because the replenishment water as it
states in the contract, there is no water in the development.
If the developer or the City could put a well down,they wouldn't
touch ' any water, but the City doesn't have any water -rights in the
basin so this eliminates the possibility of the City sinking a
well�.for supplying supplemental water. You are asking people
coming in to our community to buy new homes to live in our
community to pay a Maintenance replenishment tax which they are not
receiving any benefit from and paying a higher rate for water than
their adjoining neighbors. I think this might be a problem and
having been on the Council I think you have enough problems without
creating more by establishing different rates throughout the
community.
This development is going to rely wholly and
solely on the feeder line from MWD and it is stated that the line
will be shut down for a certain period of time for maintenance, so
therefore the reservoir is a necessity which I agree with. But
what would happen if there was a major catastrophe in California
which would rupture the feeder line? These people would be de-
pendent on the reservoir which would have a limited supply. It was
stated that agreements could be worked out�with Rowland County Water
District and the City of Walnut. I want to inform you these people
are also wholly dependent'upon MWD water for a,feeder. If you will
check with the MWD you will�see that their capacity is going to be
hard-pressed in the next 15 to 20 years to supply sufficient water
of good quality to the residents of Rowland 'akeas-,and Walnut
It has been brought up that the City can provide many services and
give better service, and this I would agree. I think,the tax
revenue to the City was covered adequately. But one thing I want
to remind you - when there is a fire im the City of West Covina
the fire department goes to a fire plug on which,we pay $1'.50 rental
per month which cost between $300 and $500 to install, hooks a hose
to that and pumps all the water they need to fight that fire�and
in this area when the Fire Department hooks to a plug we are going
to pay for every drop that comes down the hose. There is no free
water from the MWD. It may be a minor cost but something you should
keep in mind.
At,past meetings there was discussion of the
possibility of a 250-acre. 15�irk-, which would'"be a gre�at dsse�`tbl this
community, and--it-was'-also"mentioned in the past that it would be
best for the City to supply the water for the proposed golf course
and development of this 250 acre park. Well that water costs you
something if you are not receiving a return on it. You have to pay
for every acre foot of Water that comes through that line. I ask
you to take time to study this and if it is in the best interests
of the total community then let's buy all 8 water services and do it
right, but I think you will make a mistake if Council decides to
get into the water business in one area, because there are some
people - I understand --� that plan to be back on the Council in
the future and they don't want to face the problem in future years.
Thank you.
William Barnett While'I agree with most of the rest of these
1237 West Rexwood gentlemen and I think it is a complete farce
West Covina or fiasco if we get in the water business, I
believe a few of you can remember the West
Covina Disposal Company and trying to get cooperation. You can get
ADJ. REG.: C.C. 9-29-70 Page Twelve
UMARK WATER SYSTEMS ACQUISITION
out and move trash barrels, but if they turn off your water and
you can't get it, you will be�awfully dry and awfully dirty. So
I think we should stay out of the water business.
Kenneth Foster I would like to go on record agreeing with
221 South Hillwood most of the other.people here this evening
West Covina and opposing this plan. I have one other
thought, while the City Council's
responsibility is with the raising and distributing of the funds
in the City, I ---wish to remind them that their decision in this
case.is going to affect all of us drastical ly in the fact that my
biggest share of the tax bill is from the School District and -any
revenue loss to the School District is going to show up directly
in my tax bill.
THE CHAIR DECLARED A RECESS AT 9:20 P.M. COUNCIL RECONVENED AT
9:40 P.M.
Mrs. Bert Bergman I would like to preface my remarks with the
426 South LeAf Avenue statement that I am not now or never have
West Covina been an employee of any water company and
I also am not a licensed engineer, yet I am
connected with water in the respect that I use it. In comparing
rates that I have been able. -to secure from three municipal
water districts -� and gentlemen I don't have an official presenta-
tion for you such as copies for everyone, etc., I can only tell you
I took these figures from the City of Los Angeles, City of Pasadena
and City of Azusa. This is not a complete survey. I don't have
the contacts to make this type of a survey but I am sure there is
such,data available to you. The summary I can give you from these
sheets of data is that as a Suburban Water'Company user I pay 34(,
per 100 cubic feet; residents of Los Angeles pay 22(,4 for the
equivalent; Pasadena 21c,4;.and Azusa lle,, which is a small community
and more familiar to all of us. These figures only make me question
statements that I have.heard tonight of municipal water going to
cost more. -
I will say I am neither an advocate or
opposed to the City entering into municipal water because I don't
know enough about it. I would also say that certain statements
caught my ear. The gentleman representing Suburban says their
efficiency is demonstrated. In my 15 years.residency as a user of
Suburban I question that by my own experience. I do not have any
facts to say the PUC bases the efficiency on. I also ask if the
only alternative of this property being under West Covina Municipal,
as implied by many individuals, is Suburban? Did I not hear in the
engineer's report that the company who owns the property would have
the right to make the decision where the water company they are
building will be sold? If this is to be sold to a private enter-
prise.then are they going to give it to them - and the revenues and
interest actually reported by the gentleman from Suburban aren't
going to accrue to them and this interest continues to accumulate
to them - what makes it so desirable for a private firm to take on?
My only request of this Council would be,
as I am sure it has been done since I became aware of the proposal
from Umark, being in this City Hall as early as the first of this
year - that they have had ample time to study and that specifically
the study has been thorough and that the decision will be made not
on the basis of who wants what, but on what is finally going to be
the betterment for our City. Thank you.
Floyd Morgan Before I start on the remarks I had intended
748 South Broadmoor to make I would like to refute some of the
West Covina comments made"On the water rates. I don't
know where the 34(,4 comes from with regard
to Suburban but if you call them you will find they have listed
charges for two different service areas. If you have a 5/8ths x 3/4
meter they have a minimum charge of $2.40. Beyond that you can buy
12
ADJ. REG. C.C. 9-29-70 Page Thirteen
UMARK WATER SYSTEMS ACQUISITION
up to 30,000 cubic feet of water 14e, per hundred cubic feet, or 17e,
per hundred cubic feet. Mr. Downs may be able to clarify that.
Later on I will get into the comparative rates on a realistic basis
with the City of Los.Angeles, Azusa and Santa Fe Springs.
I
Councilman Lloyd: A point of order, Mr. Mayor. Mr. Morgan who
I do you work for?
Mr. Morgan: I would rather not say, I donOt think that is
necessary. I am employed by'a development
agency, as such I am a real estate appraiser
and my background I recently made a study on water companies and
water rights and I must agree with Mr. Downs that the value of
something is not necessarily the cost of construction.
.Personally I find the basic concept of a
municipal water system . somewhat repugnant, but discounting my own
feelings on that, I would like to go into what causes me to have
this attitude. First of all it has been mentioned that property
taxes are an item. A water system owned by a municipality is tax
exempt within their city limits, if outside they have to pay taxes.
Since it is exempt this makes the general public bear proportionately
the taxes that would have been assessed against a private system.
for the support of schools and other government agencies - all who
cry against the erosion -of the tax base. For example, if this
property is worth four million dollars it would in all likelihood
be assessed at about one million dollars And applying the school
tax rate of approximately $5.35 per hundred we are talking about
$53,000 per year or five school teachers. The alternative may be
to allow the Rowland Area County Water System by default - I feel
that is preferable.
We started in by discussing water rates. I
consider myself as average, I have a modest home on a 7500 sq. ft.
lot. I don't own a swimming pool and I keep my grass green. I
consume in excess of 2000 cubic feet per month., I am served by
Suburban and my cost for the--2000 cubic feet for the meter charge
plus the consumption would be $5.20 per month. In the City of
Azusa it would cost me the same. $5.20 per month. If I were a
resident of Covina I would pay 30(,4 per month less and they are not
paying any property taxes, income taxes or franchise taxes. As a
West Covina resident served by the City of West Covina I would pay
$7.30 per month * In Los Angeles that same water would cost me
$6.85. If you are interested I do have a single copy'of the
rate schedule put out by the City of Los Angeles Department of
Water & Power. In the City of Santa Fe Springs which is perhaps
the latest City to get into the Municipal Water business that same
2000 cubic feet would cost me $8.00 per month. When the citizens
received I their $ubstantially higher water bills they turned to the
PUC and found out they couldn't help them because i� was a City -
owned utility and not a private utility under their jurisdiction.
I don't like th e fact that the City has the power to levy or
collect a property tax to pay for the system according to Section
4306A of the Government Code. The argument the City,would be able
to save a lot of money in the future by selling water to itself
for Galster Park and a proposed golf course is an excuse for the
pending,acquisition, and is not a reason. The City can save more
money by acquiring and exercising water rights. I assume the City
would acquire its water from MWD whose current prices are $49.00 per
acre foot at their feeder line, the cost of pumping water from a
ground water basin is normally about $10.00 per acre foot or a savings
of $39*.00 per acre foot. Soon the Upper San Gabriel Valley basin will
be adjucated and at that time water rights will be available fox
purchase at below $200. per acre foot or about -a five year's savings.
