By Royal Calkins
It should surprise no one, not even Cal Am’s pals in the business community, that the company will stop at nothing in its latest effort to prevent a public takeover of its water monopoly on the Monterey Peninsula.
Four years ago, in the run-up to ballot Measure O, the utility outspent takeover advocates by some 20-1 and ended up winning a close race that likely would have gone the other way if the company hadn’t bought so much deceptive campaign advertising.
At the heart of the Cal Am campaign in 2014, and an earlier contest, was the argument that the takeover process would distract the company from the crucial task of completing its much delayed desalination project. There were TV ads featuring actors walking along the beach, looking out to sea and declaring that the desal plant was just beyond the horizon. At the heart of the Cal Am campaign this year, predictably, is the same argument even though the project has barely drifted any closer to the shore. (Which doesn’t really matter to Cal Am because state law lets it charge its customers 110 percent of the cost of the project no matter the outcome. In the world of regulated utilities, failure is just as profitable as success.)
Now faced with a better-organized takeover effort following years of out-of-control rate increases, Cal Am has added a new trick. Last week it sent out an exceptionally deceptive mailer that instructs voters on how they can remove their names from the takeover petitions being circulated by Public Water Now.
Public Water Now (PWN) has just two weeks left to collect enough signatures to qualify a new takeover measure for the November ballot. PWN founder George Riley says the petition drive is doing just fine and called the latest Cal Am tactic “an act of desperation.”
The Cal Am mailer includes a coupon that petition signers can use to request that their signatures be removed. It also repeatedly accuses PWN of trying to deceive voters by claiming that residential water bills would be reduced under public ownership, which has proved to be the case elsewhere no matter how loudly Cal Am disagrees. See Missoula, Mt., and Nashua, N.H.
Cal Am maintains that water customers would see rate increases as a result of a takeover and that their property taxes would climb dramatically to cover the acquisition costs. PWN, however, forecasts that simply eliminating Cal Am’s automatic profit margin of 10 percent could allow the purchase to be financed without increasing property taxes.
Not surprisingly, considering the company’s record, Cal Am’s mailer contains other serious deceptions of its own. The most blatant involves what occurred after voters in the Santa Cruz County community of Felton agreed to buy out the Cal Am operation there.
PWN touts a Food & Water Watch study that found Peninsula water rates to be the highest in the country. Cal Am, which makes a practice of creating false and indecipherable comparisons, argues in the mailer that Felton’s rates under public ownership are higher yet.
But Cal Am says the average bill in Felton is $111 per month when it actually is significantly less. Cal Am correctly argues that property taxes in Felton went up dramatically to cover the purchase cost, but even accounting for that leaves Felton customers paying less than Cal Am claims.
Trying to make valid rate comparisons is beyond tricky when Cal Am is involved because it is willing to bend any number to suit its purposes. The company employs number crunchers with no real incentive to provide meaningful or accurate figures.
Cal Am’s view of the Felton takeover is largely contradicted by a recent study by a national economic consulting firm. The work by the Analysis Group was paid for by the California Water Association, a trade group dedicated to combating public takeover efforts. Cal Am is a member. It concluded that water customers receive no financial benefits from public ownership, in large part because of acquisition costs. It failed to recognize, however, that acquisition costs are financed up front, eliminating a major expense within 20 to 30 years. In other words, if rates don’t go down immediately under public ownership, they will eventually, and the benefit will accrue to future generations upon generations.
The Analysis Group study even indicates that rates in Felton actually declined marginally. PWN’s Reilly says the Felton rates now are closely aligned with what takeover proponents there expected, numbers that the community is comfortable with.
The PWN ballot measure would set up an intense cost analysis. The acquisition costs would be determined either by negotiation or court order. In other words, the impact of a takeover would be well understood before it came about, so there is no reason for anyone to pay any attention now to anything Cal Am has to say on the subject.
The bottom line: Cal Am is barely acquainted with the facts and has millions of reasons to obscure them. The company maintains an able and conscientious workforce in the field locally. But upper management locally and nationally stumbles badly when it comes to technology, engineering, cost controls, public relations and fair play. The company’s top rate expert once argued publicly that the words “median” and “mean” mean the same thing.
Public Water Now’s members might occasionally get carried away in their zeal to remove a bad corporate actor from the scene, but it has already won the credibility contest by a landslide. Peninsula voters should do themselves a favor by paying close attention to PWN and ignoring almost everything the company has to say.
Calkins writes a weekly column on local politics and public affairs. He welcomes communications at email@example.com
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