Opinion Piece by Donna Westfall – January 13, 2016  – The City wants us to believe that they can repay the $40 million loan over the next 26 years by reducing 50% of the residential customers sewer rates by going to consumption based rates. I highly doubt it.

When a group of us proposed consumption based sewer rates in 2008 – 2009, the City officials said, “It can’t be done.”

“Why,” we asked,  “other municipalities are doing it?”

There was no reason given. But, here’s what I think. I think it was because they planned on doubling our rates, making everyone pay a flat rate, and then after we got over sticker shock, they would throw us a bone and offer a decrease to some of the cash cows, while increasing the others. Indeed that is what they are doing. Hey, I’m not over the initial sticker shock even now.

I believed then and I believe now that consumption based rates is the only fair and equitable thing to do. But here’s why I’m so in favor of protesting the proposed sewer rate increase.

Keep in mind that they couldn’t possibly pay back the loan under the original terms, (20 yrs with 2.4% interest) or under the amended terms, (extend loan to 30 yerars) and now they want us to think they can under the new terms (eliminate the interest = $15 mil).  I don’t think so. They were not very bright in 2007 when they voted to approve the one and only bid for $37 million, and the public knew it and called them on it right from the start. And they were not very bright to encumber this area to a $43.8 million loan.  Some may even call it a scam. Now, they need another $36 million for phase 2.  Holy moley, Andy.  That’s $80 million dollars…excuse my French… for shit. And who’s going to pay for it?  Eighty million dollars? Eighty million dollars!

When I received my NOTICE of proposed sewer rate increases on December 31st, I contacted the City about the proposed rate changes.  Under one scenario, I would save about $5/month for the first couple of years  If I calculated right, after adding 5%, then another 5%, then another 5% and a final 5%, I would be paying more than I am now. Based on the City’s calculations another way, I would be paying $15/month more than I am now or over $180/year.  Adding another 15% to that and I’m not a happy camper.  I don’t care that they can’t repay their debt.  I didn’t approve their scheme in the first place and here’s why:

While I sat on the City Council, when I asked my fellow council members why the ratepayers should be on the hook for thousands of dollars due to “designer errors on the lab and WWTP” former Mayor Slert, the architect, said that it would be asking too much of the designer to submit paperwork to his errors and omissions insurance. My four fellow council members voted to approve the designer’s error because, after all, Slert was an architect and he knew what he was talking about. Or did he?  That put the burden of the designers errors on the backs of the ratepayers. I voted against it because I was doing what I was elected to do which was called fiduciary duty in protecting those that elected me to watch how their money was being spent.

Recently, June, 2015, the current city council members voted to approve paying a second time to FIX the initial problems on the lab and WWTP.  One of the lab’s original design errors vented bad air out of the building and took good air in a short distance away.  I’m no engineer, but even I know that’s something even a first year engineer wouldn’t do.  Design errors and duplication may be simple incompetence.

Here’s a question.  How many other things are the ratepayers going to pay double?

Is that a good use of our rate paying dollars? I don’t think so and I do strongly believe a Citizens Advisory Committee needs to be set-up right away to oversee what’s going on with the WWTP and their finances because for whatever reasons, the City Council can’t do it. And the City staff isn’t doing it. They could care less.

Did the City pay two and three times for the Operations and Maintenance manuals? Will anyone investigate? Based on a reliable source, they did indeed.  Who pays for it?  The ratepayers, that’s who.

What about expansion which is supposed to be paid for by developers?  We were told by former City Manager Mike Young and former Public Works Director, that when finished the plant would provide about 1,000 more hook-ups or Single Family Residence Equivalents (SFRE’s). But get this, the harbor uses between 1100 and 3250 SFRE’s depending upon whom you talk to on any given day. Have we already blown through all the capacity?  For $43.8 million?

The City lost $165,000 in fines to which it was entitled.  That was due to a non-functioning labor compliance program.  You can thank my fellow council members for continuing to vote to pay Stover Engineering for a non-functioning Labor Compliance Program, (LCP) when I asked them to stop. Why pay thousands for something you’re not getting? But guess what?  The ratepayers are stuck with the thousands wasted on Stover Engineering for not doing their job.

Then there are the whistle blowers and eye witnesses who are too scared of retaliation to go public with these and even more (lots more) tidbits, but if the Grand Jury ever convenes a criminal Grand Jury with the intent to indict, I will release their names to the criminal Grand Jury so they can be subpoened. I believe that one of the basic problems with our Grand Jury has been Presiding Judge William Follett, and because I believe he is part and parcel of the many of the problems in this area, I support a recall.

Did we lose $12 million in a grant based on a reliable, credible source, that says the former Public Works Director missed applying for a grant by one day because he was too busy on his own personal projects?  If yes, I call that malfeasance.

Were asbestos and concrete pipes buried in Front Street Park next to the sewer plant in 2009? Was 10% disposed of legally, while 90% of it was buried next to the sewer plant? Was 90% of the money divided up instead of used to pay to legally dispose of the asbestos? If yes, burying hazardous waste for profit qualifies as criminal activity. Criminal activity needs to be prosecuted by the DA’s office.

