Sunday Commentary: A Tale of Two Issues – The City Council Needs to Do on Water What It Did For the Budget

In a way it is unfortunate that the announcement by Mayor Pro Tem Rochelle Swanson and Councilmember Dan Wolk came immediately on the heels of the budget discussion on Tuesday.  On Tuesday night, the council discussed the budget, fixing what has been a tremendous oversight – the failure to include unmet needs in budget calculations.

With the decline of state and federal funding, the council has been forced to shift from reliance on grants and outside funding to local resources, which forces road maintenance and infrastructure to compete with employee compensation for scarce resources.

The council has been very slow to respond to these changes, which have actually been some time in the making.  The result is that the city’s pavement index has been slipping and will continue to do so unless there is an influx of local money to compensate for the decline in other sources.

The council had the choice to pave over the issue, if you will, by lowering the index – i.e. their standards, but instead they chose to have truth in budgeting, and to acknowledge that a city with $15 to $20 million in deferred maintenance does not have a balanced budget.  Such a city has simply deferred costs into the future.

None of this would have been possible without the new council – Joe Krovoza, Rochelle Swanson, and Dan Wolk – holding firm on finding $2.5 million this cycle, part of which will go toward road maintenance, the rest of which would go to shoring up the other gap the city faces – its massive unfunded health liability and growing unfunded pension liability.

In this meeting, it became clear that, once again, CalPERS is kicking the can down the road.  They have decided not to do what everyone believes they need – to reduce their projected assumed rate of return.  By failing to do so, they defer heavy costs from the present to the future – somehow banking that over a thirty-year period they will recoup those costs.

This is a political rather than a fiscal decision.  One that could be very costly for cities in the future, unless they are willing to plan in advance.

This council is being aggressive in attempting to fix past mistakes which include the increase of pensions, retroactive increases that were not previously funded, massive build-up in compensation over the last decade and, most recently, questionable decisions that led to the imposed contract on the largest bargaining group being thrown out.

At the same time, while one could argue that they have been handed a poor card to deal with on the water issue – the past council failed to properly engage the community on the necessity and cost of this project, it failed to ramp up rates over the last decade, it failed to plan properly – this council has perpetuated some of these serious errors.

Some have viewed the proposal by Rochelle Swanson and Dan Wolk as kicking the can down the road.  There is, of course, something to that view.  It defers rate hikes by nine months.  It defers the rate hikes necessary to supply the water supply project with capital for probably another year, if not two.

Some have suggested that Woodland might have to proceed without Davis’ help.

Certainly, these are legitimate concerns, but they overlook the dynamic and current problems.  The city council and staff, inexperienced with floating leadership, failed to do a rate study.  That means we really do not know the proper rate that we need to set in order to finance this project.  More importantly, we do not know the impact of the rate hikes on ratepayers, businesses and the economy.  That is a huge oversight.

When we did create the new rates, we built in a conservation rate of about 20%, meaning that the actual rates hikes potentially could be much higher than the advertised 14% annual rate hike over six years.

When the Vanguard met with city officials, both Bob Clarke and Paul Navazio confessed that they did not know if these rates were ideal.

We have serious questions about the Design-Build-Operate process, and the question about whether or not we should use a public company rather than a private company to run the project is a huge one.  It is worth noting that both Veolia and United Water, aside from the ethical concerns that have been raised, have relatively poor track records as operators.  That leaves one bidder that seems to have a reasonable track record, in operations which have the potential to undermine the competitive bid process.

Some have suggested that if you do not trust the staff to plan the project, how can you trust them to publicly run the water project?  A fair question, that ignores what I think most people see as a viable alternative, and that is the creation of a SMUD-like water district to run the project.

Note that SMUD provides electricity at a better rate and more reliably than the private PG&E.  A huge problem with such private operators is that, in order to bring forth a more competitive bid, they have to find ways to cut costs, and usually that occurs on the personnel side.

That leads to problems in providing the quality of services that such a system requires, and has led to cost-overruns and the need for municipalities to, in essence, pump more capital in to bail them out.  This is what happened with Veolia in Indianapolis, and eventually the city had to bail out the company, but then it was too late and a public company had to step in and take over.

Some assure me that a DBO process would avoid that problem, but I remain skeptical.

What is clear is that the Swanson-Wolk motion seeks to pull back and acknowledge mistakes and, more importantly, inexperience.  We can go through a litany of problems from poor planning (lack of a rate study) to poor communication (advertising 14% rate hikes when they clearly were not).

But the biggest problem appears to be inexperience.  We have a mayor who on September 6 was in office barely a year.  We had an interim city manager, with a new city manager only taking over on September 2, four days before the water meeting.  The head of the JPA, Woodland’s city manager, took a new job and the new head has barely been on the job.   We have an interim public works director who replaces Bob Weir, who probably knew more about this project than anyone.  And Jacques Debra is apparently less than ideal to head this up within the city, and it is not clear how the rate structure was actually computed.

Bottom line, that is less than the ideal situation and the idea of pulling back and doing a do-over makes some sense, particularly when there are assurances from Bob Clarke, the interim public works director, that a small delay would not be fatal to the project.

That is what Rochelle Swanson said, and it gibes with what Mr. Clarke told the Vanguard in October.

Is this ideal?  No.  But those who believe this is kicking the can down the road need to recognize that there is a good chance that the rate hike would be rejected by the voters.

Dan Wolk and Rochelle Swanson have positioned themselves as the deal brokers on this, and need to hold the line so as to protect the public and make sure this $155 million project is a success when it finally goes forward.

The city council has taken leadership to fix the problems on the budget and the council majority that helped pass the budget in June deserves tremendous credit for pushing this issue. Now the same council majority has to step forward and make the water project something that most of the community can get behind.  The Swanson-Wolk proposal is a good start.

—David M. Greenwald reporting