Last fall, George Riley was a candidate for the board of the Monterey Peninsula Water Management District. He was also a chief architect of Measure J, a ballot initiative authored by Public Water Now, compelling the MPWMD to pursue a public takeover of the private water utility serving the Monterey Peninsula, California American Water.
Both Riley and Measure J won with wide margins. He was sworn in as a board member right away, but Measure J is slower moving. The ballot measure called for a feasibility study within nine months, but what's ready instead is a progress report of sorts, a 15-page update by MPWMD General Manager Dave Stoldt, who presented his report to the board on Aug. 19.
There was little discussion from the board other than to urge Stoldt forward in the process.
"I want to know the facts, I want to know how much it costs," Riley said at the meeting. "I put my heart and soul on the line for a lot of this issue, and I want to know what the numbers are."
The numbers, plus more information, are anticipated to be included in a feasibility study scheduled to be completed by consultants this fall.
Measure J compels MPWMD to conduct a feasibility study, and if it's determined to be feasible to take over Cal Am, for the district to pursue a takeover. Cal Am has repeatedly said the company is not for sale, so a potential takeover would have to be done in court—a negotiated deal is unlikely—meaning MPWMD is also gearing up for a potential legal battle.
Stoldt's report is the first public document that lays out with some rough detail what the feasibility study will entail, and what the process will be.
The question of "feasibility" will evaluate four criteria. First—and a cornerstone of the Yes on J campaign promise—is whether it's financially feasible. Will water cost less under MPWMD than Cal Am, and how long would it take ratepayers to experience any savings? According to Stoldt's report, "The board will want to ensure there is a significant potential for [cost of service] savings before deciding to move forward with acquisition."
Second is operations and quality of service, with an analysis of whether MPWMD can continue to provide water at least as effectively as Cal Am.
Third is an analysis of governance; if the district does successfully pursue a takeover, the district will become the board responsible for overseeing the water supply. (Most water utilities in the U.S. are publicly owned.) "
Fourth is the legal question: "Will the acquisition pass muster under California's eminent domain law?"
Cal Am Vice President Kevin Tilden spoke at the Aug. 19 board meeting, laying the groundwork for some of Cal Am's legal fight. One central question is whether MPWMD can take Cal Am assets that exist outside of MPWMD's district boundaries. Chief among those assets is Cal Am's proposed desalination plant in Marina—which is not within MPWMD's territory.
Cal Am has long asserted that public water advocates undervalued the company's assets in the Measure J campaign, and speaking to the board, Tilden said there would be even more money: "The report fails to mention severance damages, which could be in the hundreds of millions of dollars."
Stoldt's plan does indicate that an examination of financial feasibility should calculate scenarios in which the acquisition cost exceeds projections.
Consultants—whose identities have not been made public—will continue preparing the feasibility study, with draft reports expected by the third week of September. (Those drafts will also not be made public.)
The MPWMD board is then expected to meet with their legal counsel in the first week of October, their first opportunity to discuss price.
Stoldt expects to publicly release the feasibility analysis to the public in the first week of November, though information that could be the subject of litigation—if MPWMD does decide to pursue eminent domain—will be redacted.
Public workshops will follow, with different timelines depending on whether or not it appears feasible to pursue a takeover. If it does, the board is scheduled to discuss follow-up steps in February 2020; it would require five of seven board members' votes in order to authorize a takeover effort.