The Partisan: Cal Am’s claims on takeover require scrutiny

OPINION |

By Royal Calkins

If you are like most readers of Voices, you already know how you’re going to vote on Measure J, which would kick off a public takeover of Cal Am, everyone’s favorite for-profit water company.

But in case the guests at your next barbecue aren’t as up to speed as you are, or in case you’re surrounded with chamber of commerce types at your next fundraiser, here are some helpful talking points.

The first and perhaps most important one involves Cal Am’s claim that its local water system is worth $1 billion. Of course it is. Just like my 2004 Volvo wagon is worth $125,000. If you’ll pay it, I’ll take it. (NOTE: DUE TO A TYPO, THIS ARTICLE ORIGINALLY AND ERRONEOUSLY SAID CAL AM’S APPRAISAL WAS $1.4 BILLION).

What your less enlightened friends need to know is that the purchase price will be the product of a negotiation and, ultimately, a judge will come up with the final number. During previous buyout efforts elsewhere, Cal Am has announced appraised values three to four times higher than what an objective appraiser would calculate.

According to Public Water Now, the group pushing the takeover measure, Cal Am wanted $46 million when voters in Felton decided to buy the system there. The sales price turned out to be $13 million. “Cal Am is using this $1 billion price tag to scare people into believing a buyout would be too costly,” says PWN Director George Riley.

If approved, Measure J would set up a feasibility study to determine what the water system is worth and whether the public can afford to buy it. The $1 billion figure? Meaningless.

Here are some more talking points.

Cal Am says on its Monterey Water Works website that despite water rates as high as any in the country, the company is actually losing money here.

Here are Cal Am’s own words on the subject: “Over the last seven years, Cal Am’s average rate of return on investment has been minus 1.8 percent. For the period 2010-02016, Cal Am’s cumulative cash-based earnings has (sic) been minus $16 million. Monterey has not been a profit center for Cal Am.”

But the system is worth $1 billion?

If it’s a money loser, one has to wonder why it is fighting so hard to keep it. In fact, maybe the company ought to be asking voters to take it off its hands.

On the topic of desalination, Cal Am says on the website and in its advertising that a public takeover would disrupt the process of getting a desal plant built. History shows us that Cal Am itself is the primary obstacle to completing this poorly planned venture and that rising costs and other factors strongly suggest that there are other, more effective ways to address the Peninsula’s water shortage.

Arguing with its growing number of critics, Cal Am says on the website that there is no issue about water rights for the desalination plant, that it needs no water rights to pump sea water.

The fact is that the plant as designed would also draw in a significant amount of fresh water, and the company has no rights to that water. It is proceeding as though it doesn’t need the rights. In fact, if it ever starts actually building the plant, it will have to pay big bucks for rights to the groundwater, bucks that eventually be part of your water bill.

While researching the record for this piece, I looked at some of the company’s successful efforts to defeat previous takeover efforts. I was struck by a news article in the Carmel Pine Cone from early 2014. Not surprisingly, considering that Pine Cone Publisher Paul Miller has been shilling for Cal Am for a few decades now, it was a terribly lopsided piece.

The headline declared “Cal Am takeover idea drawing little support.” The opening followed the same path.

“The group calling for a public takeover of California American Water promises that the move will drastically lower monthly rates for the Peninsula’s 38,000 water customers, ensure better service and that it won’t delay the effort to build a desal plant.

“But with all the purported benefits, pursuing a takeover seems to have little support from prominent Peninsula organizations and community leaders.”

Two things of note.

The supporters of that ballot measure never promised dramatic rate reductions. They never promised anything except a professional evaluation and feasibility study.

And who were the “prominent Peninsula organizations and community leaders” who were opposed to the measure back then?

It was a familiar cast of characters. The Monterey Peninsula Taxpayers Association, the Pacific Grove Chamber of Commerce, Monterey Commercial Property Owners Association were the most prominent organizations cited. Careful readers of Voices may recall that we recently printed a list of local organizations that had received so-called charitable contributions from Cal Am in 2017. You guessed it. On the list were the taxpayers association, PG chamber, the taxpayers association and several other groups that are opposing Measure J.

Çal Am survived the last takeover effort for two reasons. First, it outspent the opposition dramatically. Second, it spent that money on deceptive advertising mischaracterizing the motives of the opposition and the impact of a takeover. Sound familiar?

So why does the current effort stand a better chance? First off, there are those high water bills. Cal Am officials responded to their earlier victory by looking for every possible mechanism to raise rates and the Public Utilities Commission had neither the expertise or will to closely examine each request before saying yes.

Second, supporters of the earlier takeover effort were slow getting their message out. Analysis of the vote showed that early, absentee voters fell for Cal Am’s pitch but voters who waited and went to the polls sided with the takeover.

This time around, the group supporting the takeover is much larger, much better organized. Go to a Public Water Now meeting and you’ll find a crowd made up of pillars of the community – teachers, lawyers, accountants, engineers, retired folks. Check out the board of directors. While Cal Am is relying on simplistic and misleading advertising, just like last time, the Public Water Now folks are  knocking on doors, handling out leaflets, making speeches and organizing the troops.

I predict a different result this time.

Have something to say about this story? Comment below or send us a letter.

