Wednesday, May 15, 2013

Is It Time to Consider Taking Our Water Company Into Bankruptcy?

Lightning striking twice in the same place
Last night's City Council meeting was a seemingly endless slog through various opportunities for the City to take more of our money. Fees, rates, fines, penalties, permits, late fees, if it was there on the big table the costs went up. There wasn't a single no vote against increasing any of these items.

The captive population of Sierra Madre woke up this morning to find a much larger hand in its pocket. I guess everyone should count themselves lucky that they got to keep the rest of their pants. Of course, you should never completely assume this will always be the case. Someday it could come to that as well. That giant ripping sound just might be your wallet being separated from the rest your Wranglers.

There are two reason why City Hall needs to constantly find new revenue sources. The first are the growing pension, benefits and salary costs of maintaining Sierra Madre's helping hands. Apparently it has been deemed wise by those who lead us that we need to establish a kind of mini Los Angeles at 232 W. Sierra Madre Boulevard. This being essential to maintaining the quality of government here in our little town. Or so the story goes. All done so that the important work of collecting fees in order to cover the labor costs of collecting fees can take place at the highest possible level. Think of this as a form of double happiness.

The other reason is approximately $19 million dollars in 1998 and 2003 water bond debt. Done at a time when government here had apparently lost most of its mental footing. This has today become the black hole of Sierra Madre finance, consuming about a million dollars in Water Company revenue every year. If you have ever wondered how it can be that our old leaking pipes don't get replaced, new wells don't get drilled and the quality of our water infrastructure never seems to improve, this is it. The money that would have normally been used to take care of such things now gets sent to the Bank of New York, and from there into the hands of some very well cared for bond holders. And will for at least another two decades.

Sierra Madre's fully owned water enterprise will remain crippled and financially endangered if it cannot somehow get out from under this mountain of debt. This is no temporary situation. And you will be required to pay more and more for water because of it.

Despite all the diversionary talk you may have heard about repairing water infrastructure here, this bond debt is the actual reason why water rates are about to go up for the second time in the last three years. The bond covenants wrapped about this vast sea of highly toxic debt are not adequate to the meet the demands of the bond holders, and because of that our Standard & Poore's bond ratings are low and could be getting even lower. Something that cripples any attempt to refinance those bonds and escape the high interest rates we are hopelessly locked into. It is not a very good situation for a small City like ours to be in.

Caring as deeply as I do about this topic, I made a little speech at the meeting last night. This is how it went:

There has been some talk, even in this room, that if the water rate payers of this town succeed in killing off the next water rate hike through Prop 218, we could somehow lose Sierra Madre's water company. The city would be forced to sell it to a private company that would raise our water rates every two or so years. Kind of like the way it happens now.

I have some good news. Should the water rate payers succeed in defeating the upcoming proposed water rate increase through Prop 218, we will not lose the water company. The good news is the millions of dollars in water bond debt from the 1998 and 2003 water bonds, the actual source of most of our water company's financial difficulty, is insured. And should our water company default on its payments, or go into bankruptcy, that debt would be paid off by the insurers.

This would benefit us in three important ways:

1) We would be out from under $19 million with interest in bond debt, freeing up $1 million a year in water revenue that can then be used for desperately needed infrastructure repair.

2) Our bond ratings would then be so low that no damn fool could ever put us into this kind of financial predicament again.

3) The water rate payers can go ahead with a Prop 218 protest with no fear that their actions could cost us our water company.

If it was a privately run business our water company would have been taken into bankruptcy long before now. No real business could long tolerate, or even survive, the kinds of deep financial hits the City of Sierra Madre is taking today. But since this is a government entity, and therefore well removed from the competitive marketplace, the solution has been to ask the captive consumers for more money, and often. Which is what City Hall is doing now. It is a far easier solution than actually dealing with the real problem, which is $19 million dollars (with interest) in bond debt.

Bankruptcy is a valid business tool. It is used all of the time in order to get troubled businesses out from under the kinds of financial peril our water company finds itself in. General Motors did it, United Airlines did it, as have some of the very largest financial institutions on Wall Street. And rather than going back to the captive water consumers of this town for more money over and over again, our City government really does owe it to us to take care of this problem once and for all. It can't go on like this for too much longer.

A decade or so ago two really bad City Councils, both led by the same individual, made some very bad decisions regarding water bonds. Today we are paying the price. I do not see how we should be forced to suffer the nasty consequences caused by mistakes made by those people for the next twenty years.

It is time to take our water company into bankruptcy and get out from under the consequences of other peoples' financial idiocy. It is not the kind of solution anyone should ever take lightly, and I am certain it will not be easy or consequence free. But it would be a better situation than what we are facing now, and will be for the next two decades.

Either this City Council does this for us, or we do it for them through Proposition 218. After all, in the end it really is our money, and we can decide whether or not they merit receiving it. And if they are not going to be willing to do the right thing, and instead just kick this can further down the same road, then we need to refuse to comply with their request for another water rate increase.

As we all know, without our money City Hall is just another small group of people with opinions. In this case, not the opinions that work for us.

http://sierramadretattler.blogspot.com

83 comments:

  1. No ! we should raise the rate and pay off our bills , though I am not looking foward to it

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    1. The city is accepting voluntary donations if you like. The fee for handling them is $30.

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    2. 6:21 - don't you mean Bart Doyle's bills? I certainly didn't do it.

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    3. I also did not agree to go into the most irresponsible kind of borrowing possible. I don't live my own life that way, and I don't expect the city to do so either.

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    4. We are also locked into some very high interest rates that because of our lousy bond ratings we cannot refinance. The bond holders must love that.

