The mother of all battles over the future of water on the Monterey Peninsula has finally come to a vote, and California American Water executives hope the $2.2 million they’ve spent to defeat Measure O will convince voters to reject the referendum. After filtering through the complexities of O, the truths and fictions, we’ve come to the opposite conclusion: The Weekly’s Editorial Board recommends a Yes on O.
Measure O calls for a feasibility study to determine if Cal Am should be bought out and the water company publicly owned. It is not an outright vote for public ownership of the water supply and distribution. If O passes and the feasibility study concludes it makes sense for the Monterey Peninsula Water Management District (MPWMD) to move ahead to take over the local water company, then the board must vote to accept or reject the study and its recommendations.
The risk we cannot afford – the name of the committee formed to oppose Measure O, as well as its ubiquitous tagline – appears to be a risk that doesn’t exist. Cal Am’s tale, communicated by proxy through the Monterey Peninsula Regional Water Authority (also known as the mayors’ group) and the ham-fisted “No on O” campaign, purports that a proposed seawater desalination plant would go off the rails if O passes. They say O would undermine Cal Am’s ability to resolve a desperate water crunch resulting from decades of overpumping the Carmel River, and a state order for corrective action.
After many conversations with water policy experts and people on all sides of the ballot initiative, it is the opinion of the Weekly that the process to develop a new and much-needed water supply will proceed on its own pace regardless of Measure O.
Based on our research, we’ve concluded Measure O doesn’t threaten the desal plant. The design-build agreement between Cal Am and CDM Constructors is signed. The permitting process is underway. The desal plant is proceeding along a completely different track than the public buyout. If the plant is built, it will be built by Cal Am. And if a buyout happens, the plant will be part of it.
It’s a matter of timing.
If Measure O passes, it will get the ball rolling on a feasibility study that must be done by February 2015, according to the initiative’s language. Then, after a series of public hearings, the MPWMD board would have to vote on accepting that study. That takes us to around May 2015. By July of that year, if the buyout’s still moving forward, MPWMD will start negotiating with Cal Am.
We can be fairly certain Cal Am won’t go quietly; company reps have said at various public meetings, “We are not for sale.” So in summer 2015, we can expect the eminent domain process to begin. That’s a sluggish, court-driven, juried process that will probably take three to five years, and we’re guessing Cal Am will drag it out. So in the smoothest of likely scenarios, the public would not own Cal Am until summer 2018 at the very earliest – if eminent domain is used.
Meanwhile, the desalination plant will have progressed along its own separate path.
By July 2015, we should know if the California Public Utilities Commission (PUC) has given Cal Am the green light to build it. We should also know if the PUC has directed Cal Am to buy water from the groundwater replenishment project (a wastewater recycling system the Monterey Regional Water Pollution Control Agency and MPWMD are pursuing).
If it has, Cal Am will move forward with a smaller desal plant, at 6.4 million gallons per day. If it hasn’t, Cal Am will build the bigger plant, at 9.6 million gallons per day.
The design-build team, involving a couple dozen subcontractors, will be raring to go by that point. Assuming construction isn’t held up by lawsuits, the plant should be online by early 2018, while the public buyout is still in the courts.
Point being: If the people of the Monterey Water District buy Cal Am – optimistically in mid-2018 – they will be buying a brand-new desal plant along with the company’s other local assets.
Cease-and-desist is real, but Measure O won’t affect it.
Note that 2018 is past the much-bemoaned deadline of December 2016. That’s when, under the State Water Resources Control Board’s cease-and-desist-order, Cal Am has to quit overpumping from the Carmel River. That means, with the order in full effect, we lose about 55 percent of our river-sourced water, which is where Cal Am gets about 73 percent of its water today. (The other 27 percent comes from the Seaside Basin, which is facing its own court-ordered adjudication. We’ll have to cut pumping from there in half by 2021, but that’s another sad story.)
No one – not the Peninsula mayors, not even Cal Am – expects the desal plant to be online by that deadline, so officials will almost certainly be standing hat in hand in Sacramento, asking the state water board for an extension. If the order is enforced and we don’t have replacement water ready to go, the Monterey region could face dire consequences: rationing that may force the hospitality industry to limit its room rentals, turning off golf course irrigation, halting construction, ending outdoor watering, limiting car washing. The local economy will suffer greatly.
