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Richard Hajas of Ojai gives some tips to Peninsula folks about how to take over a water utility

Corrected Ojai takeover figure below

 

Public Water Now Holds Forum on the Feasibility of a Cal Am Buyout

PWN’s guest speaker, Richard Hajas, spoke from experience Monday night. Former general manager of the Casitas Municipal Water District in Ventura County, he was the key author of the feasibility study for the community of Ojai in its recent successful buyout of the private Golden State water system.

Hajas worked as a volunteer with Ojai Flow, the citizens group seeking to municipalize Ojai’s water system. He did the feasibility study pro bono. “Our Feasibility Study was our bible—it had all the facts we needed to argue for local public control,” he told the audience.

To determine if such a takeover is affordable to ratepayers, Hajas explained that the rate base is critical to the cost estimate. A reasonable estimate must also include the fair market value of the system, the costs of a 30-year bond to cover the purchase, the legal costs, and the costs of getting the public agency prepared to take over the operation.

Why did Ojai want public ownership of their water? Hajas said, “The cost of water from the private provider was the big problem. Our costs were more than twice as much as our neighbors and Golden State Water was taking $6 million a year out of our small community.”

The Monterey Peninsula has the most expensive water in the country. The audience could definitely relate to Ojai’s motivation! Although Ojai has a much smaller water system than the Monterey Peninsula, the community successfully fought the corporate Goliath’s legal onslaught and publicity campaign and won public ownership.

Hajas cautioned that the current private water owner will do everything possible to discourage the public from such an undertaking. “Water is a very profitable business,” he said, “and the private owner will definitely not go away quietly.”

It took seven years and cost a total of $60 million for Ojai to buy out Golden State Water. When it came to a public vote Hajas felt confident in the outcome. (Article originally said, incorrectly, that the total was $44 million.)

“I’m a numbers guy. Voters approved the process to purchase the Golden State water delivery system with an 87% majority.”

Under public ownership long-term savings for small usage customers is project to amount to hundreds of dollars per year and much more for larger customers. For the Ojai community of 5,000 to 6,000 people, the total savings over the first 10 years could reach $25.8 million.

Asked if it was worth it, Hajas said, “Yes, because it will cut the annual cost increase to ratepayers in half, from 8% per year to 4%, over a 20-year period, saving many millions of dollars. And I stress the importance of looking at such a project over the long term. It’s long-term savings. My kids and grandkids will see the greater benefit”.

George Riley, director of Pubic Water Now, ended the meeting saying, “PWN wants to make the public aware of the problems and costs related to private water systems. Their motivation is profit, they’re answerable to their shareholders, not us. It easy to see why 87% of the water systems in the U.S. are publicly owned and operated for the good of the communities they serve. I don’t like to be the bearer of bad news, but more water rate increases are coming from Cal-Am. We need to take action!”

Public Water Now will begin collecting signatures in October to qualify municipalization of our water system for a vote on the November 2018 ballot.

Melodie Chrislock, the communications director for Public Water Now, can be reached at MWChrislock@redshift.com

Comments on this entry are closed.

  • Melodie Chrislock September 12, 2017, 7:45 pm

    Thanks Royal, hey I’d probably should be honored that you would put your by line on this…even if it was just a mistake 🙂

  • Ron Chesshire September 12, 2017, 8:23 pm

    The people of Ojai had a responsible, motivated, and dedicated agency which helped them lead the charge in the effort. Who do we have? Actually, I think I know the answer but want a member of PWN to fully enlighten us.

    Please check out the Ojai Flow website. http://ojaiflow.com/

    • Dan Turner September 12, 2017, 10:20 pm

      And so it falls unto me to enlighten you, Ron. Incidentally, the following is my personal opinion and not Public Water Now’s official position or policy statement. Also, it is possible that some of the folks in the leadership of that organization may take issue w/some of the things I’m going to say.
      We are using the Monterey Peninsula Water Management District (WMD) as the agency to take over distribution of our water because : 1. they are the logical agency to do it and, 2. there is no other viable alternative.
      The problems w/choosing WMD are : 1. many people dislike it because they have become the “water police” for the past 20 years. This is a result of them being the agency charged w/enforcing the State Water Resources Control Board’s (SWRCB) Cease and Desist Order (CDO) that gave CalAm 20 years (from 1996) to stop over-pumping the Carmel Valley aquifer. So, when folks want to develop a piece of property or add a bathroom to their house as part of a remodel, it is the WMD that tells them they can’t build a new house or add a bathroom because of the the SWRCB’s CDO. There are other reasons that more than a few folks dislike the WMD – some valid and others not, in my opinion – but I’m not going to go into them here.
      The second reason that it is problematical to choose the WMD to be the agency to take over distribution of our water is that four of the seven members of the Board of Directors are opposed to the idea of getting rid of CalAm and installing the WMD as the public agency to distribute our water. Three of the five elected members oppose it and one of the two appointed members opposes it.
      So, why have we selected the WMD as the agency to oust CalAm and become the public water agency? Because, first, it is the WATER Management District. Water is its business. Second, there really isn’t any alternative to them because : 1. we can’t form a new Joint Powers Agency (JPA) to be our public water agency by ourselves – as private citizens. It requires two, or more, governmental or public agencies to form a JPA so, legally, we just can’t do that. A city, like Monterey, could go to court and get CalAm condemned w/in its city limits but there is no chance that any city in CalAm’s territory will do that. So that’s not an option. I’m not certain of it but I believe that either the Marina Coast Water District has no interest in getting rid of CalAm and expanding its district to include CalAm’s territory, or there may be legal reasons why it can’t do that.
      So, what’s left? The WMD! It is possible that, for a variety of reasons, some of the Directors of the WMD may change their position from opposing community-owned water to supporting it during the next year or so and that would certainly make the transition to a community-owned water distribution system easier. If they don’t, we’re going to have to replace them at the ballot box with folks who are in favor of community-owned water ASAP.
      This situation is far from ideal but we think we can succeed and we hope that you’ll be with us.