The future savings would probably be greater since MWD prices have
increased by $3.00 per acre foot in each of the last 8 years.
In a Tribune article last Wednesday on the
problems of the Diamond Bar Water Company the main reason given
13
ADJ. REG. C. C. 9-29-70 Page F6Ukteen
UMARK WATER SYSTEMS ACQUISITION
for the high cost of their operation was that their water source
was "Metropolitan Water District water, which is the only source
the City has to.turn to." ..And the only-soUirbe this City has to
turn to. The reason for other water companies rates being lower
was "many supplement their supply source or may rely entirely for
their supplies on less costly.pumped ground water." I know that
Suburban has water rights that will be adjucated in the Upper
San Gabriel Valley basin and they already have adjucated water
rights in the Central basin.
The argument that this move is also providing
the ground work for acquiring the Covina System where we have 248
West Covina residents, is just,another excuse. I firmly..believe
from my knowledge of the PUC if West Covina sought their assistance
an amiable transfer of this system to private enterprise could be
accomplished and those residents could drop down from $7.80 to
$5.20 for the same water I get. This, of course,.is not the item
on the agenda so I won't pursue it further.
In a discussion of the contract there was
mentioned an exception - Appendix A. If I understand it correctly,
this exception could conceivably leave West Covina with a million
dollar city lien with nobody to 2200 acres to serve it. This
might infringe on the franchise areas of several water companies
and maybe you might have a million bucks you have to amortize to
the residents in five acres. It specifically refers to the city
installing all intract fire hydrants at city expense. I don't
believe this is a practice we employed with other developers.
We required that they make their own installations and it is up
to them as to what they can work out with the water company.
It also requires, I believe in the contract, that the City must
establish a Water District and an assessed property tax,.to pay for
this system. To top it all off we are agreeing to study the
possibility of paying it all off early through general obligation
revenue bonds. That is kind of a back door gimmick so you don't
have the bond election until after you have bought the system.
Then you can tell the people the interest rate would be lower on
the bonds,and they would.go along with that.
To me this system is so weighted in favor
of Umark that I find it difficult to believe,we even had a
negotiator present. Pardon me for jumping around but'Mr. Downs'
presentation wa7s so complete I had to completely revise mine.
Although I doubt that you can conclude that a municipal water
system is in the best public interests - let's exam ' ine the
second problem,you are faced with �- should West Covina buy the
Woodside System? Just the fact West Covina has,negotiated
with Woodside has in my opinion caused them to be able to raise
the interest rate to 7.2%. If the competition was between the
Rowland District and Suburban -the interest rate would be nominal
because Suburban could not legally pay interest on their
construr,tion advances which would be equal'to the purchase
obligation. The lower interest rate would benefit the consumer,
hopefully. As a citizen of West Covina I don't like the idea
of subsidizing the loss that will occur during the first years.
ome people will say we will use existing employees rather t i han
hiring additional until the system gets too big. The division
osf city staff from normal duties is still a form of subsidy in
disguise. These.people are being paid and if the water system
can't support it then we shouldn't have it.
A recent Tribune article referred that our
engineer study showed of the three possible buyers of the system
that West Covina would have to charge the highest rates. If I am
correct, with that in mind, what conceivable distortion of conscience
leave anybody with the thought that such a move is in the
public interests? -In-the foregoing vein, what would West Covina
charge the nonresident consumers in the development outside of
- 14 -
ADJ. REG. C.C. 9-29-70 Page Fifteen
UMARK WATER SYSTEMS ACQUISITION
the city limits? Would they be charged rates that would cover
only the property taxes the city must pay on the system outside
of the city limits or would West Covina be hyprocritical and
follow Covina's noncitizen gouging techniques? In summation I
feel there is still too much unknown and from the available
information this proposal does not appear to be in the best
interests of the community. The record clearly shows that
private enterprise is so much more efficient in this field,
that they can pay property taxes for the support of schools
and local government, pay State and Federal taxes, Franchise
taxes and make a strictly regulated profit and.still charge rates.
generally below those of,muhicipal water companies. I thank you
very much for the opporttinity.
Irene Messina A question just occured to me that would
1831 Pioneer Drive clarify things for me. I live close to
West Covina Azusa Avenue and I can't help but be aware
of the all night construction going on and
inquiring I have been informed that Umark is constructing a water
line. If this is true and the water line is in, what is the
purpose of the hearing?
John Skelton I have an official capacity with a large
1326 East Greenville mutual water company in San Bernardino County;
West Covina and an official capacity with two public
utility.water companines in Los Angeles
County, one of which is Suburban. I am opposed on physiological
grounds for the City to engage in one of private enterprise and
one which I think the private' enterprise can do better. I have
been greatly impressed by the figures presented tonight by
Mr. Downs. I think this City Council isn't really attuned to the
public ear if ater hearing all the testimony -tonight they do not
give the citizens an opportunity to vote on it. 'I , really believe
if the City of,.Wes,t Covina operates this system and operates on a
basis whi 6h will not be subsidized by the other citizens,, the
people in this area receiving water service their rates will be
higher and I would predict that West Covina under those circumstances
might become the most unpopular wdte.r supplier in this part of the
country. I am opposed to this as a citizen and a.taxpayer.
John Baines , Since July I have been retained by
2166 Monte Vista Kenneth I. Mullen, the City"s counselling
West Covina engineer. Unfortunately Mr..Mullen's
isn't,here tonight,.he is.on his way to the
Orient. Prior to going towork for Mr. Mullen's I worked for the
City of Pasadena for 17 years and in the last 3 years I was
GeneralManager and Chief Engineer of the Water and Power Depart-
ment.
I would like to -say I don't know whetber-this
is a good bargain-.and.a good'deal, I don't know 'Whether�_the Umark
tract will be developed within'the 9,years it is planned, but that
30" main after 9'years would be used to capacity and no'engineer
would build that transmission line to half its c apacity because it
costs much more to��increase.
In listening to Mr. Downs he was throwing
figures around that really surprised me. I noticed in a report that
Suburban Water Systems for 2200 cubic feet the charge would be
$6.39 and if you lived in Pasadena it would be $5.46'or about $1.00
less. It is true our service expense per service:is about $90.00
but we give much better service than the private. With this lower
rate in Pasadena they pay the general city 6% in -lieu tax, they pay
the MWD tax out of revenue which amounts to about. 17% and they pay
for general city service which amounts to about one and a half
million for the Department and it has been 35 years since we had a
bond issue. We built the system up to a second class system by the
Bureau of Fire Underwriters. On private systems'they can't afford
to build a stxopq�:system that will give you fire 7
protection and
15
ADJ. REG. C.0 9-29-70 Page 'Sixteen
UMARK WATER SYSTEMS ACQUISITION
naturally your fire rates are going to be higher. The PUC
won't establish rates or give the same credit for building a strong
system fore fire only, it is for water only they base their rates
on. Mr. Downs - on the -.tax losses said over a 20 year period
there would be over $4,837,000 lost in property tax, Franchise tax
.,$332,000 or a total of approximately $5,169,000. He forgets at the
e :d of 20 years the -City would own a property worth thirty million
n
dollars, according to his figure of cost. So when you pay your
water bill you are buying an equity in that system and there are
other advantages in having your own water system. In the last year
and a half we spent a lot of time fighting the private utilities
they were trying to get the municipals out of the electric business
and they said the next step was to get the municipals out of the
water business because we are too much competition for them and
the way their prices are going if we weren't in there to give them
a little competition ..... I will be glad to answer any questions
that you might have, if I can.
Tom Gallagher I would like to address a question to the
812 South Valinda entire dhamber. In 1963, when the State
West Covina Department of Water resources was doing the
design work on the east and west branch of the
California acquaduct the City of West Covina entered into an agree-
ment with the State Department of Water Resources to have so many
thousand acre feet of water supplied to the City for a number of
years. Since that time the MWD has been in the act and they come
up with the Foothill feeder. But st the time this agreement was
sig ' ned it was hailed by all the officials of the State Department
as a landmark agreement and the City of West Covina was the first
municipality in the State of California to enter into an agreement
of this nature, which would give them an assured supply of water for
a number of years at an assured price and the thing was generally
recognized in West Covina as a major breakthrough,but since that time
it has completely dropped dead -and I have heard nothing about it.
Since then I heard the MWD is in the act and my question is -
is this contract still valid and if it is what will it do for the
City if anything? Thank you, gentlemen.
Joanne Wilner I am still not sure which way I feel -
2108 Casa Linda -Drive West Covina for water or West Covina against
West Covina water. But in listening to most of the
testimony tonight I am inclined towards the
negative, that we should stay out, but I would like more information
before I could really state which way I stand.