This is not a phantom threat, and the Weekly shares the dread of the imposition of the cease-and-desist order. We’re strong advocates for a viable solution to our water shortage.
The mayors worry that Measure O will make Peninsula water managers look hog-tied, spooking the state water board into denying us an extension. And it’s true that we can’t be sure what the board will do. But we think state water board members will be reluctant to torpedo the Peninsula. We believe they will give the Peninsula a few more years, rather than plunge us into a thirsty economic freefall. But again, these possibilities are irrespective of the outcome of Measure O.
The Monterey Peninsula Water Supply Project is the slate of alternative water-supply projects including aquifer storage and recovery, groundwater replenishment and the desal plant. It is also a step that, timeline-wise, is already well underway with MPWMD’s full participation. Someone could throw a wrench into the desal timeline – Salinas Valley farmers could sue over water rights, an advocacy group could sue over environmental impacts – but it won’t be Measure O.
MPWMD General Manager Dave Stoldt can’t give an opinion about Measure O. But in the context of the district’s lead role in the search for a new water supply, he states unequivocally: “If the desal plant fails to get built, it will not be as a result of Measure O.”
As it stands today, Cal Am owns the cease-and-desist order. If the public buys them out, we take on their debts (including the order) right along with their assets. The restrictions on Carmel River pumping will remain. But we expect that the CDO will be lifted when Cal Am flips on the switch at the desal plant – and as we explained earlier, that’s going to happen before a public takeover is finalized.
Other good arguments against O, and why they don’t convince us.
The mayors fear Measure O could sow discord between Cal Am and MPWMD, which have been working together on low-interest financing for the desal plant – a brilliant deal, hatched and well executed by Carmel Mayor Jason Burnett, to save ratepayers $100 million.
Burnett, the most public face of the six-member Peninsula mayors group, says that $100-million deal, along with adding the groundwater recharge project just getting underway into the mix, are already two significant steps.
WE’RE DISMISSING THE CENTRAL CLAIMS OF BOTH CAMPAIGNS.
“I wouldn’t say public ownership is a bad thing,” Burnett says, but adds he has “a whole host of reasons” for opposing Measure O. It starts with timing.
“This is the wrong time to be doing it,” he says “If you buy Cal Am now, you’re buying the CDO.
“It would be better to be asking this question on feasibility after you’ve resolved groundwater recharge, water purchase agreements, the CDO and all the rest,” Burnett says.
Burnett says the mayors group, the water management district and Cal Am have a good working relationship. That’s important because the relationship between previous desal partners Marina Coast Water District, Monterey County Water Resources Agency and Cal Am ended with criminal charges against a county water commissioner and protracted litigation as Cal Am tries to extricate itself from the deal.
“Power only comes when you have leverage,” Burnett says. “Cal Am isn’t compelled to sign the water purchase agreement with the water management district, and therefore the public would have less ownership.”
But we believe that leverage will still exist if Measure O passes – even if it adds more tension to the relationship. The two entities have been frenemies for decades; they have proven they know how to work with each even when their interests at times are contradictory.
A third concern of the mayors: That if O passes, Cal Am will get revenge on its Monterey district ratepayers by purposely delaying the desal project. But the consultants defending Cal Am on a public buyout will be different and separate from the Cal Am consultants working on the desal plant. Again: They’re unrelated processes on separate tracks. In this case, the buyout of a new desal plant also offers Cal Am a huge profit motive to get the plant finished before a public takeover.
Yes, a bunch of money will get burnt along the way. But Monterey District ratepayers have been dealing with that every step of the road to desal. Ratepayers are already paying for Cal Am’s previous missteps.
And that leads to our next point:
Public water won’t necessarily be cheaper.
Measure O proponents have pinned their campaign on the promise that public water will be cheaper than Cal Am’s private water.
That’s a nice idea, but reality may prove different. The truth is, we don’t know how a public buyout would affect our water bills. That’s what the feasibility study will explore. Remember, Measure O doesn’t guarantee a buyout – it authorizes MPWMD to commission a feasibility study and move forward only if a buyout is considered “both feasible and beneficial to ratepayers.”
We’re not sure it will be either.
Public Water Now co-founder George Riley says the feasibility study will settle the cost debate. “If we prove [public water is cheaper], then we go forward,” he says. “If we can’t prove it, end of game.”