The obvious problems are/were:

1.  Spent too much with too little oversight.

2. Used MBR technology which was overkill for this area, and cost us $30 million out of $43.8 million

3.  The City Council of 2008 – 2009 would not investigate charges of alleged corruption, fraud and graft brought up by me and chose to censure me, making me withdraw from ALL committees and stopping my investigation by talking with any sub-contractors.  The censure was only lifted AFTER the sewer plant project was finished.  My investigation resumed after the censure was lifted. The City Council needs to amend their CENSURE policy to include an investigation component to it and stop acting like bullies, incompetents and crooks.  Their use or misuse of the Code of Ethics was just plain obscene.

4. The Grand Jury was stacked like a deck of cards and lead around like a bull on a ring. Instead of doing what they are supposed to do, they were in 2008-2009 and as recently as the 2014-2015 Grand Jury, guided and pressured to reflect a  predetermined outcome.  If they had done their job back in 2008-2009 like they were supposed to, we might have seen them call to convene a criminal Grand Jury and issue indictments.

5.  A Citizens Advisory Committee needs to be established to take out a microscope and look into the financial transactions of the past as well as the future because I guarantee that the City Council and City staff are not looking after the public’s money and interests.

My opinion, the City has some hard decisions to make.  If they want to get things in line with reality, they could initiate prosecuting those that allegedly scammed the public.  Let them get restitution and then pay down that loan.  Let them get asset forfeiture and pay down that loan. The looming problem is the size of the loan.  This area could have afforded a $20 million loan, not $43.8 million. Based on documentation I have in my possession, when they figured out they could borrow $1 million for every dollar increase in rates, they went for the maximum.

On January 12, I received the following email communication from Deputy Directory, Darrin Polhemus. He’s in charge of the Division of Financial Assistance.  He’s it.  He’s the head honcho.  My questions 1-3 are not published here because they were basic information gathering questions like are all Water Board members elected, appointed or hired.  The answer is they are all appointed by the Governor.

The following questions I asked are in bold.  His answers are in italic.

4. Are State Revolving Loan applications for sewer expansions and upgrades based on a city’s population or the number of ratepayers?

We fund projects of all sizes with the Clean Water State Revolving Loan (CWSRF) fund program, everything from the little communities of several hundred, all the way to the City of Los Angeles.

4(a) In what capacity did the figure of 7,500 population for the City of Crescent City serve any purpose? 

The City’s population is certainly related to its rate base, and we do consider that in attempting to assess loan affordability and ability to repay a loan.

 4(b) On what criteria does the State Revolving Loan applications base their approval and then repayment?

The loan criteria is covered by the “Policy for Implementing the Clean Water State Revolving Fund.”  You find this located at:http://www.waterboards.ca.gov/water_issues/programs/grants_loans/srf/finalpolicy0513.shtml

5. Have any municipalities in California possessing a state revolving loan declared bankruptcy?

Yes, the Los Osos Community Services District, the Town of Mammoth Lakes, the City of San Bernardino, and the City of Stockton.  In each case, the municipality has proceeded to pay its CWSRF debt in full.

6. If a municipality has to declare bankruptcy how would that affect the status of their current loan?

We would potentially declare the City in default on the loan.  The loan balance would continue to be owed pending some sort of ruling or settlement from the bankruptcy court. There are not a lot of instances of this. Generally, the loans are secured by the wastewater enterprise of the municipality, which continues to pay during bankruptcy proceedings.  The State’s general position is that no further loans or grants are given to the community until the original loan amount is repaid.

7. If a municipality has to declare bankruptcy how would that affect qualifying for any future loans?

The municipality would most likely not receive any further loans until the conditions leading to the bankruptcy were eliminated and the previous debt repaid.  This might affect other State financing as well.

8. Has the Water Board ever forgiven a loan, or part of the loan principal?

The Water Board has reduced interest rates on loans for severely distressed communities (as was done for Crescent City as their loan was reduced to a 0% interest rate).  New projects for severely disadvantaged communities in the past received principal for forgiveness (basically another form of a grant) as part of their initial loan package, however with the passage of Proposition 1 these communities are receiving grants instead.  Prop 1 grants can only be used for new projects are not available to already completed projects as established by law.

To conclude, it seems to make sense to me that declaring bankruptcy should be researched. But, first and foremost, investigations and/or looking into possibly prosecuting those responsible would make more sense. I honestly don’t think that anyone winning the Power Ball lottery will come in and pay off the $40 million remaining on the loan. I don’t think that those that received thousands and thousands for malfeasance, incompetence or alleged graft are going to willingly write a check to the City.  But bankruptcy is not the end of the world. And if the City insists on borrowing another $36 million, without addressing the problems of the current huge loan, I think I would want to see them go bankrupt before they get another cent in their coffers so they can drive out the remaining cash cows, see more businesses close, or force them into bankruptcy.

If you want to protest the sewer rate increase, you can pick up forms around town.  Newest location;  Store on the corner of Humboldt and Howland Hill.