As to the indebtedness that would fall back
onto the general taxpayer, I am not too clear. It was stated, I
believe ' that revenue bonds would be sold to finance this and
they would be secured strictly by revenue and with no backing of
the general fund. I wonder if this is true or just in what way this
tax loss from b ng off the tax rolls as already stated - will the
� je�i
general fund be liable and if so, would it be in the form of floating
bonds to cover it, in which case I believe you would first have to
have an election in order to have a general bond. Another question,
are there now parallel lines within Azusa Avenue going up to MWD
water? Does Suburban have a connection to MWD thereby already there
has been an extremely exorbitant outlay that has been a duplication
which you would be taking on if we took over, whereas it could just
be an investor's loss if ' someone else might take over and use the
lines he already has and where there is no need for anymore?
Generally why does the City want to get involved in the water
business? What benefit to the general citizens would there be?
THERE BEING NO FURTHER PUBLIC TESTIMONY, PUBLIC HEARING CLOSED.
COUNCIL DISCUSSION.
Mayor Chappell: Mr. Aiassa, I believe we received a
tremendous amount of information this evening,
- 16 -
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Page- Se'veftteen
I
0
do you or your staff have any answers to any of the questions
asked?
Mr. Aiassa: If Council has any specific questions they
would like answered we will attempt to
answer.
Councilman Lloyd: 'Mr. Mayor. First of all I would like to ask
the gentleman from Umakk - - I read a letter
dated June 25th and in that letter it said
you received a proposal from Suburban Water, is that correct?
Mr. Patterson: Yes sir, one of several.
Councilman Lloyd: And that you, after reviewing their
proposal, in fact several proposals, your
company turned them down?
Mr. Patterson: That is correct.
Councilman Lloyd: Have you reversed your stand on that?
Mr. Patterson: We have not.
Councilman Lloyd: At the present moment you are not considering
any agreement with Suburban Water?
Mr. Patterson:
That
is correct.
Councilman Lloyd:
What
would happen if the
City turned this
down
would you go back to
Suburban?
Mr. Patterson:
No.
We plan to resume our
interrupted plans
with
Rowland County Area
Water District.
Councilman Lloyd:
They
have indicated they
will buy this system
right
now? In other words
essentially you
have
a contract in your pocket?
Mr. Patterson: Essentially that is correct.
Councilman Lloyd: In other words we are not involved in the
question of whether you will negotiate
with Suburban but we are really involved in
the question of whether West Covina should go in the water business
or not.
Mt. Patterson: That is the primary question. As I hope you
gentlemen know, we, as I have already
testified/own the water system now under con-
struction, we own the land this water system is being built to
serve and to the best of our knowledge the land in question is not
subject to any certification or any legal statutes from any water
utility, publicly owned or privately owned. We are in effect,
therefore, free agents - to deal with whomever we feel we want to deal
with. It is not, therefore, a matter of default. This body cannot
determine, if'they do not choose to-do business -with us as to -whom
we will do business with, that is our decision to make.
Councilman Lloyd: What is the reason you are not going into
the water business? Do you feel -you would be
a loser or something?.
Mr. Patterson: It is,not the kind,of business, first of all,
that we are ordinal-ily interested in,' and
secondly, as I am sure you-are.aware, for us
to go.into the water business ourselves we would have to.apply -for'
and seek�the certification of the PUC. If: the history —tri-this area
is repeated they would unquestionably contest it and'it would be a
- 17 -
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Page ti-ghteeri-..
long drawn out proceedings. While we have some optimism that we
could obtain such ceKtification we do not know how long it would
take and time is rather important.
Councilman Lloyd: At the time you made this turn down of
Suburban had you been in negotiation with
I the City of West Covina?
Mr. Patterson: No sir. Not as I define those terms. We
had been in conversation but in terms of a
business definition of negotiation, we had
not.
Councilman Lloyd: In other words you didn't consider any offer
from the City of West Covina as a bona fide
offer for the water system which you were in
the process of constructing at that time?
Mr. Patterson:
Councilman Lloyd:
Mr. Patterson:
Councilman Lloyd:
Mr. Patterson:
At that time that is true..
In other words Suburban was not on the scene
at that time?
That is correct.
And Rowland County was on the scene and you
were in negotiation with them?
Yes sir.
Councilman Shearer: I would like to clarify better for those in
the audience and myself, the status of the
Rowland County Area Water District. Is it a
private corporation?
Mr. Patterson: No sir, it is a County Water District.
Councilman Shearer: . How is this controlled?
Mr. Patterson: It is my understanding as a county water
district the voters in that district elect
publicly a Board of Directors and they
operate the water district. That is not a legal answer but my
practical answer.
Councilman Shearer: Mr. Wakefield, are you in agreement with
that?
Mr. Wakefield: Yes, Mr. Patterson's answer is correct.
It is a public agency, a special district
created and organized under the County Water
District law and is governed by an elected Board of Directors.
Councilman Shearer: Then it would be much the same as far as
organization, rules and controls, as our
body, except they have only one interest -
water. (Answer: Yes) Are they controlled
by the PUC as far as rates, rules, etc.,?
Mr. Wakefield: No sir.
Councilman Young: There is much discussion about the loss in
tax revenue if the City operates this system
rather than a private organization - does
the Rowland County Water District pay taxes, -Mr. City Attorney?
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ADJ. REG. C.C. 9-29-70 Page 'Ninete.en
UMARK WATER SYSTEMS ACQUISITION
Mr. Wakefield: The Rowland County Area Water District as a
public agency pays no property taxes as
such, it pays no franchise fees, it would be
in the same situation as if it were a City owned water system.
In other words within the limits of its District boundaries and
service area it is not obliga�ed to pay property tax or franchise
tax.
Councilman Young: Where it operates within the City of West
Covina does it pay something to West Covina
in lieu of taxes?
Mr. Wakefield: No sir.
Councilman Young: So there is no revenue whatsoever to the
city.
Mr. Wakefield: That is correct.
Councilman Nichols: There have been a great many figures tossed
around in terms of cost and I would like to
clarify for my own mind a couple of these
that are vital to the West Covina citizens. In the agreement
prepared for the review of the City of West Covina is there any pro-
visions or any way therein where any of the contractural obligations
on the City in terms of dollar values could be levied against the
total citizenry or are all contractural obligations to be levied
against those people receiving the service in the 2200 acres?
Mr. Patterson: It is the intent and to my knowledge
accomplished, in the agreement that the entire
obligation of the City of West Covina derives
on the revenues to be generated from the development known as
Woodside Village. There is no language whatsoever that would provide
conclusion that the general public of West Covina has any liability
whatsoever.
Councilman Nichols: Mr. City Attorney will you comment on that
response as to its correctness or incorrect-
ness after your careful review of the contract?'
Mr. Wakefield: I agree with the statement which
Mr. Patterson has made. The obligation under
the contract obligates only to the extent of
the Umark lands and the obligation of the City is limited to the
repayment from water revenues of the entire cost of the
acquisition of the system and its maintenance and operation.
Councilman Nichols: According to the contract prepared and if we
assume that there are great massive sources
of interests that build up and some
indebtedness resulting from unpaid interest and other costs, and
if the repayment of these sums based upon the limits stipulated
in the contract from revenue are not sufficient, what will be the
ultimate dispostion of that debt at the conclusion of the 25 year
agreement?
Mr. Patterson: We will be the poorer for that debt at the
end of 25 years. Umark at the end of 25
years - if the City owes Umark any sums -
principal or interest, it is forgiven and no longer an obligation
of the City and we will perhaps have wished we went into the water
business.
Councilman Young: In the discussion here
,,0 1 am not quite
satisfied with
,,is the practical matter.
This agreement provides for a payback out
.19
ADJ. REG. C.C. 9-29-70 Page Twenty-
UMARK WATER SYSTEMS ACQUISITION
of gross revenue in 20 years, possibly 25, ranging from 22,1-2% up to
50% and for the majority of the time it is 50%, approximately 9
or 10 years and if we undertake this contract.we are obligating
ourselves to furnishing water. We have the process of purchasing
water, delivering the water, administrative overhead costs, etc.,
and I am disturbed by the ultimate effect of 50% payback if
administrative costs continue to rise and the cost of resale water
continues to rise and the consumer squeeze will go on, I can see
where' we might have to go into the general revenue of the city in
order to satisfy our obligation to deliver water and our obligation
to make the appropriate payback.
Mr..Patterson: As I understand your comments I would first
reply that I do not see the demon that you
apparently see. First, the 50% level of
gross revenues which I gather is the area of concern to you ....
Councilman Young: Not necessarily but a good starting point.
Mr. Patterson: You don't reach there until 10 years from
now. Between now and then you are paying
a smaller sum of the gross revenues. Ten
years from now, if the wor8t happens, the growth of the area7i:§
not as large as anticipated and the Montgomery report contemplates
the property will be substantially totally developed in ten years,
if not, your demands for service in terms of your operation costs
and in terms of your water costs will hot be as large as projected.