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Royal Calkins

About Royal Calkins

Contributing writer Royal Calkins has worked for newspapers in Santa Cruz, Monterey and Fresno. For the past couple of years, he has produced a local news and commentary blog, the Monterey Bay Partisan. He can be reached at calkinsroyal@gmail.com.

7 thoughts on “The Partisan: Cal Am’s claims on takeover require scrutiny

  1. No, the primary obstacle to any solution regarding water has been the “man/person/voter in the mirror” and Politics. I find it interesting that we have an Agency, Water One, dealing with it’s challenges and another Agency, MPWMD, which has always been sidetracked by
    politics. Two agencies, same resource (water), but different governing structures and different results. Does that tell you anything? Why would anyone in their right mind hand over the “keys to the kingdom” to the MPWMD?
    Our communities have been stagnant, restricted, and brought to their knees unless they had the resources ($$$) to do otherwise, by the government meant to provide for them. We are hostages of our own making. Cal Am is the scapegoat. I have seen the enemy and they are us. No jurisdiction within the MPWMD authority has the right to self determination because they have to “kiss the ring” of the district regarding almost any situation revolving around water. Current property owners and owners of businesses with above average water use sit in a quasi-monopolistic environment because limited or no water brings limited or no competition.

    The proponents of Measure J also have a better idea than the proposal just approved by the CPUC? Well, we’ve seen that act before, the “old bait and switch” Seems to always come around once a solution is imminent. They also are in collusion with the Marina Coast Water District and alas, all the players are those that have always fought any economic development while crying for “affordable housing”. Can’t have housing of any kind or decent jobs without water, go figure? Play with J and you’ll get burned.

  2. HI Ron = as usual, you skip the real elephant in the room that is the reason all of this is happening = costs. Yes, the MPWMD has its flaws, which at least the ballot box is available to correct. But, Cal-Am and its favored position with the CPUC (check history if not believed) have resulted in costs that business people who can pass their pain on to customers and those who make a living promoting development overlook other hurdles than just water. The Peninsula basically has three or four entrances and exits, none of which other than Route 1 from Monterey to Castroville have been seriously improved, lack of affordable housing that employees of all those wonderful developments would live, etc.

    Add all of that to the fact that Cal-Am has mismanaged its operations, had allowed those operations degenerate into legal fights, all of which take time and money,and most of which fall on the shoulders of the ratepayers. And add the fact that Cal-Am isn’t totally truthful, as Royal says about its financial situation and its actual value. Who in his right mind wants to keep the “keys of the kingdom” in a company that sucks out all it can from its ratepayers, doesn’t really keep their interests at heart (well, they are a corporation, most of which exist to make money not to be good and nice guys.

    I’d believe you and take a strong interest in agreeing with you if you really looked at the big picture, not just the picture that is of interest to your personal interests.

    1. Bill, the COST is nothing more than the function of a confused electorate, an agency which has sat around and not done much of what it is capable of doing, and a company which is conducting business under the rules as outlined by the State of California Public Utilities Commission. Our complacency, ineffectiveness, and inaction has led us to this point and that in itself has cost us plenty.

      We are stagnant. Therefore, I will bring up the only bright side of this whole situation by quoting something I never liked hearing from my Father, “do something, even if it’s wrong”.

      As for your parting shot, I must say, I’ll bet my 62 1/2 years on the Peninsula big picture against your personal interests and perspective. I wasn’t born yesterday and didn’t fall off the cabbage truck, water has been used to usurp and control the powers of the entities within the boundaries of the MPWMD to act on economic development and I don’t want to see that extended into the future.

      1. Hi Ron – thanks for your response. Don’t get me wrong – I do respect the opinions of those who have a major stake in the outcome of the Peninsula’s water issues, even if I disagree. That doesn’t mean I won’t point out aspects to differing opinons that I believe are misconsidered, especially iff I feel that history and current affairs support my perspective.

        So, I know a bit about your opinions and the bases behind them I know you didn’t fall off any truck, not just a cabbage truck, and that your entire life has been focused on the Peninsula. But I have a question. Am I reading you right in that you acknowledge that the rate history is related to factors – the CPUC and Cal-Am gaming the system. I guess, after all, that any private corporation would not make use of anything that it could get legally, even if the process involved is biased in its favor. If that is what you are saying that that is the reason for high rates, why don’t you think it’s time to try and look for an alternative process that will at least have the potential for access, lower rates, and, most importantly a real say in how the process will be implemented? Thanks, BIllk

  3. I’m not disputing Cal Am’s claim to giving so many $$$ to charities… but I’d love to see some actual org names and gift amounts… thanks!

    1. Yes, Cal Am does give some money to local charities, but guess what? Look at your bill and you will see that YOU are underwriting those gifts to charities. So Cal Am can brag about it, but you/we are paying for it.

  4. Great article Royal, You hit all the main points the pro Measure J folks have been telling the community for over a year (or 4 years, if you want to include our previous effort). Cal Am is trying to scare the ratepayers by inundating them with those fiction-filled mailers we are paying for. But PWN has a reply to all those lies, and they are on our website. This is American Water’s tactic whenever it is challenged by a takeover in a community. We’ve heard this story from Felton, and Missoula MN. This is exactly what they do every time – try to scare the locals, inflate their value estimates, and hope that it works. I think our community has been paying close attention this time and hope they will realize who the wolf in sheep’s clothing is. Its time for Cal Am to go.

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