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Smoke Stacks

A lawsuit filed today against the Monterey Bay region’s air pollution agency accuses it of systematically and illegally imposing excessive fees against large businesses such as the Moss Landing power plant, which pay annual assessments because they release emissions into the atmosphere.

The suit was filed in Monterey Superior Court on behalf of two longtime district employees and was prepared by two Ventura lawyers, including Jean Getchell, a former planning supervisor for the Monterey Bay Unified Air Pollution Control District. Getchell’s contract was not renewed in 2011 after she told district officials that they were improperly co-mingling various funds.

That dispute and allegations of overbilling were first reported in 2012 by Monterey Herald reporter Virginia Hennessey.

The lawsuit says state law requires air pollution fees and fines to be based on actual costs without padding to cover unrelated expenses or create reserves. The district, however, despite repeated warnings, used excessive fees to build a large reserve fund and to provide additional compensation to top employees.

A study commissioned by the district in 2014 found that more than 2,000 relatively small entities, those emitting less than 8 tons of regulated pollutants annually, were not paying the full costs of monitoring but that the 84 largest sources in the district were subsidizing them through excessive fees. One of those, Dynegy Energy, operator of the Moss Landing power plant, recently negotiated a $450,000 annual fee reduction as a result of Getchell’s research. Also among those paying excessive fees is the Lhoist lime plant in Salinas. Getchell was not available to comment on the lawsuit but she has said in the past that other entities should be entitled to refunds as well.

According to the court filing, “The study documented the intentional omission of the revenues from the two largest sources of air pollution, which had paid $1,200,000-$1,300,000 in fee revenue annually. In so doing, MBUAPCD omitted approximately 44 percent of the (actual) revenues from the analysis. As a result, the study’s conclusion represents a disregard and contradiction of facts already known to” the district.

Getchell’s co-counsel, Richard L. Francis, said in a news release, “The board’s ongoing approval of … Richard Stedman’s fee recommendations has resulted in millions of dollars in overcharges to the business community. This is illegal and should end.”

The district enforces air quality laws in Monterey, Santa Cruz and San Benito counties. It is governed by an 11-member board of elected officials. Monterey County’s representatives are county supervisors Simon Salinas, Jane Parker and John Phillips, who recently replaced former Supervisor Lou Calcagno on the board. Other board members include Salinas City Councilman Steve McShane, Carmel City Councilman Ken Talmadge and Santa Cruz County supervisors Ryan Coonerty and Zach Friend.

The agency’s top administrator, Richard Stedman, has said in the past that the fees are properly set and that a reserve fund that reached more than $7 million was largely the result of fines imposed on polluting industries, mostly before he took over in 2010. He could not be reached to comment late Friday.

The lawsuit says air pollution districts can set fees above actual costs but only after a vote of the affected electorate, a procedure the district has not followed. It seeks a court order requiring the district to follow the applicable laws.

“For the past three years, the MBUAPCD and its Board of Directors have continued and still continue to allow regulatory fee revenue to be spent for purposed unrelated to the regulatory activities for which the fees are levied in contravention of (state law),” the suit contends.

Plaintiffs in the case are Michael and Teresa Sewell,  23-year district employees. Teresa Sewell is a supervising air quality c0mpliance inspector while her husband is an air quality engineer. The suit says they have standing to bring the lawsuit because they are taxpayers in the district.  For several years, Getchell and other district employees have been involved in grievance procedures and other actions over the district’s personnel policies

The lawsuit says that Stedman told the Herald in 2012 that he was about to perform a cost analysis and would be developing a “spend down” plan to essentially reimburse permit holders by capping or reducing their fees. Since then, however, the fees have increased, the lawsuit contends.

“By continuing to impose … permit fees in the manner it has for the past three fiscal years, wherein permit fee revenues have always surpassed the reasonable necessary costs of the regulatory program, the MBUAPCD through its Board of Directors has imposed regulatory fees that are revenue raising. The police power that authorizes public agencies to impose regulatory fees for legitimate regulation of health and welfare  does not authorize fees that are revenue raising without a vote of the relevant electorate,” the suit says.

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Do profits prevent Cal Am from picking up the pace?

????Twelve years ago, Nader Agha told me “Cal Am will never build a desal plant.”

We were having lunch at the Hyatt Monterey. Agha had set up the meeting to chew me out. I was the city editor at the Monterey Herald, which had published an article about his plan to buy the National Refractories property at Moss Landing. Agha, the developer-coin dealer-entrepreneur, was buying it as a potential site for a desalination plant of his own and he feared that publicity would kill the deal.

When I said I was skeptical about his ability to build a desal plant, he shook his head and said, “Do you really think Cal Am is going to build a desal plant?” He drew in his breath and raised his shoulders and said, slowly and loudly, “Cal Am will NEVER build a desal plant. NEVER.”

Why’s that, I asked, quickly and softly. He pulled out a pen and started scrawling on a napkin. There were numbers and arrows and plus signs and minuses. When he could tell I was not following, he wadded the napkin and said, “It’s simple. Cal Am is making too much money selling water that it gets for free. Why would the company want to spend millions of dollars doing something else when it is making so much money selling water it gets for free?”

Each time Cal Am suffers another setback in its effort to build a desal plant for the Peninsula, I think about Agha’s prediction. He’s no expert on utility finance but he has does know something about buying low and selling high. Given Cal Am’s halting progress toward a desal solution, I have had plenty of occasions to think about his forecast.

I thought of it again this week, of course, when I heard that Cal Am is suing over rights to use the Cemex property in Marina to drill test wells. In case you missed it, there had been a big fuss over the last several months over whether the city of Marina would allow Cal Am to drill the wells without conducting a complete environmental impact study. The city said no, and Cal Am supporters howled that do-nothing environmentalists on the City Council were trying to block the desal plant because of its growth-inducing potential.

As we have been told again and again, time’s a’wasting. The Peninsula is under state order to greatly reduce its reliance on the Carmel River. Cal Am needs to develop a considerable supply of replacement water pronto or face large fines.

Who pays those fines is an open question, of course. If Cal Am can persuade the state that it did all it could, those fines could land right on top of our water bills. Cal Am has stumbled to the right and stumbled to the left since the original water cutback order of 1995 but has managed each time to somehow put the blame on everyone else.

Now, here’s another delay and Cal Am is telling us it wasn’t its fault. It was Marina’s fault or the fault of whoever got to Cemex.

It turns out Cal Am had no firm deal with Cemex to drill the wells. Cal Am’s engineering department had gotten ahead of the legal department. In other words, this multinational conglomerate has been spending more ratepayer money and doing all sorts of engineering and hydrological work based on a handshake arrangement with another multinational conglomerate.

Good thinking.

Now Cal Am will try to get the courts to order Cemex to go along as a public necessity. There will be appeals and appeals of appeals, all involving deployments of sharply dressed lawyers.

We’ll be told that it’s the fault of do-nothing enviros, or even Cal Am customers who couldn’t convince Marina politicians that it is their responsibility to fix water problems outside their jurisdiction.

Eventually, I imagine, we’ll be asked to pay for it all, the appeals and the appeals of the appeals and the nicely dressed lawyers and the studies. Plus a 10 percent profit margin on top of it.

And in the meantime, Cal Am will keep pumping free water from the Carmel River and charging us more and more for it.

All because Cal Am’s lawyers didn’t do their job.

Or did they?

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