What Sue Greenwald Was Right About, Regarding Low Interest Loans


Sacramento-River-stockSince the start of the Measure P campaign and even before, Sue Greenwald has been arguing that the city was not eligible for low interest lows due to the fact that they had opted for a DBO (design-build-operate) with a private operator, and such operations are ineligible for state revolving funds.

In her April 27 op-ed with Mark Siegler, they wrote, “We expect no major water cost relief from the touted water project cost reductions. The reductions are exaggerated; some, like the low-interest state loans, are not likely to materialize because the City Council chose to privatize the operations…”

She would expound more fully on May 11, “The statement that Measure P could cause us to lose low-interest state loan opportunities is also false. The city likely has lost its low-interest state loan possibility because the City Council made a poor choice by opting for a no-bid contract with a multinational company and the associated privatization of the operations. State law prohibits giving low-interest state loans to projects with privatized operations.”

“So yes, we have probably lost our low-interest state loans, and yes, that could cost the city more than $100 million if The Enterprise’s cost information is correct. “

The city has vehemently denied this information, however, the Vanguard learned this weekend that Sue Greenwald is correct here and if the city does not get special legislation passed, the failure to be eligible for state revolving loans could cost the city millions.

A well-placed source told the Vanguard that the council opted to do a DBO despite warnings that the state prohibits low cost financing for private operations. That source indicated that there is legislation that would get this loophole in the law fixed, but there are no guarantees, and some people we spoke to believe that the legislation is dead while others believe it is a done deal.

The bottom line is if that legislation does not pass, the financing costs will be far more than any saving generated from going to DBO rather than the DB route.

When the Vanguard spoke with City Utilities General Manager Herb Niederberger on Monday, he denied this was an issue.

Mr. Niederberger indicated that Woodland got SRF (State Revolving Fund) Funding for their portion of the project, “So I don’t think there’s a state prohibition on low-cost financing.”

“The prohibition that Ms. Greenwald likes to hang her hat on is a prohibition against using state financing for private operations,” he explained. “But there is no prohibition on federal money being used for a design-build-operate.”

If this were the case, he argued, “then Woodland wouldn’t have gotten low interest financing for their portion of the project. They got the loan that we were looking for originally.”

He said that after Measure P is hashed out, the city will reapply for funding. He also said that, regardless of whether the city is eligible, they are correcting language in Government Code Section 5956. He argued it would be self-correcting “in a matter of weeks.”

“If State Revolving Fund Funding was not allowed on a DBO, how did Woodland get their financing?” he asked.

The answer to that question, according to Woodland City Manager Paul Navazio, who, as the former Interim City Manager and Finance Director of Davis, is familiar with both cities’ situations, has to do with the constituent base in Woodland’s water supply that is not present in Davis’ water supply.

“Because specifically of the nitrate levels in the ground water wells in Woodland, which are generally not the deep aquifer variety, so we had higher nitrate levels in our water sampling,” he said. This made Woodland eligible to apply and qualify for SRF funding under the Safe Drinking Water Act funds.

Davis had nitrate issues in the past, but dealt with them through the digging of a number of deep water wells. He said, “The bottom line is that Davis is not eligible for funding under the Clean Water Act SRF.”

Paul Navazio’s information is consistent with the information the Vanguard received this weekend, that Woodland was in a different circumstance than Davis with regard to that set of low interest loans.

The Vanguard checked with both Herb Niederberger as well as our source on the pending legislation, which now appears to be the only chance Davis has to get the low interest loans and save millions on the water project. However, neither had the information on the legislation at hand.

Our source indicated that, while all of the debate over the rates made for interesting reading over the past week, it amounts to “rearranging the deck chairs.” The financing issue could have a far greater impact overall on rates.

Sue Greenwald did not respond to the Vanguard’s inquiry for additional information. However, while she indicated publicly perhaps a $100 million impact, our source suggests more modestly a $50 million impact, enough to increase rates by as much as 25 to 35% over the next 30 years.

—David M. Greenwald reporting


About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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23 thoughts on “What Sue Greenwald Was Right About, Regarding Low Interest Loans”

      1. Rich RifkinWDE 73

        Whether you agree with Sue or not on any one issue, I believe it is always the case that she is the best person we have had on the Council in my lifetime for asking the right questions over and again and not just trusting the staff’s pat answers, which often are biased and thus not reliable. Keep in mind that staff (at the top level) tries to implement policies which it believes a majority on the Council wants. That can cause some circular reasoning and finding only the answers which fit the hoped for outcome. In all likelihood that is what happened here with Mr. Niederberger.

        Keep in mind that the very same sort of problem was going on with our waste water treatment plant. Staff was giving out false information as to what Davis needed. But Sue, after being rebuffed over and over again, finally managed to get her experts (who did not share her views on everything) to testify, and the result was that Davis saved somewhere between $80 million and $100 million on the WWTP, which had been massively over-designed by the consultants that staff had chosen. And none of the other members of the Council ever questioned staff on that.

        The irony, of course, is that Sue made enough enemies by being so dogged on these sorts of things that she failed to win re-election. It also did not help her that the corrupt unions which stand to make millions of dollars from the water project involved themselves in the last city council race and used their money to attack Sue … mostly in order to get new members on who would not keep asking so many questions.

