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Exploration of privatizing spurs debate

An elected director says the agency has a track record of incompetence


Criticism of Groveland Community Services District’s track record as well as calls for caution have come out this week in the wake of preliminary talks district board members and staff are having with a private company to explore the possibility of selling.

Groveland CSD’s exploration of privatizing, and its talks with California American Water of Coronado, will be on the agenda for discussion at the next meeting of the district board of directors, scheduled to begin at 10 a.m. Aug. 8 at 18966 Ferretti Road.

In the meantime, an elected Groveland CSD board member says selling out to a proven private utility makes sense in part because his agency has a reputation of incompetence.

On the other hand, a Groveland resident says there are reasons to be concerned about California American Water and its track record.

California American Water is based in Coronado, San Diego County, and it is part of American Water, a multi-state utility with corporate headquarters in Voorhees, New Jersey, southeast of Philadelphia.

‘We’re incompetent’

Steve Perreira, a Groveland resident who’s been on the district board of directors nine years, says giving up control to a larger utility would benefit the district and its customers.

“Some people are wigging out because we lose local control,” Perreira said this week. “But the board is incompetent, it’s been that way forever. We’re incompetent nobodies.”

A recent example that upset Perreira is that water customers in Groveland now have average bill increases of 38 percent since April 1, but the rate study that preceded the rate hike failed to include an estimated $44 million in needed upgrades for aging Pine Mountain Lake water pipes.

Altogether, Groveland CSD needs to invest about $100 million in water and sewer upgrades over the next 30 years, Perreira said.

“We’ve proved our incompetence over and over again,” Perreira said. “We’ve covered up sewer spills, in 2010 and 2011. If you give us a chance to do something right, 90 percent of the time we’re going to do it wrong.”

The sewer spills Perreira referred to resulted in the state accusing Groveland CSD of poor spill management practices and efforts to cover up those practices, as well as a preliminary penalty of $1.1 million.

Culture of cover up alleged

In October 2011, a certified letter from the State Water Resources Control Board office of enforcement, copied to Groveland CSD’s general manager at the time, Gary Mello, stated:

“Central Valley Water Board enforcement staff has investigated two recent large sewage spills in August 2010 and March 2011. These spills demonstrate deficiencies in the District’s management of its sewage collection system.

“Water Board staff investigations have also identified numerous allegations of unreported spills and spills of under reported volume and impact. In total, the allegations suggest a culture within the District of poor spill management and cover up over many years.”

State water board officials accused the district of failing to properly report the 2010 and 2011 spills and their sizes, which were eventually determined to be up to 59,000 gallons of raw sewage in August 2010 and up to 96,000 gallons of raw sewage in March 2011.

Groveland CSD officials initially reported the spills, which reached local waterways, including Pine Mountain Lake and Rattlesnake Creek, as 50 gallons and 1,000 gallons, respectively.

The Groveland district eventually paid penalties of $375,000 and an estimated $298,883 in legal fees and costs related to sewage spills in 2010 and 2011, Jon Sterling, Groveland CSD’s current general manager, said Thursday.

Giving up local control of water and sewer will be worth it to have a proven entity invest in Groveland CSD’s aging pipes and other needs, Perreira said this week.

“Basically we don’t have any money to improve our infrastructure,” Perreira said. “We need tens of millions of dollars for a paltry 3,200 customers.”

The October 2011 enforcement action is the only one of its kind taken by state regulators against Groveland Community Services District since 2009, according to Andrew Altevogt, of the Central Valley Regional Water Quality Control Board.

“Groveland CSD is in compliance with their requirements from us at this time and we have no ongoing investigations,” Altevogt said this week.

A resident’s concerns

Kay Crow, a resident of Groveland since 1988, says she attends most Groveland CSD meetings and she is worried about the move to explore selling out to a larger utility.

“Basically I learned about this while I was out of town,” Crow said. “I didn’t see it on the agenda. I asked some questions and called the company and asked for a prospectus. They have many subsidiary companies and they can sell a water company after they purchase it.”

Crow said she is concerned that Groveland CSD is crippled right now, and she hopes the directors “aren’t looking at this like it’s a quick fix.”

We have failing infrastructure everybody in the community knows need to be fixed,” Crow said. “The directors and the residents of Groveland need to look closely at this move to privatize and at California American Water. They need to weigh it all out, the pros and cons. There are so many things that can go upside down.”

Crow said she’s learned the community of Felton in Santa Cruz County had some issues with California American Water more than a decade ago.

“They privatized their company and Cal Am sold it and they ended up with another company, and the residents bought their company back,” Crow said.

Jim Graham, a volunteer spokesman for the group Felton Friends of Locally Owned Water, said this week that “Cal-Am owned our water system, pushed for astronomical rate hikes at the California Public Utilities Commission and when we realized we weren’t going to get a fair hearing from the PUC, we initiated a successful campaign to use eminent domain to acquire the water system from the company.”

California American Water

Kevin Tilden, a San Diego-based spokesman for California American Water, said Thursday that Crow is right to call for scrutiny of any deal to partner with another utility.

“Everything she says is right,” Tilden said. “People should look at this before making a decision, any government agency should weigh the pros and cons. But if they decide to work with us, we look forward to working with them and helping them out.”

Tilden also said people should be careful about drawing any parallels between Felton and Groveland.

“They did choose to take their water company back, but their bills are double now what they used to be,” Tilden said of Felton residents. “To be clear, they did a property tax assessment and when you combine the assessment with their increased water rates, it’s double what they used to pay.”

California American Water serves about 630,000 people in 50 communities up and down the Golden State, according to its website.

Cities, towns and regions served by California American Water include parts of the Sacramento area, Larkfield, the Monterey Peninsula, Thousand Oaks, Newbury Park and Camarillo, Bradbury, Duarte and San Marino, portions of El Monte, Irwindale, Monrovia, Rosemead, San Gabriel, Temple City, the Baldwin Hills area, unincorporated parts of Los Angeles County, Coronado, Imperial Beach and other parts of San Diego County.

California American Water’s parent, American Water, is a public utility company operating in the United States and Canada. It was founded in 1886 as American Water Works & Guarantee Company.

American Water public relations staff say the corporation operates regulated utilities in 16 U.S. states. The entity also has market-based operations in 30 other states. Altogether, American Water serves an estimated 15 million people in 47 states and in Ontario, Canada.

In 2015, American Water had operating revenues of $3.15 billion, operating income of $1.07 billion and net income of $476 million, according to American Water results reported for that year.

“This is exploration of a concept in its earliest stage,” Sterling said this week. “We are at the stage of trying to figure out if it is even possible, before spending the larger effort to determine if it would actually be a benefit to ratepayers.”

Groveland CSD board member Bob Swan, who helped draft a public statement about talks with California American Water, said he would vote for the deal only if there’s a referendum of all district customers, and a majority of them are in favor of it.

“We’re talking about something that won’t happen for years,” Swan said. “The earliest estimate I’ve seen is it would be at least two years before anything could happen.”