MARYSVILLE WATER WARRIORS~ Yesterday we posted an email that was sent to our elected officials from Cal Water, regarding the Felton buy-out of their water system. We then posted the response from Felton! Its unclear as to why the original email was sent out in the first place. Below is another letter from Adam Scow, Food and Water Watch about Felton. It is important that ratepayers everywhere have accurate information. Keep in mind that voters do have a voice in a municipal water district. You have no voice with a private water company. Please be sure to read the post from yesterday. Be sure to share both of these posts. To: Mayor Ricky Samayoa From: Adam Scow, Food & Water Watch CC: Members of the Marysville City Council Date: October 11, 2013 Re: An Overview of the Public Purchase of the Felton Water System On September 30, 2013, a district manager for Cal Water distributed an email criticizing the public purchase of the Felton water system. The email was misleading and inaccurate. In 2008, the San Lorenzo Valley Water District purchased the Felton water system from California American Water. American Water and other companies have tried to distort this successful public purchase into a warning against municipalization in attempt to undermine other local-control efforts. Felton Households Are Saving Hundreds of Dollars a Year With Public Enemy Control of Their Water Services The important question for Marysville as it considers a public purchase of its water system is: How have households fared with a publicly owned water system compared to a privately owned system? In his email, Cal Water’s district manager excluded information about how Felton households fared under private control – how much they had been paying the private utility and how much they would have paid under continued private control. Public ownership, in fact, has saved Felton households hundreds of dollars a year on their total water costs. In 2011, a Felton household paid about $111 a month for water service — $67 a month for 13 ccfs of water and an estimated $45 a month in special taxes to pay for the system purchase. Prior to the public purchase, California American Water sought rate increases that would have made Felton households pay an estimated $156 a month for the same amount of water in 2011. So, in total, compared to the company’s proposed rates, public ownership saved a Felton household about 30 percent or $540 on total annual water costs including taxes. A Please note that Cal Water’s calculation of SLVWDs household water bills is wrong. The SLVWD has bimonthly billing and its service charge covers two months, not one month as the company’s calculations suggest. B Pre-existing SLVWD customers do not pay the special taxes related to the Felton acquisition. Those taxes apply to only Felton customers, and they expire in 2035. In 2012, the county refinanced the acquisition bonds at a lower interest rate, decreasing the special tax from $524 in 2012 to about $464 this year. Public Financing Makes Public Water Less Expensive Like many utilities, the San Lorenzo Valley Water District has increased rates in recent years to pay for system improvements, including necessary upgrades to Felton’s water system, but overall, rates have increased by much less than what Marysville, California American Water planned. This is partly because public financing is considerably less expensive than private financing. Public entities can issue low-interest municipal bonds to pay for improvement projects. The water district’s long-term debt carries interest rates of between 2.4 percent and 6.0 percent. The average cost of capital for investor owned water utilities is about 10 percent. For example, California American Water was authorized to earn about a 10 percent return on the Felton system,7 and in 2011, Cal Water made a return of 10 percent in the Marysville District. Felton Households Have Control Over Their Water Rates and Service The San Lorenzo Valley Water District is currently considering a 62 percent rate increase over the next five years. This is not to pay for the Felton purchase, but for capital improvements, watershed management and other projects.9 Unlike customers of privately owned systems, customers of the SLVWD have the ability to stop the proposed rate increase. According to Prop. 218, if a majority of customers protest it in writing, the district cannot increase water rates. Similarly, if residents disapprove of the management and decisions of the water district, they can vote in a new board of directors to run the district. Marysville homeowners and businesses have no such oversight and control of Cal Water’s rates or decision-making. Felton Households Overwhelmingly Supported a Public Purchase of Their Water System of a Down during a special election in 2005, residents specifically authorized raising their taxes and issuing $11 million of bonds to purchase the system. The measure passed with three-quarters of the vote. As one water district official remarked, “It is hard to imagine how any stronger proof could be provided of the Felton community’s level of commitment and support for gaining local control of their water utility.” Corporate Tactics Can Drive Up the Cost of a Public Purchase of a Water System California American Water’s legal wrangling delayed the purchase and wasted public resources. The water district repeatedly told California American Water that it wanted to negotiate a settlement and avoid eminent domain litigation, but the company refused to come to the bargaining table until after the district filed an eminent domain petition. The company then contested the public’s right to condemn and only withdrew its legal challenge a week before it was to go to trial. It also settled with the district over the purchase price less than a week before the valuation trial was to start. Water Corporations May Try to Inflate the Value of Their Water System. In 2008, the district paid $10.5 million in cash and assumed $2.9 million of the system’s existing debt, and the company “donated” 250 acres of watershed land. The donation arrangement was presumably for corporate income tax purposes. Felton Friends of Locally Owned Water (FLOW), the primary local-control proponent, said in 2004 that the acquisition would cost $10 million to $12 million, and the water district’s official appraisal put the asset value at $7.6 million. These projections were much closer to the final price than the company’s appraisal, which put the value at $25.6 million. At one point in 2005, the company even claimed that the system was worth as much as $46 million — nearly three and-a-half times the final purchase price. Other local-control movements can look to Felton as an example of why they should not become discouraged when water corporations refuse to negotiate or demand excessive purchase prices.
Posted on: Fri, 25 Oct 2013 12:24:20 +0000
Trending Topics
Recently Viewed Topics
© 2015