10-04-1999 - Special Meeting - MinutesMINUTES
SPECIAL MEETING OF THE
WEST COVINA CITY COUNCIL
OCTOBER 4, 1999
isThe special meeting of the West Covina City Council was called to order by Mayor Howard at 7:13 pm
at the Shadow Oak Park facility located at 2121 E. Shadow Oak Drive, West Covina.
ROLL CALL Mayor Howard, Mayor Pro Tern Melendez, Councilmembers
Touhey and Wong
Absent: Councilmember Herfert
Others Present: Hobbs, Collier, Pidgeon, Mayer, King, Briley, Urban, Berry
POTENTIAL SALE OF THE CITY'S WATER SYSTEM TO SUBURBAN WATER SYSTEMS
Mayor Howard welcomed the citizens of both Walnut and West
Covina, customers of the City's Water System, and outlined the
procedures for the evening.
City Manager Hobbs City Manager Hobbs presented an overview of the evaluation
process, including:
* Top reasons to sell the system to Suburban
* Top reasons for keeping the water system
City Manager Hobbs explained that to sell the system to Suburban,
the following recommendations apply:
a) The sale must be fair.
b) Validated by a third party.
c) Minimum of 5% rate reduction.
e) Vote of the subscribers and information from the
city to the voting parties.
Mr. Hobbs stated that if the City retains the Water System,.the fol-
lowing recommendations apply:
a) A rate reduction of 5%. -
b) After two years, additional rate reductions.
Staff Presentation
Public Services Director Collier Public Services Director Collier presented a more in-depth review
of staffs analysis of the proposed sale. Using an overhead projec-
tor, he discussed several aspects, including the following:
* A listing of the City's water system assets.
* Estimated on -going costs to the general fund ($788,966)
and other funds ($187,140) that would continue after the sale.
* During FY 97/98 the City purchased water from four water
sources: Upper San Gabriel Valley Water Basin, Walnut Valley
• Water Company, Covina Irrigation Company, and Valencia
Heights Water Company.
* Water rate comparisons.
* Water system consumption for the last four years.
* Process of selling a water system, with a tentative public
hearing date of November 16, 1999 to tally the election votes.
Mayor Howard added that the next public meeting on this
issue has been set for October 30. Information as to the time and
place will be announced as soon as it has been determined.
Council Minutes 10/4/99
Council Ad -hoc Committee Report
Councilmember Touhey As a member of the Council ad hoc committee that studied the
potential sale in depth, Councilmember Touhey presented the
findings of the committee, after three years of study. He noted
that current state law does not permit residents outside the city, that
receive the City's water service, to vote on the issue. The City
• Council was successful in getting special legislation (AB 1120)
passed that also prohibited West Covina citizens not served by the
City's water department (approximately 88% of the residents) from
voting on the issue as well. This was to ensure that only the
residents served by the water department could vote on the issue —
to control their destiny, in relation to water services.
Mr. Touhey addressed the one company that stood out
among the others that would really benefit the citizens and the
City, and that company was Suburban Water Systems. Suburban
Water has water rights that allows them to transfer water from one
basin to another and that greatly reduces the cost of water service.
He discussed rate issues: how they are regulated, surrounding
water purveyor rates, current rates, and future rates. He stated that
when that by a unanimous vote of the City Council, permission
was granted to proceed with the potential sale of the water system
to Suburban Water Systems.
Suburban Water Svstems
Michael Quinn Michael Quinn, President of Suburban Water Systems, spoke of
the advantages to the residents, the City of West Covina, and his
company in selling the City's water system to his company. Of the
many points he presented, he mentioned that Suburban already
serves 70% of the City's water customers. Suburban has a large
number of water rights (the City only has one) and only purchases
water from MWD during summer months, the peak demand
period. MWD water is very expensive and MWD will be raising
their rates again.
Mr. Quinn addressed the reduction in rates for the residents
of West Covina and Walnut if the proposed sale becomes final. He
noted that water is the company's only business and Suburban
Water has been serving West Covina for the last fifty years.