We’re not supporting Measure O because we’re convinced a public agency can run the water system better than a private business. Cal Am might be more efficient. If you turn on your tap today at home, you get safe drinking water delivered on demand. Cal Am charges for this service, but they deliver as well.
Public ownership doesn’t by itself equal service excellence or civic integrity – hello, Marina Coast Water District and Monterey County Water Resources Agency, whose bungling of the last desal project brought it down in very expensive flames due to some greedy individuals and backroom political deals.
With MPWMD in control of the Peninsula’s water supply, the pressures on board members would intensify, and the board’s direction could change under duress of ideological warfare. There is absolutely no guarantee that the new public board will be any better at controlling costs. But we have high confidence in General Manager Dave Stoldt as a competent leader, with the experience and savvy to make big water projects happen.
It could evolve in a fiscally responsible way, though. The MPWMD will be able to float bonds at a lower rate than Cal Am. It is true that the 10 percent profit Cal Am earns on its capital projects will go away, but the evidence with other public water systems shows this money is often consumed by deferred maintenance and upgrades. The public may get a better system, but it is unlikely that public ownership is going to mean a reduction in water bills on the Peninsula.
So: We’re dismissing the central claims of both campaigns. We don’t think Measure O will affect the desal plant, and we aren’t convinced a public buyout will lower our water bills.
You wouldn’t know it by looking at the campaigns. The Risk We Cannot Afford Committee’s ads have been both prolific and ridiculous – cue the “What Are They Smoking?” mailers and the creepy redhead-on-the-beach commercial. Based on the angry comments on Risk We Cannot Afford’s own Facebook page, we gather they might be backfiring.
Cal Am has committed an astonishing $2.2 million (and counting) in shareholder cash to defeating Measure O. Public Water Now’s pro-O coffers hadn’t even hit $50,000 as of the last campaign finance filing April 15. It’s not at all a fair PR fight, but even the Yes on O campaign could do better than mailers promising lower water bills under public ownership.
We shouldn’t vote based on our fears.
Water utilities should be public.
That’s a premise we believed back in 2005, when the Weekly endorsed Measure W. That initiative, like this one, would have directed MPWMD to conduct a Cal Am buyout study. That initiative, like this one, was drowned by a flood of opposition-campaign money from Cal Am. It still lost.
Public ownership of our water distribution system is a preferred pathway in the long term: A locally elected board means more accountability and local control, and it’s a tested idea. Eighty-five percent of the water systems in the U.S. are publicly owned; if public water systems were a drain on public coffers or a bad delivery system for customers, there would be movements across the country to make water systems private.
A local, publicly owned water utility would be represented by locals, for locals, with increased transparency and access – public records, meetings, elected water officials. We’re all for eliminating the profit incentive in the control of what is inherently a public resource. Water ownership by a large, investor-owned corporation based in New Jersey is simply not in the best interests of this community.
Cal Am does not have a great customer service or system maintenance record. The company’s interests and the community’s are not necessarily in sync. Plus, with a public buyout, we eliminate the Public Utility Commission’s oversight and bring water decision-making to a local level, for rates, capital project and the like.
We applaud the concerned citizens who want to take ownership today (or at least investigate it). We agree timing is critical, and we don’t want to upend the deal to create a new water supply.
We need a desalination plant to meet this community’s water needs. Ideally, we’d be able to wean off the Carmel River with less resource-intensive water projects, but they won’t be enough to sustain a healthy local economy and smart growth.
Yes, there are risks to doing it now – but there will be risks in five years, and in 10. Cal Am will have its fingers in water-project pots for as long as it controls the Peninsula’s water-delivery system. So we disagree with No on O rhetoric like the mailer with a blown-up headshot of initiative opponent Scott Dick, which states: “I support public water. But Measure O is the wrong measure at the wrong time.”
We are now in the midst of the worst drought in California’s recent history, with more likely to follow. The Carmel River has been overpumped for years, and it is no longer healthy. We must restore the river, from both a legal and an ethical standpoint. The Peninsula can no longer depend on the river and its aquifer as its primary water source.
These are not zero-sum goals.
We need a new water supply ASAP – and the desal plant is our best hope. We support public control of our water supply in the long term – and Measure O is the way to find out if it will be feasible.