Number two, thecost of the water system that you are then paying
for probably will not be as large as contemplated because it
would not have been built. We would not�have a need for it,
because we have not had that many people. Thirdly, if everything
has gone up, presumably the water rates have also gone up, both
within this property as well as without it. Presumably.the ratio
of your costs in terms of operation, your cost in terms of water,
will be approximately the same as now projected. The precise
numbers will be different but the relationship to the�gross
revenues will be the same. In any event, Umark only anticipates
getting part of what you receive, whatever that is. %
Councilman Young: I appreciate that if I were buying a
business on credit my expectation would be
to pay for that out of the revenue and if
I thought I had to go to other sources to pay for that business,
particularly over a 25 year period, I probably wouldn't buy it.
You are posing a hypothesis which is pretty good and I am posing a
hypothesis that isn't. Either one of us could be correct, only
the future will say who is.
Mr. Patterson: The only additional thing I would like to
add is that there is certainly no require-
ment or expectation in this agreement, that
the City would ever have to go beyond the gross revenues of service
to Umark land for additional funds to operate the system.
Councilman Young: This I understand but we have the opinion
expressed that this contract would not
require any invasion of general revenues
apart from the water district itself, yet we are dealing with
gross figures and I don't see how we can make that kind of -
assumption under those circumstances and at the same time undertake
all the obligations we do under t his contract. We are dealing with
net'revenues and then we write into this thing the overhead costs
the administration costs, the cost for delivery of water, etc., and
pay for all these things and then there is so much money left over
at the end of each month and out of that if we were paying for the
debt there would be no problem, but when we are dealing with the
gross we are in an area we can't really control.
- 20 -
I
E
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Page Twenty-6ne
Mr. Patterson: I would submit net income figures only flow
from gross income figures. You have to
collect money before you have any money to
spend for anything. Where we do substitute a net figure for a
gross figure in this agreement we would surely want to provide a
minimum level as we have provided a minimum gross level we would
want to provide a minimum net level otherwise there might not be a
net level. So in any event the City from time to time in order to
balance their books for the water department will establish such
gross revenues as you require to meet your net obligations.
That really adds up to the same in my eyes and are intimately
related.
Councilman Young: I think I got a little bit lost somewhere ...
Mr. Patterson: I apologize for that. I might not be the
right person for you to be asking that
question of - this is obviously an essential
business matter of*the City and beyond my prevue, I was just
attempting to give you my viewpoint.
Councilman Lloyd: If we don't go into this ;!_,.h.ow.-soo�nj
would you negotiate the"contract with Rowland?
Mr. Patterson: As soon as possible.
Councilman Lloyd: What would you say - 10 days or two weeks?
Mr. Patterson: When you say how soon - what do you mean?
Councilman Lloyd: Whtt I am really kind of'looking for the in
the back of my mind - if I have any
manuevering room left?
Mr. Patterson: No.
Councilman Shearer: Have you made your best offerto the City of
West Covina?
Mr. Patterson:. Yes sir.
Councilman Shearer: Thank you. Is Mr. Merrion still in the
audience - Mr. Mayor, if so I have a
question. (Mr. Merrion stepped to the micro-
phone) Mr. Merrion in your testimony you appeared to be knowledgeable
of certain facts regarding PUC findings in the controversY.Ibe'twee.n
Home Savings & Loan and Suburban several years ago?
Mr. Marro'n::� That is correct.
Councilman Shearer: The general statement you made regarding the
payback - that the PUC considered to be a
reasonable figure for private companies to
pay back capital investment - if this is the right term - what was
that percentage?
Mr. Marr6n'. The PUC indicates 22%. -There are provisions
in their code and rules and regulations that
th�ey allow for backbone facilities to be
advanced by the developer.
Councilman Shearer: Do they use the 22% in determining what
the'utility may charge in their rate to the
consumer?
Mr. Marr6n: No, as a matter of fact the PUC in
establishing the rates will not allow the
- '21 -
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Page Twenty- twO
utility to earn on any outstanding indebtedness in the form of
refund agreements.
Councilman Shearer: The 22% is cnsidered a reasonable amount?
Mr. Marron:: Yes and that is without interest.
Councilman Shearer: In this finding of the PUC in the issue which
was finally cancelled out because everybody
evidently went their way, did you make the
statement that they did state that a small company such as Home
Saving s or whatever the name was, was not feasible or Suburban was
more feasible?
Mr. Marr6n:,-� I didn't make that statement, it was made
by Mr ' Downs in reading from the PUC findings.
One thing that might be of interest to the
Council in regards to percentage, the percentage of revenue and pay-
back have been based on going to 50% at the end of 10 years and that
just so happens to be the time that Umark will have all of their
property sold off and they won't be paying any of it, it will be the
residents they are serving.
Councilman Young: Mr. Merrion, I would like for you to expand
a little bit on a comment made. My notes
indicate that you take the position the
proper procedure here would be the payback
at any given time would only be on what is in operation. Is that
correct?
Mr. Marro'n:,-, That would be the most fair way you could do
it.
Councilman Young: Is that a requirement of the PUC where it
has regulatory power? Does is so limit the
payback?
Mr. Marr(in: Yes on the backbone system that is advanced
by the developers the payback is proportional
to the customers it was designed to serve and
as those customers come on the line then they are entitled to a
refund on that basis.
Councilman Young: That is a percentage type payback based on
revenues produced from the sale of water?
Mr. Marro'n: No it is not. Ther e are two methods. If you
go in on a "no advance" or the utility iouts
none of its own money into it; the 'in -tract
facilities, the ones so-called donated to the City are reimbursed on
the basis of 22% of the revenue received from the actual use of the
�facilities that were advanced is gross revenue. The backbone system
that is advanced to serve customers beyond the in -tract customerst
such as your transmission main, reservoirs, pumping stations, rights -
of -way, etc., are usually reimbursed when they are advanced by the
developer on the basis of a proportionate share of the facilities
in which they are used. For instance, I don't know the figures
offhand, but say you are expecting -.20,000 services in the area to
be served by four and a half million dollar backbone system, that
means as each new customer I comes on, the developer is entitled to
$225.00 cash at that time for the backbone system and that is all
he gets. If he doesn't develop what the backbone system was design-
ed for, I believe, at the end of 15 or 20 years he gets nothing more.
Councilman Young: He is entitled to charge interest for his
investment in that backbone system?
Mr. k'Marron No, he is not. The PUC is not interested
- 22-
ADJ. REG. C.C. 9-29-70 Page Twenty-three
UMARK,WATER SYSTEMS ACQUISITION
in the utility nor the developer, their interest is only in the
consumerand anything that costs the consumer more, money they are
not interested in.
Councilman Young: His profit then, as far as the developer is
concerned, is limited to his sale of the
development?
Mr. Marr6n:,,: That is correct. He gets only his cost back.
The PUC takes thepoint the land isn't worth
a dime without a water system.
Councilman Young: That is the background then to your comment
that.you don't think anyone else would give
Umark a deal like we are considered?
Mr. Marro'n�:' No, I am sure not. I would say �ihbther_he
goes to Suburban or Rowland that his deal is as
near as good - if it was he wouldn't be here
tonight. This is a business proposition for him.
Councilman Young: That is perhaps not a fair statement - logical
but speculative. In any event the change in
this contract would be then to eliminate the
interest and put the payback on this unit by unit basis as you
suggested?
Mr. Marrdn:.:� That would be the most fair approach.
Councilman Shearer: A question of Mr. Downs - without repeating
the second question I asked Mr. Merrion, did
this report from PUC indicate that the water
system that Home Savings proposed was less efficient and less
desirable than Suburban?
Mr. Downs: That is correct. It was Finding No. 10 in
the decision.
Councilman Shearer: What was the basis for this?
Mr..Downs: As I understand it, it was based on the
economic testimony. Suburban has ' been pre-
pared to go into this area; you would not
have duplication of facilities; Suburban had reservoir,sites;
Suburban would not have to go through construction costs; it has
its own water available,; doesn't have to buy MWD water; doesn't
face the extra reservoir problem brought on by merely having MWD
feeder. Finding No. 10 was based on all of these numerous factors
and that Suburban is better able to serve the public.
Councilman Shearer: You mentioned the potential cost to the
purchaser of this system at three million
dollars plus $6,000 per acre for right-of-way.
This figures out to 500 acres. Would you care to tell me what
would require 500 acres to construct a backbone system for this tract?
Mr. Downs: I believe we passed in the night on the figures.
The contract states that right-of-way.and other
land rights - an expenditure may be made up to
$6,000 per acre in the tract. There are 2200 acres in the tract and
thus there is a potential essentially of $1,300,000.
Councilman Shearer: If we bought the whole tract?'
Mr. Downs: No - as the contract reads, I think the
limit is one million three hundred thousand
dollars and the developer has the power to
charge about whatever he wants to for specific right-of-ways and
easements. It is not a charge limited to the area of the specific
right.being charged�it is a limit relating to the total acreage.