      • Ron Chesshire September 12, 2017, 10:56 pm

        Thank you Dan and am looking forward to the official position also. My point is you need a willing agency to be actively involved to accomplish your goal. At this time the District’s record regarding water augmentation and political makeup of the Board speaks for itself. I will be looking forward to the group’s Feasibility Study and good luck in the upcoming (2018) elections.

        • Dan Turner September 12, 2017, 11:31 pm

          I agree that it would be much easier w/a willing agency which we, unfortunately, don’t have. However, although we’d much rather not have to overcome such obstacles, we do not think they are insurmountable.

  • Ron Chesshire September 12, 2017, 8:34 pm

    The Casitas Municipal Water District played a major role in the public takeover. Please look into the Ojai Flow website. The link above and here – http://ojaiflow.com/ and check out the Reference Info section in the header. Lots of good info. RC

    • Melodie Chrislock September 13, 2017, 3:56 pm

      Ron, while our situation is not ideal, neither was Ojai’s. They had many, but different hurdles, to over come. One of them being, as Richard Hajas pointed out in his presentation, that the Casitas Municipal Water District was very reluctant and not at all interested in taking on Ojai’s water system. They required much negotiation and reassurance.

      While we have some WMD board members who oppose public water and stand by Cal Am no matter what, others would be happy to see Cal Am and it’s bottom line gone for good. Time (and public pressure on some WMD board members) will tell just how much longer they can back Cal Am.

  • Steve Saunders September 12, 2017, 10:31 pm

    We need to take back our water and our lives from the money grabbing 1% the see us only as a source of income with no limits to their greed..ENOUGH IS ENOUGH….

  • James Toy September 12, 2017, 11:38 pm

    “To determine if such a takeover is affordable to ratepayers, Hajas explained that the rate base is critical to the cost estimate. A reasonable estimate must also include the fair market value of the system, the costs of a 30-year bond to cover the purchase, the legal costs, and the costs of getting the public agency prepared to take over the operation.”

    Exactly. Unfortunately after years and years of talk about a buyout of Cal Am we still don’t have those numbers. Without those numbers we can only speculate about how a buyout will affect water rates. If the numbers work out favorably, I could support a public takeover. But until we have them I’m not ready to jump on the bandwagon.

    • Myrleen Fisher September 13, 2017, 8:10 am

      Mr. Toy,
      It’s heart-warming to see you say, “If the numbers work out favorably, I could support a public takeover. But until we have them I’m not ready to jump on the bandwagon.” That kind of reasonable approach is all that Public Water Now is hoping to have from the public.

      Now, maybe you could help obtain and crunch the needed numbers with us. You wouldn’t be jumping on a bandwagon, instead, you’d be making a constructive effort to determine the feasibility of public water. Your help, and that of others, is most welcome. We are an open, grassroots organization, trying to improve our water situation for all of us. Help us.

