08-03-1999 - Special Meeting - MinutesMINUTES
SPECIAL MEETING OF THE
WEST COVINA CITY COUNCIL
AUGUST 3, 1999
The special meeting of the West Covina City Council was called to order by Mayor Howard at 4:40 pm
in the City Hall Council Chambers, 1444 W. Garvey Avenue, West Covina.
ROLL CALL Mayor Howard, Mayor Pro Tem Melendez (arrived at 5:00 pm),
Councilmember Herfert (arrived at 6:00 pm), Councilmembers
Touhey and Wong
Others Present: Hobbs, Fields, Martyn, Collier, King, Briley, Dove, Mayer,
Tucker, Pidgeon, Berry
STUDY SESSION CONSIDERATION OF SALE OF WEST COVINA'S
WATER SYSTEM TO SUBURBAN WATER SYSTEMS
City Manager Hobbs presented evaluation factors and the top
reasons for retaining the City's water system and the top reasons
for selling it to Suburban Water Systems.
Public Services Director Collier presented the staff report,
commencing with the history of the City's water system covering
relevant statistics and the evaluation process, and concluding with
options available to the City Council.
Mayor Pro Tem Melendez arrived at 5:00 pm.
Finance Director Tucker presented the financial aspects of the
water system as well as the components of the sale. She discussed
bonded indebtedness, stranded costs and other costs impacting the
General Fund.
Public Services Director Collier discussed the impact on the City's
organization. Because the potential sale of the City's water system
has been discussed for several years, the City has not filled
vacancies in the Maintenance Department, for those employees
effected by the sale will be transferred to those positions. There is
one account clerk position that is proposed for elimination.
Harold Morgan Harold Morgan of Bookman-Edmonston, the City's consultant
who participated in the evaluation and negotiations on behalf of the
City, gave his expert opinion on the terms of the potential sale. He
presented his credentials and his association with appraising large
and small water systems.
Mr. Morgan opined the proposal is fair to both the City and
the ratepayers and is a fair market sale. He stated three overriding .�
• benefits to the City:
1) Suburban has alternative water sources, which gives an
economic flexibility to Suburban in times of emergency which the
City doesn't have.
2) From a system of 7,600 connections to a system of 77,000
connections will result in a gain of economic, operational
efficiencies.
Council Minutes of 8/3/99
11
3) Suburban has the expertise for state -of -the art operation
and management, which the City being much smaller, does not
possess.
Councilmember Touhey spoke as a member of the City Council ad
hoc committee and commented on several issues:
* Suburban Water Systems has rights to transfer water
between water basins, whereas the other bidders did not.
* Where the City has a maximum amount of water it can
purchase from Covina Irrigation, Suburban is not restricted.
* Both Mayor Howard and he agreed and recommended to
the remaining City Council that the City enter into an Exclusive
Negotiation Agreement with Suburban.
*, BKK has decided to leave the City's water system to obtain
reclaimed water for the landfill landscape maintenance. This
amounts to an 11% loss in gross revenues. BKK has a signed
M.O.U. with the City of Industry.
* The City's system is currently at its peak and the value of
the system may begin to drop. The ad hoc committee felt moving
forward with the sale at this time would yield the maximum value
from the water system.
Councilmember Touhey stated that the ad hoc committee's
recommendation to the City Council is to move forward with
placing the matter on the ballot for a vote of the ratepayers and to
approve the Letter of Intent to sell the water system to Suburban.
Public Comments
Mayor Howard stated that this was time to take comments from the
audience.
Letter from Michael Miller
Before the first•person spoke, Mayor Howard read a letter dated
August 2, 1999 submitted by Michael Miller, 735 E. Herring
Avenue, expressing his concerns and questions about the potential
sale.
In Favor
Tony Gamier
Tony Gamier, President of Southwest Water, the company that
owns 100% of Suburban Water Systems, addressed Council as the
spokesman for Suburban. He complimented the thoroughness of
the staff report and not wishing to be redundant, cut his remarks
short.
Mr. Gamier introduced Mike Quinn and Reg Stone,
president and vice president, respectively, of Suburban Water
Systems.
In Opposition
Robert Nationales Tafoya
Robert Nationales Tafoya, 2214 Calle Jalapa, founder of "Citizens
Against the Water Sale." He stated that his group is against the .
sale of the water system because they felt it was not in the best
interest of the City. He said the City is offering a 10% decrease on
the commodity charges and the standby charges to both the City's
ratepayers as well as the Walnut ratepayers. Suburban, on the
other hand, is offering a 10% reduction solely to the City's
ratepayers.
He then addressed the reserve fund of $9 million. He noted
that the appraisal of the water system was determined to be $12
million. That makes a 75% reserve fund and a 15% reserve fund
would be sufficient. He felt the water rates have been kept
artificially high because of the potential sale. Therefore, if the City
were to reduce the reserve fund, it could reduce the water rates
paid currently by the residents.
He also suggested that Suburban may very well increase its
rates because of a contaminant found in the San Gabriel Valley
Basin, which will cost millions of dollars to clean up. The
ratepayers will be charged for the contamination cleanup.
K,
Council Minutes of 8/3/99
Quoting from the June 25th Southwest Company's
Quarterly Report to the CPUC, he notes that the company states
that there will be future construction expenses and operational
costs which may result in rate increases.
Herfert arrived at 6:00 pm.
Mr. Nationales Tafoya opposed the sale too for the loss of City set -
vices. He said the CPUC is a large bureaucracy and unresponsive
to citizens. He concluded his remarks by suggesting Council
postpone any decision on this issue and conduct neighborhood
meetings.
Jeff Parker Jeff Parker, City Manager of the City of Walnut, noted that he was
not speaking in opposition but did have questions posed to him by
Walnut residents. He spoke favorably of the Walnut rate payers
who have contributed to the City's reserve fund for the last ten
years. They have been good neighbors and should be offered the
same 10% rate reduction as that being offered to the West Covina
resident/rate payers. In relation to the reserve fund, if the City
Council decides to sell the water system, he suggested some dis-
cussion on the impact of the reserve fund on the Walnut residents.
Finally, he supported more forums or meetings for all the rate
payers, including Walnut, to learn more about the issue.
Councilmember Touhey noted that the other residents in
Walnut are served by the Walnut Valley Water Company and he
asked Mr. Parker if his City would be seeking a reduction with
Walnut Valley to match Suburban's, if that actually happened.
Mr. Parker stated that that would be the time an analysis of
the various rates would be conducted.
Royal Brown Royal Brown, 2153 Aroma Drive, asked several questions made
several statements. a) Does the proposal include selling a portion
of the City's maintenance yard. b) A refund to West Covina was
not passed along to the ratepayers. c) There was a glaring omission
on the first page of the staff report. The value of the assets listed
on page one was not included in the appraisal total. d) Will the
area east of Galster Park going to be able to vote on this issue.
Adjournment Council concurred on discussing the matter during the regular
Council meeting scheduled for 7:30 pm. Additional comments
might be received from the audience and staff can respond to those
as well as the questions/comments offered at this meeting. Mayor
Howard adjourned this meeting at 6:25 pm.
Attest:
City Clerk.Janet Ber
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