ADJ. REG. C.C. 9-29-70 Page Twenty-f6ur
UMARK WATER SYSTEMS ACQUISITION
Councilman Shearer: I am not an attorney and I am lost. You
mentioned parallel systems. Basically what
parallel system does Suburban own that
would be able to serve this area without the acquisition of the
30" line?
Mr. Downs: The 30" line is not essential to Suburban
because they have their own water supply
through pumping and thereby can supply
water cheaper and more economically at lower rates and have prepared
for many years to go into this area.and incidentally Suburban's
certification area reached into this area. We have the description
on that and within that area and within the area shown on the map
pr�esen ted on the screen, Suburban has constructed lines under
anticipated f ' reeways, actually has lines in that area, has reservoir
sites immediately parallel to and adjacent to the area. and engineer-
ing plans for lines right adjacent to the immediate area, are larger
than you could ever conceive of using unless you were going into the
area. A 161 line in anticipation of going into the area. So this
whole question of the lines, the reservoir site as well as all of
the Suburban property which is parallel to their surrounding the
Azusa transmission line.
Councilman Shearer: If the City Council tonight says "no" and
Mr. Patterson commences negotiations with
Rowland, will your position with regards
to legality be the same with them as it is with the City of West
Covina?
Mr. Downs: Two things on that connection. Rowland has
an agreement with Suburban Water System
that it will not serve.this area. This was
worked out in 1956 and was worked out in connection with the
whole engineering layout for the development of the area. Now
in our conversations with Rowland/the telegrams which were sent/
were telegrams jointly on behalf of Suburban md Rowland, assuring
them we know we have arrangements which we believe would be
satisfactory to them and which were offered to them -in good faith.
We believe ' if this Council turns it down, there will be no question
but that the water will be available and the tract will go forward
on fair and equitable terms.
Councilman Shearer: The answer to my question is that you are
going to court?
Mr. Downs: Yes, we are going to court,
Councilman Lloyd: The pivotol point here as far as you are con-
cerned and I get the distinct impression from
what Mr. Patterson says/is that they have
no intention of selling'you these lands and yet you continue to
allude to the fact you are going to move in. Would you tell me on
what basis you will operate, since they are going to sell to someone
else?
Mr. Downs: As a practical business matter if this Council
turns down this arrangement these people will
be coming to Suburban and Rowland.
Councilman Lloyd: Mr. Patterson, did you say you would do
business with Suburban, or did I misunderstand
you?
Mr. Patterson: Those were not the words you asked and that I
answered to you. I think you asked me what
we would do if we did not go forward tonight
and I told you we did not anticipate discussing with Suburban and
would in fact renew our discussions with Rowland.
- ZZL -
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Page Twenty-fiVe
Councilman Lloyd: I am obviously having trouble understanding -
Mr. Downs - but to me thatsAY-c�flat out you
are not in business with these people, not
in the area ofwater. I am probably very much lacking but I am a
businessman and able to have some fundamental understanding of
contractural relations and that man over there does not intend to do
business with you. It may come as a shock to you but he doesn't.
Mr. Downs: If I were in his position I would be saying
exactly what he is saying, but the instant
I am turned down by the City of West Covina
I am going to be negotiating with Rowland and Suburban and I am now
going to be looking at the arrangements between Rowland and
Suburban which have exi,st-,�!.d.,, for some 15 years and approaching them
as a businessman on the basis of what is the best deal I can get
from those two, either separately or in combination. And all I am
saying to you is he will get his deal and he will be dealing with
Suburban in conjunction with Rowland.
Councilman Lloyd: I appreciate what you are saying but un-
fortunately I can't base my decision on what
you are projecting for a future situation
when the man says he is not going to do business with you and he
does indicate he is going to do business with Rowland which is not
germane to anything I can make a decision to. Does he have the
right to do business with whom he wants to?
Mr. Downs: He has no right to do business directly
with Rowland under the existing contractural
agreements between Suburban and Rowland and
the years of planning that has gone into the agreements as a legal
matter.
Councilman Lloyd: He has no right?
Mr. -Downs: No that is interference with a business agree-
ment.
Councilman Young: Mr. Downs to clarify i ' n my own mind - it is
my understanding then that Suburban's
position - for example, if West Covina turns
this contract down and Umark deals with Rowland, Suburban's present
intention is to insist on certain legal rights and if it involves
court action, so be it?
Mr. Downs: We do not anticipate that being so because
Rowland and Suburban jointly are submitting
an offer to the developer and have sent a
telegram over their joint signatures to the developer.
Councilman Young:
Then you are working together now?
Mr. Downs:
That is correct - the telegram was over both
signatures.
Councilman Young:
This joint effort is the result of the con-
tract you made with Rowland some 15 years ago?
Mr. Downs:
I can't speak from Rowland's standpoint, I can
only say the contract is in existence, it is
well known and both parties have built
extensive engineering plans which have been a part of the future
development of the
entire area.
Councilman Young:
Rowland is operating with you to avoid
litigation?
Mr. Downs: We have not expressed to them at anytime to
25
ADJ. REG. C.C. 9-29-70 Page Twenty -.%ix 'i
UMARK WATER SYSTEMS ACQUISITION
my knowledge any thought of litigation. It has been approached
entirely from a business standpoint.
Councilman Young: It would be viewed as a joint profitable
venture then?
Mr. Downs. It has been approached as a business venture.
Councilman Young: It isn't your contemplation to buy this water
line going up Azusa - is that correct? Would
you plan to buy that if you make a deal?
Mr. Downs: Yes.
Councilman Young: And use it for whatever purpose you would use
it?
Mr. Downs: In conjunction with Rowland but not if not in
conjunction with Rowland.
Councilman Young: Would you construct the backbone system -
the in -tract system?
Mr. Downs: No. As I understand the present agreement
Umark is not constructing the in -tract, it
will be constructi?d by the subdevelopers.
The backbone is being constructed by Umark and acquired for three
million dollars plus interest.
Councilman Young: Then this'would be a similar deal that you
would anticipate. You have th-e—off-tract and
the in -tract being the line down Azusa and
the in -tract....
Mr. Downs: Backbone and in -tract mean two different
things to me. As part of our offer we have
included an offer relating to the backbone
system which is the same item that is involved in the contract here.
Councilman'Young: As financially ruinous: as this would appear
to be to the City of West Covina, how can it
be otherwise to Suburban Water Company and
Rowland County?
Mr. Downs: Because Suburban already has facilities in
the area; they can move out and serve the
area gradually without incurring the initial
backbone costs presented here and you not only incur that four
million dollars very quickly under the scheme of things but
immediately start piling interest on it. Suburban 9wns its own
water and a number of.other economies are involved.
Councilman Young: Am I correct in assuming that Suburban would
depart from the Master System of the James
Montgomery report?
Mr. Downs: That is correct. We would not have to go
through that because we have facilities
�which enable us to serve cheaper and without
duplication.
Councilman Young: Service, but likewise construct?
Mr. Downs: We would not have to construct in the same
way or with the same enormous outlay in
relationship to the number of services involved.
ADJ. REG. C.C. 9-29-70 Page Twenty-se*ven
UMARK WATER SYSTEMS ACQUISITION
Councilman Young: You made a statement on the point of
appropriate governmental procedure. You
indicated some information had been with -
.held from you, you didn't expand on it and I wish you would. What
information, and by whom?
Mr..Downs: The specific information supplied to us was
the James Montgomery report together with
the contract, which the City Manager's office
supplied pursuant to the resolution by City Council at its last�l
meeting. We were not presented and until arriving this evening,
had no knowledge of any feasibility report which would go into a
projection of revenue alluded to as a report by Mr. Mull6ns - this
we have never seen and it was not available in the City Manager's
office. We saw the James Montgomery report estimates relating
to construction costs but no feasibility report and we did have the
contract available to us.
Councilman Young: I personally have reviewed a mountain of
material in the last few days and I don't
have an independent recollection of seeing
that report either. You are not suggesting that there was a
wilful withholding of that information?
Mr. Downs: I am sure the Council had no such thought.
Councilman Young: Or the City Manager's office?
Mr. Downs: I am assuming that is true, I will certainly
give that presumption.
Councilman Nichols: You made a statement which comes right to the
.very heart of the basis of most of my
rationale in the matter so far. Unless I
have misquoted you, you made the statement that the ' Rowland County
Area Water District has an agreement with Suburban Water Systems
and that the Rowland District will not serve the Umark area. I have
been told and told again this evening that the Umark people for
reasons that I don't feel the need to elaborate here - does not
choose to do business with the Suburban Water Systems in this matter
in anyway whatsoever and that an agreement has already been drafted
dnd a tender made independently between Rowland District with no
allusion to Suburban and if the City of West Covina chooses not to
enter into a contract with Umark they will within 10 days to 2 weeks
have signed an agreement with the Rowland District and in no time
during any of the discussions I have had with anybody was there any
mention that that would be a joint undertaking of Suburban and
Rowland and if that were in fact true then the option before the
City Council would not be between another governmental agency and
itself, but between a private utility represented here tonight.
