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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. 2 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. 4 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. 0