Presentation on theme: "The Vallejo Lakes Water System [LWS]"— Presentation transcript:
1 The Vallejo Lakes Water System [LWS] History and Current IssuesJanuary 26, 2014
2 LWS Was Originally Developed as a New Water Supply for Vallejo Vallejo bought property above Green Valley around 1892, to develop a new water supply for the CityA dam was created on Wild Horse Creek and a 14-inch transmission pipeline (Green Line) was installed to bring this water to the City of Vallejo1894: Lake Frey created1908: Lake Madigan created1925: Lake Curry built, along with a 24-inch transmission pipeline (Gordon Valley Line) to bring additional water to VallejoVallejo obtained pipeline easements and riparian water rights by trading for free water.
3 Vallejo Obtained Additional Water From New Sources to Meet Demands Vallejo acquired new water supplies from the Sacramento River Delta (Cache Slough) and Lake Berryessa in the 1950’sNew pump stations and pipelines were completed to convey this water to a new treatment plant (Fleming Hill WTP in Vallejo)Water from these sources was:CheaperMore abundant and dependableBetter qualityIn 1988, Vallejo began receiving additional water from the State Water Project, through the North Bay AqueductWith these multiple sources Vallejo no longer needed LWS water
4 New Drinking Water Regulations Changed the LWS Operation 1992-Present1992: The Critical YearVallejo was compelled to cease delivering water from Lake Curry to domestic users because of new water treatment requirementsDue to this, Gordon Valley pipeline could no longer deliver Lake Curry potable water to customers along that routeTreated water from Green Valley was fed “backwards” into Gordon Valley to serve former Lake Curry customersAfter Lake Curry was abandoned, and for the first time in almost 100 years, Vallejo received no water from the LWS.Vallejo decided to make the 809 LWS customers pay all system costs (instead of the 30,000 Vallejo customers).
5 New Green Valley WTP Built to Meet EPA and State Requirements In January, 1994 the Dept. of Health Services ordered Vallejo to add a modern treatment plant to replace the old pressure filter plantA LWS Master Plan was developed and, together with the Green Valley Landowners Association (GVLA), it was decided to construct a new 1 million gallon per day water treatment plant and reservoir in Green ValleyVallejo added an $80 bi-monthly surcharge on to the water bills to pay for these facilities
6 Improvements Added to Meet New Requirements In 2004, EPA ordered Vallejo to reduce the level of trihalomethanes (THMs) in the treated waterA MIEX ion exchange process was added in 2006The Green Valley Water Treatment Plant now receives about 75% of its water from the Solano Irrigation District (SID - Berryessa Water) and the remainder from Lakes Frey and Madigan.The blended water from the two sources improves water quantity, quality, and simplifies treatment plant operation
7 The Cost of LWS Water Has Changed Dramatically Since 1991
8 The Cost of LWS Water Has Changed Dramatically Since 1991
9 The LWS Today: What Does it Consist Of? Over 50 miles of pipeline; the pipeline “backbone” consists of two lines: the Green Valley Line and the Gordon Valley Line, an aging, fragile and inadequate distribution system, which cannot reliably meet potable water or fire flow needsReservoirs and pump stationsA 1 million gallon/day water treatment plant (the Green Valley Water Treatment Plant)Serves Upper Green Valley, Gordon Valley, Old Cordelia, Willotta Oaks, Spurs Ranch, Solano JC, and others
10 The LWS is Different Than Many Small Water Systems The source for the LWS is surface water rather than wells or purchased treated waterSurface water requires treatment to meet the Federal and State Safe Drinking Water StandardsThe LWS was originally designed to supply water to the City of Vallejo but now only needs to deliver treated water to a comparatively small number of customers
11 The LWS Infrastructure Cost is Very High Our infrastructure cost per customer is higher than typical small water systemsLakes Water System = $11,220 per customerTypical Small System= $925 per customerLWS Infrastructure Cost is More Than Ten Timesthat of Other Systems
12 Vallejo Has Given Indications That it Plans to Sell the LWS The City no longer wants the Lakes System water supplyThe LWS is physically separated from the City of VallejoThe LWS is expensive to operate and maintainThere are significant liability issues for Vallejo due to the age and extent of the system infrastructureThe only reason Vallejo continues to operate and maintain the LWS is because they have an on-going responsibility to serve the customers.