For that reason I think the statement you made is an absolute vital
and crucial statement and should have rapid proof and supporting
information brought forward. I would 4ppreciate it if you would
elaborate on your comments, precisely:and exactly, so there will be
no misunderstanding of the intent of what you are saying.
Mr. Downs: By a contract dated September, 1956, Rowland
is and Suburban entered into this agreement.
The contract is available and remains in
effect and there was considerable plans based upon it. It is a
matter of record which we will be glad to present to you. it is
our understanding in conversation with Rowland that their status
of negotiation is not such that there could be any exe.cution of
the contract in the immediate future. To the contrary we have
met with representatives of Rowland and -as a business matter there
was a telegram sent over the signatilie-s of both Suburban and Rowland;
that telegram is a matter of record which I have here. ,
Councilman Nichols: You have alluded to it several times and
implied some kind of a joint action that
-,27
ADJ. REG. C.C. 9-29-70 Page Twenty-eig'ht
UMARK WATER SYSTEMS ACQUISITION
there is a partnership. Does the telegram imply that information?
Mr. Downs: Yes, I have the telegram. The telegram
states that Rowland and Suburban jointly has
a contemplated offer for the developer.
(THE CHAIR DECLARED A SHORT RECESS TO ALLOW MR. DOWNS TIME TO FIND
THE TELEGRAM. RECESS CALLED AT 11:04 P.M. COUNCIL RECONVENED AT
11:20 P.M.)
Mr. Downs: The telegram is addressed to Bruce S. Chelburg,
President, Trans -Union Land Development
Company, 111 * W. Jackson Blvd., Chicago and
reads: "Should your proposed agreement with the City of West Covina
be refused or delayed Rowland and Suburban have agreed on a program
which we feel will be to your advantage" Signed: Oliver H. Engler, Jr.,
General Manager Rowland Area County Water District; Anton C. Garnier,
President - Suburban Water Systems.
Let me add to that - I have confirmed my
understanding that there is no contract at a stage of negotiation
between Rowland and the devel.oper which is anywhere close to execu-
tion. Rowland and Suburban have met within the last 48 hours and
the telegram has been sent as a joint business development and there
has been no suggestions or discussion of any lawsuit between them.
I want to make one additional comment that may be of help. It is
not, we believe, the responsibility to bail out the developer. The
developer at this point is not talking to Suburban and Rowland,
because he has the deal on the terms to favorable to him, with
West Covina. In the audience both Mr. Engler and Mr. Frank STWif-t,
a consulting engineer for the Rowland County District and he is
available for questions and will answer any questions you might
desire.
Councilman Young: Mr. Downs, could I impose upon you as�an
expert in the field of water? A gentleman
asked me at the recess - and he testified
earlier regarding this matter - whether or not the City would have
to obtain PUC approval. Can you clarify what if any approvals
from the PUC would have to be obtained in the even the City entered
into this contract?
Mr. Downs: Actually your counsel has correctly stated
and this is one of our points, the City
contract and the City utility is not
subject in any fashion to PUC jurisdiction. So there is no review
of rates or PUC review of operation, there is no form.by which a
person can make complaints and we are subject to this and the City
is not.
Councilman Young: Would Umark have to get clearance from PUC?
Mr. Downs: Umark would have to on its,own.
Councilman Young: If Umark entered into the contract with the
city?...
is Mr. Downs: The way the contract is set up is to avoid
PUC. They sell the system to you before it
commences operating. If Umark commenced
operating that system they would have to go to the PUC and they
are facing findings which would deny them the right to do it.
Councilman Young:
Mayor Chappell:
Thank you.
Mr. aWift-, consulting
County District, will
microphone.
engineer for Rowland
you please step to the
- 28 -
ADJ. REG. C.C. 9-29-70
Page Twe.hty-nine
UMARK WATER SYSTEMS
ACQUISITION —
Mr. Frank M. Swift
I have served as engineer
for the Rowland
Consulting Engineer
Area County
Water District
in excess -of
Alderman, Swift & Louis 15 years.
721 Fair Oaks
South Pasadena
.Mayor Chappell:
Then testimony
you would give
us tonight
would be their
position?
Mr. Swift:
That is right.
.Councilman Nichols:
You are here in
the capacity
of representing
Rowland?
Mr. Swift:
That is right.
Co uncilman Nichols: Are you aware of an agreement dating back to
1956 between the Rowland District and the
Suburban Water Systems for dividing service
areas in the portion of the area contemplated tonight here in the
contract?
Mr. Swift: Yes and may I explain my answer? (Permission
given.) Back in 1956 the District had a
definite boundary but at that time a private
water company could go into that area and the law has been changed
since that time, but at that time to protect the Rowland District
area and to protect Suburban we worked out a joint agreement.
Councilman Nichols: Does the County still consider that agreement
binding?
Mr. Swift: They considered it binding to protect them-
selves against another water company coming
into that area and when we understood
Suburban was no longer in the picture Rowland entered in negotia-
tions with Umark.
Councilman Nichols: In the event Umark would renew with Rowland
does Rowland contemplate in some fashion
turning over the service area provided in
this contract to Suburban for providing service?
Mr. Swift: Rowland states they are going back to their
original agreement that states the line, -
generally the extension of Nogales Street
westerly is an area that Suburban would serve and easterly of there
is an area we would consider serving.
Councilman Nichols: Are you saying in fact that your district
would not annex the area westerly of Nogales?
Mr. Swift: Along that general line,
Councilman Nichols: In other words you are entertaining a proposal
that you have not discussed at all with Umark?
Mr. Swift: That is right. Umark closed off negotiations
with us.
Councilman Lloyd: In your representation of the Rowland District
what you just said, has been discussed with
your Board? First, do,you have a Board?
Mr. Swift: Rowland has a Board of Directors.
� '2 9 �.
ADJ. REG. C.C. 9-29-70 Page Thirty-
UMARK WATER SYSTEMS ACQUISITION
Councilman Lloyd: Rowland has a Board and they had a vote and
they agreed and you are going forward with
that?
Mr. Swift: After our meeting with Suburban we contacted
every member of the Board and discussed this
I and they said if we are back to the original
agreement that is fine with the Board. We have unanimous agreement
from the Board.
Councilman Lloyd: In other words you really are a part of this
telegram that was sent.
Mr. Swift: Yes, we are. We are very interested in the
transmission main. That is our interest.
Councilman Lloyd: You want the big 30" main?
Mr. Swift: That's right.
Councilman Lloyd: But you don't care who gets it on the back-
side?
Mr. Swift: No. We have cooperated with Suburban
heretofore and if they can serve this we
consider it their area.
Councilman Young: Is that the entire 2200 acres?
Mr. Swif t: No,. -it" --.is roughly half of.it.
Councilman Young: Would it be the half that lies.in West Covina
that Suburban would serve?
Mr. Swift: That is the general boundary line. For
economical service you might meander off the
line somewhat so you wouldn't have parallel
lines.
Councilman Young: Would Suburban own the system or would it be
a joint ownership with Rowland?
Mr. Swift: As we discussed it the portion served by
Suburban would be owned by them. The portion,
if any, served by Rowland would be owned by
Rowland. The transmission main is the portion Rowland is interested
in and it was on this basis we sent the telegram to Umark recently.
Councilman
Lloyd:
On that
main line, would Suburban be in joint
ownership
with you on the 30" line?
Mr. Swift:
No, the
Rowland District would own that line.
Councilman
Lloyd:
In other
words you would pay no taxes on it?
Mr. Swift.:
That -is
right.
Councilman
Nichols:
Are you
prepared to state to this Council,
in the event
the Council decided not to enter
into an
agreem6nt with Umark that the Rowland
Area County
District
would not
enter into any agreement with Umark
except on the
basis
of dividing
the service area'
Mr. Swift: That is subject to confirmation by the Board,
but that is how I understand the Board's
opinion is at this time.
Councilman Nichols: The deal made, dropped, and renewed under
duress?
- 30
ADJ. REG. C.C. 9-29-70
UMARK WATER SYSTEMS ACQUISITION
Mr. Swif t:
That's right.
Page Thirty -,one
That is a good description.
Councilman Nichols: This is your understanding that this is the
position the District will take if West
Covina does not provide service the District
will not annex that portion of the Umark property westerly of
Is Nogales?
Mr. Swift: That is right.
Councilman Young: Mr. Swift - has the Rowland District made
an analysis of the rates it would have to
charge in this service area under this
arrangement?
Mr. Swift: No. We made an analysis based on our present
rates.
Councilman Young: Which is what?
Mr. Swift: 25(,' per 100 cubic -feet minimum and in a block
rate that drops down to 20(,', 18e, and 13e,.
under our present rates we could not pay for
the system. This was the extent of our analysis.