        1. Davis Progressive

          you’re underestimating her downside. she turned off people who agreed with her on most issues through her inability to control her behavior – and i don’t just mean by asking tough questions. you seem utterly incapable of understanding her personality traits that hampered her ability to be effective.

          1. tj

            You appear to have Sue mixed up with Ruth [edit]
            Edited. Please refrain from personal attacks. Don

          2. Davis Progressive

            no. i often agreed with sue, but grew tired off the attitude and negativity. i work in sac, and often heard stories about her from those in the region.

  1. South of Davis

    David posted:

    > we have probably lost our low-interest state loans, and yes,
    > that could cost the city more than $100 million if The
    > Enterprise’s cost information is correct.

    When we can easily fill the $100 million gap with a $5,000 per home parcel tax it is probably not anything that the city workers even care about while they “study” new types of bags to ban and spend more money “study” another business the city can take over (waiting to retire younger than anyone else with a huge pension)…

  2. Frankly

    We will have net savings with DBO because the operations of the water works will not be city employees that buy favors from CC candidates like Sheila Allen and end up with compensation and benefits 200% higher than what the labor market would otherwise require.

    Don’t you love how state government has set this up… the state public employee unions get yet another gift from their paid for politicians… no state money to any private company… only public sector unions.

        1. Davis Progressive

          but not always. sometimes it is about the purchasing of interest by key big corporations in order to secure lucrative government details. these laws were enacted – in another era – to curtail these excesses.

        2. Tia Will

          “You mean public monies funding necessary services in the most cost-effective manner?”

          I mean public moneys funding necessary serves in the most advantageous manner as possible. Sometimes that will be synonymous with cost -effective, sometimes not.
          For me the two are not synonyms.

        1. SODA

          Whose idea was it to forgo the interest rate savings for DBO. Did CC know?
          Seems like a we have learned a couple things have been changed by staff in last week as pertains to the water project. Is Herb the point person now that Dianna has left?
          Will he be the URAC’s staff person?

          1. Matt Williams

            Herb is listed on the URAC webpage on the City website as the URAC staff liaison.

          2. Matt Williams

            Here is the Agenda for Thursday’s URAC meeting.

            C I T Y of D A V I S
            Utility Rate Advisory Committee

            Senior Center Valente Room, 600 A Street June 5, 2014
            6:30 p.m.

            Committee Members: Ben Bourne, Greg Clumpner, Lorenzo Kristov, Frank Loge, Richard McCann, Elaine Roberts Musser Johannes Troost,
            Alternate: Gerry Braun

            Assigned Staff: Herbert Niederberger, GM – Utilities, Development, & Operations

            1. Call to Order and Roll Call

            2. Approval of Agenda

            3. Consent Items

            4. Public Comment (At this time, any member of the public may comment at this time on any item not on the agenda. Comments will be limited to no more than 3 minutes per speaker. This item is a time for the committee to receive comments; except for brief questions for clarification, no discussion or action may be taken on any item that is not on the agenda; Public comment may be continued to the end of the meeting if the time allotted for public comment expires )

            5. Water Rate Discussion and Recommendation

            a. Modified and Improved CBFR (Donna Lemongello and Matt Williams) (5 min)

            b. Presentation of Different Rate Designs (Doug Dove, Bartle Wells Associates)

            c. Discussion among URAC and Possible Recommendation to City Council regarding a preferred rate schedule

            6. Meeting Schedule and discussion subjects (Long Range Calendar)

            7. Staff and Committee brief communications –

            8. Adjourn Meeting

    1. Dave Hart

      Frankly’s conspiratorial side is showing here. The state is not interested in loaning money to localities that relinquish control of projects to private entities because it is more risky. Private entities have every incentive to squeeze profits by keeping a separate set of books that will paint the Operations phase as more costly than anticipated. That is why the Operations part of this project was the one part of it that I was against from the first time it was proposed. I am still in favor of the project, but I think there is a great burden on the City Council and all of us to watch CH2M Hill like a hawk and to assume, when the time comes (and it will) that they need more to run the operation than projected. Just as important is that the project be maintained properly so that when the contract for the Operations is up for renewal the facility has not been run into the ground.

  3. dlemongello

    Also, the $100 million loss figure comes right from Herb Niederberger’s Staff report to the city, I am fairly sure that that is the Enterprise source for that figure. Where else would they get it?

  4. Tia Will

    Barack Palin

    “yes because we know all public entities are always run more cost effective.”

    There are two ways of looking at this. One is that you can “trust” a public entity knowing that you have at least some peripheral say in how the decision making will occur according to how you vote and how much interaction you choose to have with your elected officials once they are in office. Or you can put your “trust” in a private entity such as PG&E with their monopoly and hope that by acting in their own best interest, they will also be acting in yours.
    The problem with private sector “trust” is that if you do not get the service you hope for, you have no ability to influence who is calling the shots. At least with the public sector, we have the opportunity to make changes through our votes if we do not believe we are being well served.

  5. tribeUSA

    Yeah Sue! I hope she runs for city council again–if she makes other council members uncomfortable; we can be assured she is doing a good job in helping formulate good policies that save Davis taxpayers mucho money (she does have that record of accomplishment). It doesn’t speak well of those decision-makers who value their own comfort over what is best for the community…

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