"Citizens Azainst the Water Sale
Robert Tafoya Robert Tafoya, 2214 Calle Jalapa and the group's representative,
discussed his group's findings that compel them to oppose the sale
of the water system. He read from several reports and countered
information provided in the staff report.
Mr. Tafoya noted that City services would suffer if the
water system was sold and local control would be lost to the
California Public Utilities Commission, an entity too large and
remote to bother with local concerns.
Public Comments
.Tune Wentworth ,Tune Wentworth, Mayor Pro Tern of the City of Walnut, read and
submitted a letter imploring the City Council to treat the residential
water customers of Walnut the same as those in West Covina. She
requested that the issue of uniformly applied rates be included as
part of the conditions of the sale to Suburban Water.
Tony Cartagena Tony Cartagena, 21200 E. Valley View Road, Walnut, opposed the
water system sale to Suburban, feeling there would be an unfair
reduction to the Walnut residents.
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Council Minutes 10/4/99
Harold Toy Harold Toy, 477 N. Beverly Drive, Walnut, spoke as a member of
Citizens Against the Water Sale requested a clarification as to the
different rate reduction for the customers in Walnut versus those in
West Covina.
Wendy Toy Wendy Toy, 477 N. Beverly Drive, Walnut, addressed Council as a
member of the Citizens Against the Water Sale group and read a
letter opposing the sale.
Royal Brown Royal Brown, 2153 Aroma Drive, noted that there are three com-
ponents to the water rates and explained each. He also gave
examples of different rates for the various sized meters.
Dan Marostica Dan Marostica, 347 Pierre Road, Walnut, Walnut City Council -
member, noted that Walnut residents make up about 40% of West
Covina's water system customers and have been contributed to the
City's reserve funds. He suggested that it could be unethical and
illegal for the City of West Covina to use its reserves without
consulting the Walnut residents/customers.
Bert Ashley Bert Ashley, 479 Castle Hill Drive, Walnut, Walnut City Council -
member, spoke in support of her constituents and urged the West
Covina City Council to consider their neighbors to the south.
Mike Miller Mike Miller, 735 E. Herring Avenue, stated his interest in seeing
the sales agreement and suggested that it be placed in the library
for public consumption. He felt the water customers would vote
on the issue depending on how it effects their pocket books. With
that in mind, he suggested that West Covina give examples of
actual billing amounts, before and after the sale. Rate reductions
discussed in percentages are more difficult to comprehend and
appreciate.
Mr. Miller related the history of the water system. No
company was interested in providing water to the Woodside
Village area when it was first developed, so the City of West
Covina created its own. He said it makes sense that any revenues
generated by the sale should revert to the City of West Covina.
Leonard Mercado Leonard Mercado, 3508 Patricia Street, spoke as a member of' the
Citizens Against the Water Sale group and noted his support for
local control.
Leslie Nacionales Leslie Nacionales, 2214 Calle Jalapa, member of the Citizens
Against the Water Sale, spoke in opposition to the sale because it
was not conducted in a competitive bid fashion. She disagreed
with the regulations limiting one ballot per homeowner
association, rather than one ballot per tenant household.
Priscilla Dompier Priscilla Dompier, 19830 Camino Arroyo, Walnut, member of the
Citizens Against the Water Sale, felt the sale of the water system
was very unfair to the Walnut customers and also thought the pro-
cess should have been through competitive bidding.
Recess Mayor Howard called a recess at 8:33 pm. The City Council re-
convened at 8:40 pm with all members present. .
Council and Staff Response
Councilmember Touhey Councilmember Touhey discussed the following topics:
Council Minutes 10/4/99
•
C�
* From the revenue that would be generated from the sale of
the water system, $8.5 million would offset the current bonded
indebtedness.
* In response to a question, Councilmember Touhey reversed
the question by asking what would the Walnut Valley Water
District do for its West Covina residential customers with its $43
million in reserves.
* West Covina is the only municipal water system that does
not impose an additional surcharge to residents outside its
boundaries. Walnut residents have not had to pay this typical
additional charge.
* Citizens have been quoting from an outdated contract dated
1971. The current agreement is dated 1984.
* He discussed Requests for Qualifications, the process used,
for this issue. The consulting firm hired is the only one in the field
that does this type of work and the City knew that.