Councilman Young: So there would have to be a higher charge to
pay for the system?
Mr. Swift: At that time we were looking into taking over
the entire area and that would be the case.
Councilman Lloyd: Mr. Patterson, we seem to have a whole new
set of variables - were you aware of the'
situation that has now developed?
Mr. Patterson: No sir. I agree with your opening comment,
we have a whole new ball game, assuming
the game is not called.this evening.
This telegram was sent to Umark in Chicago�T-in care of my office
and was not delivered, it was phoned in this afternoon but the
telegram as you have read it is not informational, it merely
implies in the event we don't do business with the City of West
Covina they would like to talk to us. I repeat all of my previous
testimony in reference.to it in that regard.
Councilman Young:
A question of Mr. Downs. What analysis
if any has Suburban Water Company made on
the effect of this acquisition onits rate
structure?
Mr. Downs:
My understanding is there has been no such
study. I made enough of an initial study
to ascer tain that they would not follow the
master plan, but I was
'
so busy turning out charts 1 to 6 that I
didn't get to this.
Councilman Young:
I might say it would have been appreci ated
if we had these sooner. But I realize things
moved along rather rapidly.
Mr. Aiassa:
The Suburban Water Company filed with PUC
an official application to serve this area
and actually established an official water
rate. I think if Mr.
Downs infers it didn't, maybe he hasn't do,,ne-
his research.
Mr. Downs:
Mr. Aiassa, the question was - have we made a
feasibility study at this time in connection
- al -
ADJ. REG. C.C. 9-29-70 Page Thirty--'ewo
UMARK WATER SYSTEMS ACQUISITION
with the rates we would charge at this time. You are correct and
Mr. Hannan just called my attention and advised me that in connection
with the Home Savings proceedings Suburban of course filed studies
in 1966-67 in which they advised they would be able to serve the
area and it is Mr. Hannan's recollection that there would be a rate
increase of only 3(,.
Mr. Aiassa: Mr. Downs do you have the rate you know they
were going to propose?
Mr. Downs: I would be happy to provide it,I don't have
it with me.
Mr. Aiassa: Mr. Zimmerman can you provide that for the
Council?
Mr. Zimmerman: The figure given in the report to the Council
last Saturday was $6.39 and that was based on
the usual us.age of 2200 cubic feet per month
through a 3/4" meter.
Mr. Aiassa: 'Mr. Zimmerman, I am talking about the official
application they made with the PUC for serving
the whole property. I believe the rate was
closer to $9.50. Do you remember that?
Mr. Zimmerman: This we would have to check. Our figures are
as I quoted.
Councilman Young: May I continue my inquiry a little further
with Mr. Downs? Would the acquisition of
this system essentially involve a rate
increase by Suburban?
Mr. Downs: on the basis of the study submitted to the
PUC some rate increase was contemplated at
that time, but it was.relatively minor.
Councilman Young: But it would be an increase for all consumers
served by Suburban? Or would it be limited
to this area?
Mr. Downs: Since we have not made a study on it and
everything is subject to the PUC review and
they -make up their mind as to how it is to be
divided, what is to be done, what rate to be charged, etc., frankly
we haven't got into that and I am unable to answer your question.
Councilman Young: There has been some reference made in the
City Engineer's report to the Council
before this hearing was opened to the public
or perhaps it was Mr. Patterson, but I recall a reference indicating
that Suburban may not have the financial capacity to develop this
area?
Mr. Downs: That would be categorically incorrect. We
have no'question on our ability to handle
0 the situation.
Mayor Chappell: Have you filed with PUC recently for a rate
increase in the area you are now serving?
Mr. Downs: No, we have not.
Councilman Nichols: At the outset of this matter to which I and
all of the Councilmen have given considerable
time and thought, I had taken the position
- '32
ADJ..REG. C.C. 9-29-70 Page Thirty-three
UMARK WATER SYSTEMS ACQUISITION
that I would favor municipal acquisition of this system as an
alternative to the acquisition of the system by another
governmental agency. At that time it was my understanding and I
think of many people, that Umark had three directions it could
propose to move in. Negotiating in each case separately - one,
with the City of West Covina; two,Rowland County District, and
thirdly, Suburban Water System. I was informed, I think,
totally in good faith that apparently Umark, for its own reasons,
would not enter or solicit negotiations with Suburban Water
Systems, and so as we moved into this area the option available
to me in my own mind was and has been not whether this area should
be served by Suburban but whether the Rowland District or the City
of West Covina should serve this area. I did not read the option
in any other way.
It now appears in a very interesting series
of negotiations, discussions regarding alitjhment and realignments
have been occurring and it appears now that the options that
existed not only for Umark but for the City of West Covina aren't
as they were apparently and it appears that Umark is not now in a
position to go independently to the Rowland Water District but can
deal only jointly with Suburban, and as its only option, short of
operating the system itself.
A development has occurred here this evening
which if it were consummated provides the very set of conditions on
which I stated I could not support municipal acquisition at all. I
can only go on the statements of a man that says he is representing
a governmental agency and that they are taking this position, and if
that is correct I don't see how at this point I can take.a vote to
acquire a system and convInce-myself that I am exercising the only
choice they would have. It might be in a day or two, -or three, con-
firming or collaberating information will be submitted to change
this or we might find that people making presentations here tonight
are not speaking with the authority they feel they are.
I would not be prepared to close this issue
off entirely tonight and say we are not considering acquisition,
but defer subject to the confirmation that Umark1s only other
practical alternate is to allow Suburban to serve the area, then I
would have to take the position that I would have to allow Suburban
to serve the area. If there is any way that it can be determined
to me that that is not the case and that alternates do exist and
will exist and in no event can Suburban be given service of.this
area - and this body does not control that - and then if.the choice
is for me to sit down and determine the choice is between Rowland
serving this 2200 acres,�*.th6_h:'.,T will go into the water business
for this City, because I think'one governmental agency can be as
responsible as another. Furthermore, I think the citizens of this
City would have a lot more recourse coming to this City Council
complaining than living in the City of West Covina and complaining
to the Rowland District. I still am not sure what my option is,
so I would not be prepared to take a firm action on this proposal
tonight. That would be my position.
Councilman Lloyd: Obviously the terrible things that can occur
to someone if they go into this water
business are not so terrible to some people
and that is more than amply borne out. There is money on the .
table on this thing, there is no question about that. There is
for Rowland, there is for Suburban, and apparently for the City of
West Covina. How much, or how little, or what the variables are
that go into things, frankly I really don't know. I think we have
ha d a very fine presentation on the part of Mr. Downs' for his
client - Suburban; and I would like to be as well represented if I
were in Suburban's position. As far as Umark is concerned in my
mind they have been amply represented by their people. They know
what they want out of it; they want their money out of it and
they can't put those houses up until they have water and on the
basis of -that they were apparently_willing to gamble millions of
�33 -
ADJ. REG. C.C. 9-29-70 Page Thirty-f9ur
UMARK WATER SYSTEMS ACQUISITION
dollars to put in a 301 line and apparently that 30" line is
something that nobody else was capable of handling and now all of
a sudden it is up for grabs and everybody is grabbing. I have
heard comments throughout the City with regards to who controls
what and how this Council is going to do and whether Mr. Aiassa
is going to vi6ld a tremendous source of influences over any
single ' individual and I can assure you that he has not, because I
have been swayed both ways this evening. My immediate inclination
is I am for private enterprise, and I don't believe there is
anybody wholts probably more strongly defended that on this Council
than I have. Historically I have been right down the line on it.
But the world isn't -made or broken by independent enterprise and
if I have a choice I favor a private corporation over a municipal
even though in some cases I think municipalities can give better
service and do a better job. On the other hand,I am a businessman
enough to'say - well wait a minute now, if there's some money on
the table and if that money can accrue to the people - 70,000 of
them - here in the City of West Covina and help reduce their taxes,
I am going to take A real deep look at it because frankly I am
tired of paying taxes and in case some of you haven't noticed
,, your
taxes are going to go up very shortly and not as a result of the
action of this Council but of the action of other governmental
bodies,.over which I have no control. I will say if we are going
to protect our own amity - and I am the guy that yelled let's
put two cities together because there will be economies and
efficiencies in government - I still believe that very strongly and
I think 'it should be done and I am not so foolish to believe it will
happen right now for many reasons not germane to the fact at hand.
So the fact.remains that I too, am of the opinion that at this
point we do not have a sufficient amount of information as presented
and I am not intimating that any man has lacked in personal
integrity in the presentation to this Council, but I am confused and
I would be quick to say what I said a week ago, that I am not in
anyway intimidated if Suburban Water would sue the City if the City
went into the water business. We will take our chances in court ,
I will not be intimadated by anyone, as a local legislator I don�t
care who they are, we have the right to represent everybody here,
we were propprly elected and we will go forward on that. If there
is a real opportunity that taxes will accrue and private enterprise
can go forward, I want to make sure that 9pportunity is fully
explored. If indeed it turns out that Suburba:n doesn't have an
opportunity to serve then again I kind of vote for West Covina
over Rowland.