    • Dan Turner September 13, 2017, 10:12 am

      It won’t take 30 years for our water bills to be less than they would be if we stayed with CalAm but suppose it did? One of the things that Mr. Hajas mentioned in his talk was that the folks in his group who worked for a community-owned water system were concerned about the long-term interests of, and benefits to, their community. He said that people in his children’s and grandchildren’s generation will really benefit enormously from the inclusion of Ojai, in 2017, in a community-owned water system – which is what the Casitas Municipal Water District is. Mr. Hajas and the others in his group were very concerned about posterity – the folks who will be here in the future. This does not mean only his children and grandchildren, his progeny, but everyone who will be living in Ojai in 10, or 50, or 100 years. Now you might think that only a sucker would be interested in posterity. After all, what has posterity ever done for you? Unfortunately, I have actually heard arguments just like that from members of the MPWMD.
      As you know, if you attended one of Monday’s forums at which Mr. Hajas spoke, it didn’t take 30 years for the folks in Ojai to realize savings on their water bills. Those savings began the very first year. But what if those savings hadn’t begun until 5 years out? Or 10? Or 15? Wouldn’t it still have been worth it for them to have gotten rid of their corporate water supplier? Le’s compare it to buying a house. Your rent for an apartment might be $1,000 per month and, upon buying a house, your payments increase to $1,500 per month. That wouldn’t sound like such a good deal to some folks unless you look 5, 10 or 15 years down the road. By that time, the rent on the apartment would probably have increase to more than $1,500 per month. So, at that point, you’re ahead, financially. And then, 25 or 30 years out, you’ve paid off the note or the mortgage and you own the house free and clear with only maintenance and taxes as expenses. The apartment you rented for $1,000 30 years ago would probably be renting for $2,000 to $3,000 per month at that point. Please show me where my numbers or analogies are wrong.
      One last word about this idea that we shouldn’t do anything unless it can be shown that it benefits US and that it benefits us RIGHT NOW. Sometimes people my age (I’ll be 72 in December) plant a tree in whose shade we will never sit. Do you think that makes me a sucker?

  • Elizabeth Murray September 13, 2017, 8:23 am

    Thank you for the clarity. Water is essential/ it will always be in demand & in short supply. Investing time & money to buy out for profit CalAm to be a public water facility not for profit is The best investment for our future.

  • Melodie Chrislock September 13, 2017, 3:34 pm

    CORRECTION ON ARTICLE
    I got the figure for Ojai’s total cost of purchase wrong. It should be $60 million, not $44 million. The $44 million was the figure for a Revenue Bond, but in the end the Casitas Water Municipal District went with a Property Bond which upped the price.

    • Melodie Chrislock September 13, 2017, 3:35 pm

      Thanks to Troy Ishikawa for spotting my error. He was really paying attention!

  • Ron Weitzman September 13, 2017, 11:57 pm

    Invited by PWN, Richard Hajas made a superb presentation at our Monday morning WRAMP meeting of mostly PWN and WRAMP board members. Important for our local municipalization effort, he made these critical observations: (a) In a feasibility study, you must show that the transfer of ownership is in the public interest by, among other things, providing specific evidence that costs to ratepayers under existing local public ownership have been and are projected to be significantly lower than corresponding costs under existing private ownership and (b) the “rate base” of the privately-owned utility is a good approximation of its fair-market value. (Used to determine the amount of annual profit on equity and interest on debt charged to ratepayers, the rate base consists of a combination of equity and debt reflecting capital improvements and their depreciation.) Observation (a) implies that the prospective public buyer have a track record in public water purveyance. That is bad news for us because the water management district has had no experience in water purveyance. Observation (b), on the other hand, is good news because the current rate base of our local Cal Am is about $140 million, far from the $800 million fair-market value the company has for years been bandying about to frighten us. Since I did not attend the two later presentations that day, I do not know if they included this information.

  • Bob Oliver September 16, 2017, 9:05 am

    IS THIS ALL A PUT-ON? Cal Am has proven to us (me) that it is a “criminal enterprise”. It should be disbanded. People should go to jail, period.

    Cal AM’s selling price will be high, if left to them to figure and decide. Should their price be high for old infrastructure, bursting street pipes, and no water supply? NO! We are being “suckered” to take over an old obsolete system at an outrageous price.

    Whoever takes on the responsibility of this system needs to deal with dams, reservoirs, holding towers, aquifer replenishment, and all the other problems which have been ignored for “obscene profits.”

    Note: With the proper infrastructure in place, the Carmel River is the best source of water – not a Desal plant which is the other part of “THE LIE”. https://www.youtube.com/watch?v=JDkWYJDP554

    Bob Oliver 831 383-2676 boboliver9@gmail.com

    • Myrleen Fisher September 16, 2017, 4:50 pm

      Bob, The price for buying out Cal Am will not be left up to them. In matters of eminent domain the price is determined by the court, not by the public buyer, not by the reluctant seller. All conditions of the water system will be evaluated and they will be a factor in the pricing. The dams, the aquifers, etc., are already known to and under the surveillance of the Monterey Peninsula Water Management District, who will be charged with taking over the purveying of water from Cal Am on behalf of the community, when the next initiative passes. At that point they may either operate the system themselves, or hire another entity to operate it.
      Of course the water in the Carmel River is superior to any provided by desalination or other processed water. However, the State issued an order that we can only take a small percentage of the amount Cal Am has been taking for the last 20 years or so, since the Cease & Desist Order (CDO) was issued. We were given a 5-year extension on that order in 2015. Therefore, continued over-pumping of the river cannot continue after 2020. Other water sources must be found. Cal Am has passed over opportunities for water in past years, opting for the highest cost (highest profit) desal they could come up with. A community-owned system would, instead, seek the lowest cost solution possible–profit not being a motive. It’s the right thing. Help us get there.