* Assets of the water company belong to the City of West
Covina.
* When the City of Walnut asked for West Covina's backing
in opposing an MRF in their City, West Covina acquiesced
knowing full well that it would eventually result in higher waste
disposal costs for everyone.
Public Services Director Collier stated that Suburban Water would
utilize the current City zone structure. He clarified that for election
purposes, one ballot will be sent to each billing address. If a
homeowners' association pays the water bill, there would be one
ballot. Thirty-eight hundred notices were mailed last week for this
meeting, including a notice in the Tribune, on the web site, and on
the corkboard for cable television.
Councilmember Wong noted that the Walnut customers have been
guaranteed the same water rate for the next four years, which is
something the City of West Covina couldn't guarantee. All
indications point to an increase by MWD, which would seriously
impact West Covina's water system rates.
In response to the comments about the ugly bureaucracy of
the California Public Utilities Commission, Councilmember Wong
stated that in the last thirteen years, the CPUC has approved a net
13% increase to the water rates. West Covina water customers
have incurred a larger increase over the same time period, because
the MWD has controlled West Covina's water costs. He discussed
the dilemma of weighing rate reductions for the ratepayers of West
Covina against the City's treasury, which in the past has been
nearly $1 million a year. He then addressed the issue of fairness as
expressed by the Walnut customers.
Councilmember Wong concluded by acknowledging that
there are plusses and minuses regarding the sale, but in his study of
the entire issue, the plusses outweigh the negatives.
Councilmember Tout -icy concurred with Councilmember Wong's
comments and discussed Walnut Valley Water District's rates.
Mayor Pro Tern Melendez said he agreed with the ad hoc com-
mittee in taking this to a vote of the residents served by the water
company, but that it is unfair that the Walnut rate payers don't get
a chance to vote or receive an equal reduction in rate. He
explained his reasons for voting no on this issue, some of which
are listed below:
* There is no reason to sell a valuable asset, one that
generates approximately $976,000.00 annually.
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Council Minutes 10/4/99
•
ADJOURNMENT
Attest:;
City':Clerk Janet Be
* The rates are lower with the City of West Covina and he
would make a motion to reduce the rates 10%.
* The overhead displayed this evening was not objective.
* He could not support a sale that treats ratepayers unfairly.
* The election vote will be unfair. In relation to home-
owners' associations, only one ballot will be issued to the
association, not the individual condo owners,
* The sale price is too low. The real price will never be
known, because the real value of the assets would be
known by the amount the bidders are willing to purchase
system.
* Local control will be lost.
Mayor Howard explained the Request for Qualifications process
used for this issue. She discussed the charge of the ad hoc com-
mittee from the City Council, which was to reduce the water rates
for the Woodside Village area. There was only one water company
that could do that and that was Suburban Water Systems. The
reason for that is that Suburban has water rights of its own. All the
others, including the City's water system, must purchase the
majority of their water from MWD. The only company that can
control its water rates is Suburban because they do not need to
purchase water from MWD on a routine basis.
She said the City can not bleed the reserves to offset rising
water rates because those funds are there to pay off the bonds that
were issued to pay off the infrastructure in the Woodside Village
area.
Mayor Howard stated that the City can not give a 15%
reduction to the Walnut residents. The City is already "eating" the
fifteen percent reduction it is giving to the West Covina residents.
In doing so, the City is actually devaluing the water system by that
amount. In addition, the surcharge that is usually imposed on
outside residents served by a municipal water system is typically
included in the sale of a water system, because the value of the
system is based on the income of the water company. h} essence,
by not surcharging the Walnut residents (approximately $722,000
annually), the City actually reduced the value of the water
company when it went up for sale.
Mayor Howard noted that Suburban's water rates will
never go up at the rate that MWD increases theirs. That is because
Suburban has water rights and they can pump water into their own
system. Suburban need not use MWD water unless absolutely
necessary, for example during the hot summer months. The end
result is a reduction of water rates for the residents that would be
served by Suburban Water.
Motion by Melendez to reduce rates by ten percent. Motion died
for lack of a second.
Mayor Howard adjourned the meeting at 9:27 pm.
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