Councilman Shearer: As stated, we have a little different ball
game then what some of us were operating
on. The date on the telegram is yesterday
at 4 p.m., so it is rather a recent occurrence. I jotted down
several notes during the discussion here it's in the best
i . nterests of the City, and I am not thoroughly convinced it is.
I know we have had facts and figures shown that it was, other
facts by Mr. Downs, showing that we would end up thirty million
dollars in the hole and I have doubts on that. I don't think the
City will!be hurt if we don't go into the water business. I don't
think we, as a City Council, were elected to take risks with a
potential profit of so much as reported to us in one report. When
you take a chance in business to make a profit you also take a
risk. I don't think I was elected to venture into the world of
business, weighing a potential profit with the inherent risk
involved. The higher the profit the bigger the risk.
what impressed me is a couple of facts
brought out regarding the PUC. Although the proposed West Covina
Water District would not be controlled by PUC, PUC has said that
22% is a reasonable figure we will consider for a water company
to repay, etc., yet we are asked to go to 30% and 50%. It says
to me that PUC, .. has been in the business a heck of a lot longer
than I have and will be around a lot longer than I will and knows
a great deal more about -it than I do in this respect.
34 -
ADJ. REG. C.C. 9-29-70 Page Thirty-1 ive
UMARK WATER SYSTEMS ACQUISITION
I think,as has been stated, that we have had
good presentations both by staff and the other people involved.
Mr. Downs mentioned there were four points that he talked too:
Philospph,ic&�,Economical, Legal and Political. I am .-not.,conderned
with the legal, I don't understand what they are talking about in
the first place and will leave that to our City Attorney.
Economics, I think I have heard enough figures here tonight to sit
down and prove that Suburban would pay me to deliver me water, so I
have to sort of discount that. Political, as a first level
politician based on the testimony we heard tonight we would have to
say the people of West Covina don't want it. I don't believe that
is evident by the six or'a dozen that have said they are against
it. I don't believe -this is a fair poll of the community. So by
the process of elimination I arrive back at the first point
Philosophical.
The philosophical question of private
versus public. Initially there was no question. It was public
versus public and it may revert back to that. I realize that
City Council is not in the driver's seat, Mr. Patterson and his
company own a water company and it is their's to do with as they
see fit. So I find myself now in the position that I am not pre-
pared to vote for the City of West Covina going into the water
business. However, I will make a statement that I feel very much
convinced that it is to the best interests of the City that
Woodside Village develop to its fullest and in that regard I would
be receptive to listening again if the other potential water
services in the area fe6l.- now we have eliminated our last bit of
competition and we can really put the screws to Umark and get
everything we want and in so doing delay and interfere with the con-
struction of Woodside Village. I would be very receptive to
Umark coming back and saying - look they got us over a.barrel,
they are demanding blood and we don't have blood. What I am trying
to say I would trust this would not be a factor and that both parties
will negotiate for a reasonable deal and we could all be happy and
have lots of water.
Councilman Young: There isn't too much left to be said. I
think the key to my own thinking on this
has been somewhat like Councilman Nichols,
perhaps for a slightly different reason. I think the time will
come in West Covina when it will be more to the advantage of our
citizens for us to be in the business of conveying water and if
another political entity takes over a substantial portion of.
the system under development we will be precluded from taking
over any water,system in.that area because they will exhaust the
right of eminent domain. Whereas if a contract is worked out as
we heard testimony from Mr. Swift and Mr. Downs, we will still
be in the driver's seat if we chose to be so at a future time
through condemnation proceedings, and this is the door I would
like to see kept open, because it has become feasible in many
areas for the public entity to operate the utility for the benefit
of all the people. With tha ' t door being left open, under those
circumstances I share the conviction of the other Councilmen,
I could not conscientiously see West Covina enter into this
contract. If that door is closed and as Mr. Nichols said, if we
had gotten that information tonight, then I am going to be
strongly inclined to be right in there with Rowland fighting
to get this water system because I do think we can operate it as
efficiently as anyone and I do think we have a proposed contract
here that we can basically live with for the next 20 or 25 years.
There are aspects to it which I don't like but mostly minor and
can be worked out, I am sure. Under the immediate circumstances
I don't see how I can vote for this tonight.
Councilman Lloyd: What I really would like to see is a
continuation of this, as it is a whole
new ball game. Since it is a whole new
ball game.I don't see why we are required tonight to make a
- 35 -
ADJ. REG. C.C. - 9-29-70 Page Thirty-six
UMARK WATER SERVICES ACQUISITION
decision since we are presented with a whole new set of variables.
I think the Council's position is very adequately explained and
I would like to continue it to the 13th of October and keep the
issue open and the public hearing open.
Councilman Nichols: Is that date agreeable with the City
Manager or would he suggest an earlier date?
Councilman Lloyd: Also I think we would have to ask
Mr. Patterson - are we still in the ball game?
Mr. Patterson: It doesn't sound like it.
Councilman Lloyd: That date would fall us out?
Mr. Patterson: I don't know what would be new that evening
that we don't already know this evening.
.Councilman Lloyd: I think there has been information this
evening....
Mr. Patterson: Only so far as the alternatives. The
business descriptions are essentially the
same.
Mr. Aiassa: Mr Mayor - I think Mr. Shearer hit it on
the head. I have no quarrels per se, I am
not building an empire. That land has been
dormant for five years due to a hassle over water. Nobody can
disagree with that, the facts are there. In fact the PUC just
dismissed it,and I know Home Savings & Loan would have developed
and moved if they had,their water program. I think Mr. Shearer
hit it on the head and'I think we should leave this contract open
and give Umark all the opportunities to come back if they get a
raw deal and are put over the coals and the area is going to be
stymied and we are going to have delays for another five years,
which we cannot afford, then I think we should leave the
opportunity for Umark to come back and negotiate. In this way
they have something pending with us and if they can't work out
a favorable deal with Rowland and Suburban, they should have a
right to come back and negotiate with us, because we have a
rather strong interest in that area. Just look at the Master
Plan's of ' that area, on which the City staff has spent a lot of
time and effort, and I don't want it stymied by a lot of little
manuevering. I want to see the City grow and that is one of the
big areas which we annexed in anticipation of growth in 1958.
If we can set up a definite date - the 13th - because Columbus
Day is on the 12th, or what we can do is adjourn this meeting
to the 5th of October and if we do not have.an issue or a matter
ready for City Council, City Clerk can adjourn the meeting to
the 13th.
Councilman Nichols: I think there is one very crucial thing
that should be incorporated in any action
the Council might take - the key element
would be the Rowland
not to entertain
Area Water District's binding commitment
any annexation of any prrt of the City of West
Covina that lies
within the 2200 acres under consideration,
because if that
were not the fact then we are back where we are
now because the
choice would be between West Covina and Rowland.
So I think there
should be some direction to staff to contact
that agency and
request that their Board of Directors affirm
their position.
Mr. Aiassa: Councilman Nichols.for Rowland to serve
any area they would have to go through a
formal application with LAFCO and that
would be the same with the private utility, they would have to go
through the PUC.
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ADJ. REG. C.C. 9-29-70 Page Thirty-sdven'_
UMARK WATER SYSTEM ACQUISITION_
Councilman Nichols: I am not so much concerned as to what they
have to go through, but I would like to
know that they don't plan to go through
anything.
Mayor Chappell: We have a recommendation from the City
Manager to hold this issue open until
October 5th.
So moved by Councilman Lloyd, seconded by
Councilman Young.
Councilman Young: I think we should have it clearly under-
stood that we are not trying to bind Umark,
it still runs its own company and I think
they understand that we are anxious to cooperate.
Councilman Shearer: I would like to comment on the recommenda-
tion ofthe City Manager - October 5th is
less than a week away. Mr. Patterson said
he didn't know whatnew materiai would be offered. I hate to
say a specific date and we go over everything discussed previously.
Mr. Aiassa: No, the hearing is closed.
Councilman Shearer: What I would like to see is this meeting
adjourned and if and when Mi�. Patterson has
something new to offer then through the
City Manager,we have a meeting scheduled every twoweeks, and this
could be brought up. But if.Council votes for a.meeting on
October 5th I will be here.
Mr. Aiassa: Mr. Mayor and Councilmen, the only problem
we face is for Council to take any legal
action we have to designate a date and time
for those people interested so they will be here and otherwise I
can only give you a 24 hour notice and I have to send the notice
to newspapers and it is a little complex. This is a simplier way
of doing it.
Motion carried.
ADJOURNMENT Motion by Councilman Young, seconded by
Councilman Lloyd, and carried, adjourning
this meeting at 12:05 A.M., to October 5,
1970 at 7:30 P.M.
0 ATTEST:
CITY CLERK
APPROVED:
MAYOR
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