13 The Existing LWS Pipeline Infrastructure is a Liability The first pipeline (14-inch Green Line) was installed in about 1900Over 74% of the LWS pipeline assets have been in service for over 30 years beyond their useful life. Useful life is about years.The replacement cost for all LWS pipelines that have reached the end of their useful life is about $24.1 milThe balance of the distribution pipelines in Green Valley will reach the end of their useful life in the next 10 years. Replacement cost for these pipes is about another $6.0 milTotal Infrastructure Liability is about $30 million
14 The Pipeline Liability Represents a Huge Potential Impact on our Rates Many pipelines will need to be replaced/upgraded over the next 10 yearsNew pipelines and pumps will need to be larger to meet fire flow requirementsReplacement costs may be more than $30 mil (2012 $$)This represents a potential cost of over $37,000 per household
16 If Vallejo Sells the LWS Who Would Buy it? Investor Owned Utility (IOU)A for-profit companyRegulated by the CPUCExamples: PG&E, California American Water (Cal Am)Community Services District (CSD)A non-profit public agency (Special District)Governed by a locally elected board of directorsExample: Solano Irrigation District (SID)
17 Vallejo Had an Appraisal of the LWS Prepared in Anticipation of Sale The LWS appraisal, by FCS Group, was completed in March 2013The report concluded that the Fair Market Value of the LWS was estimated to be $9,077,000, without including any land or any water rightsThe GVLA review of the appraisal indicates that it is deeply flawed and did not consider the infrastructure liabilityIt appears that the Fair Market Value of the LWS was grossly overestimated
18 The Appraisal Report Also Analyzed Purchase by Both an IOU and CSD Purchase by an investor-owned utility (IOU) would result in higher rates than if a Community Service District (CSD) owned and operated the LWSIOU -- 54% initial increase in ratesCWD – 10% initial increase in ratesInterest rates are more favorable for CWD financing compared to an IOUAn IOU is allowed to make a return on its investment (profit) where a CWD is non-profit
19 What is Vallejo Likely to Do? Vallejo’s stated intention is to sell the LWS to a private utility.Vallejo is allegedly in discussions with California American Water (Cal Am), and others, to sell the LWS.A private utility is allowed to recover from consumers:The price it paid for the systemThe cost of all operationsThe price of any improvements to the systemPlus a reasonable rate of return (i.e. profit)Highest rates will occur with an Investor Owned Utility
20 What Will Future Water Rates Be? Rates will depend on who buys or operates the LWS: an IOU or a CSDWith financing by an IOU, the rate increase would be about $640/2-mo average per customer or:An average total bi-monthly cost of $1,150 per customer(approximately three times your present water bill)One thing is guaranteed: Without action, all operating, maintenance and deferred capital improvement costs associated with the LWS will be shared by no more than our 809 connections.
21 What Will Vallejo Likely do if We Do Nothing? Raise rates pursuant to a new 5-year study beginning in June, 2014Continue to pass the full cost of the LWS to the LWS customersContinue to defer needed infrastructure replacement and system reconfigurationLikely carry out its stated intention of selling some or all of the LWS to a privately regulated utility (who will pass on the full cost, plus profits, to the LWS customers)Possibly sell some or all of the water and non-watershed lands (while pocketing the proceeds for itself)
22 Recent Actions On December 4, 2014, the GVLA sent Vallejo: A formal claim under the Government Claims Act;A detailed demand letter; andA detailed response to the flawed appraisal of the LWS.The GVLA offered to mediate the dispute; Vallejo ignored the offer.On January 22, 2014, the GVLA filed a class action complaint on behalf of all LWS Customers against Vallejo.
23 What Does the Class Action Lawsuit Allege? The class action lawsuit alleges that Vallejo has a contractual, fiduciary and legal obligation to share in the cost of the LWS (just as it had for the first 100 years).The class action lawsuit alleges that Vallejo is obligated to pay at least 98% of the cost of operating the LWS.
24 What Does the Class Action Lawsuit Seek? Damages (of approximately $12 million) stemming from the rate increases which first went into effect in 2009.An order prohibiting Vallejo from selling the LWS to an IOU or any other party.An order compelling Vallejo to continue to share in the cost of the LWS, including:Maintenance and operational costsDeferred Capital improvement costs
25 How Does a Class Action Lawsuit Work? The GVLA is the “named plaintiff” – the plaintiff who brings the lawsuit on behalf of the class.The “class” members consist of all LWS customers between 2009 and 2014.Class actions lawsuits are binding on all class members unless you “opt out” of the class.Any settlement must be approved by the court. Class members may object to a settlement.
26 What Else is Being Done?In an abundance of caution, the GVLA is beginning the process of forming a Community Services District (CSD).The Community Services District could take title to the LWS in the event a settlement is reached (on acceptable terms), whereby the LWS is transferred to the customers.Unlike Vallejo, a Community Services District would be run by a locally-elected board of directors, responsible to the customers.In all likelihood, the District ‘s system would be operated by a third party operator, such as SID.
27 How Does the CSD Process Work? The GVLA will submit a “Notice of Intent” to form a CSD with the Solano County Local Agency Formation Committee (“LAFCO”).10% of all users of the LWS will need to sign a petition to form the CSD.Thereafter, an application and the signatures will be filed with LAFCO.If approved by LAFCO, a majority of the users need to vote to approve the formation of the new CSD.
28 What if I receive “free water”? The lawsuit does not challenge the right of certain owners to continue to receive free water.The water rights these owners obtained are vested and run with the land.However, the lawsuit does seek to recoup damages from Vallejo attributable to the increased cost the remaining customers bear in order to provide the free water.
29 What Can I Do? Contribute to the cause. Litigation is expensive;Forming a CSD is expensive;PR efforts are expensive.The minimum recommended donation is an amount equal to one bi-monthly water bill.Tell others, spread the word and stay informed.Follow and circulate local and regional news storiesHelp draft and submit letters to the editor