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    5. NMD. Not My Debt.

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    6. If you're paying Sierra Madre water bills, its your debt. Thanks, Bart Doyle!

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    7. I am not certain it is me paying my bills. I think it is us having to clean up the City's mess.

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  2. The city council can raise our rates without any citizen input at all - just fine everyone for using water. It's coming to that. If all the plants around your house are not dead, it's gonna cost you.

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    1. Thank you. I thought it was a rate increase as well.

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  3. If the city cannot afford to offer services, the city should not offer them.

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  4. Bankruptcy, perhaps. But is it ethical?

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    1. It's an ethical decision to redress an unethical decision made in the past.

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    2. Thank you, 8:11. Is it ethical for the city to not openly discuss the reasons for the water rate hike? Done in order to protect some of Josh and nancy's political allies? No.

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    3. YES THAT IS REALITY>>>>

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  5. What happen to Capoccia and Kroeber?

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    Replies
    1. CAPPOCCIA is a politician ... no longer a resident...

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  6. Paying Bart's bills. Now there is a reason to get up every morning and go to work!

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  7. I understand the Fay Angus did a wonderful job dressing down Mayor Pro Tem* Harabedian last night. I wasn't able to watch. What time does the council meeting repeat on SMTV today?

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    1. It was eloquent and rapier sharp. The scowl on Johnny Process's face while Fay spoke was worth the price of admission.

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    2. KGEM has a schedule up for every day on their website.

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    3. I know Fay was outraged at the rudeness of Harabedian. She wasn't going to let his vicious attack of Chris Koerber go unanswered.
      Good job, Fay.
      She also called out Nancy Walsh on her rudeness.

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    4. Plenty to work with in both cases - and what's so funny about it is that I bet Walsh is surprised anyone thinks she is rude.

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  8. I think we should wait to bankrupt until the outcome of all the lawsuits. That way we can get rid of our obligations at once, and maybe if we are lucky, the Police Department at the same time.

    The questions: How much could we pay down the water bond if we were not paying for lawyers to represent the City in all our legal issues. How much have we pay for the attorney services to date. How much do we pay if we lose any of the lawsuits.

    If is a chance of a loss, the lawsuits should be settled and the amount that we would have paid the attorneys should be calculated, and pay down the water bond debt.

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  9. Check the bills being paid for by Sierra Madre, you might notice a $6 thousand or higher fee for a "Prop 218 consultant" hired by the city to get around any obstacle's that the city might incur when the water rate increase is brought to a vote if they really have to or not.

    In short the consultant is a political bull dog hired to remove any obstacle's.

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    1. Wow. They're bringing in muscle.

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    2. 7:57 - do you have the name of the company handy? This might bear some looking into.

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    3. Yeah, last time the residents got into the Prop 218 process was too close for comfort for city hall. Remember, their jobs are to make sure that we support them adequately.

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  10. If you weren't motivated to conserve water before you are now!

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    1. I'll bet the city has already figured out how much they'll get in fines, and have put it into the budget. This will be like a money tap for them.

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    2. If you already conserve, and were cautious in 2011-2012, the "base year", good luck on having enough water without doubling the price for it, especially in the summer.

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    3. I don't see how the city is going to raise water rates after a significant portion of this community has been hit by "penalties." That would be a real rate hike on top of a de facto one.

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    4. I bet they could ask Mark Jomsky over in Pasadena. He has a plan for everything- even how to weed out the Board of Ed's 38 applications- form a citizen's committee of the chosen ones!

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    5. Yea, it will be just like a re-run of the Districting Task Force Committee. Lucky us!

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    6. Why does the school board allow a Pasadena City Clerk to determine the board process for selecting someone to fill the vacancy? Is it any of his business? The board members need to "man up" and figure this out themselves.

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  11. Back up to 7 or 8 months ago. Didn't Inman say we had a year of water left? Maybe it was 10 months ago. So obviously the whole system is wiped out. Is the conservation plan so that MWD will be nicer to us?

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    1. The conservation plan is to get more money from the rate payers without having to go through the Prop 218 process. That MWD spigot is all hooked up and ready to go.

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    2. The purpose of getting the MWD pipe put up on Grandview was strictly for development in the hillsides PERIOD!!!!!!!!!
      Bart Doyle and gang fought tooth and nail to convince us it was for "emergencies" BS.
      The only 4 people in the council chamber that night that "got it" were Councilman Kurt Zimmerman (voted no) Councilman Don Watts (voted no) and resident at the time, MaryAnn MacGillivray and local attorney Linda Thornton.
      MaryAnn and Linda got up and gave excellent arguments against getting involved with the "emergency" pipe. They both got it. We hadn't seen MaryAnn in the council chamber for years, but she was worried enough to come and fight this for the town. So was attorney Linda Thornton. So did Zimmerman and Watts.
      Only ones who protested this. Well....guess what Sierra Madre....they were dead right and you all should have listened to these great people.
      MaryAnn, Linda, Kurt and Don, got what the evil one....BART DOYLE was up to.
      Thornton and MacGillivray spelled it out....spelled it out! Now their fears are taking shape. Congratulations to all the low information voters in Sierra Madre. You're going to pay and so are the rest of us.

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    3. BRUCE STATED IN MAY OF 2012, THAT THE CITY HAS (12) MONTHS OF WATER LEFT,

      NOW IT IS 12 MONTHS LATTER, AND CITY STATES THERE IS 15' OF WATER IN ONLY (well 3&4) LEFT,

      GET READY TO USE YOU ARCADIAN'S NEIGHBORDS BATHROOM, FOR THE OLDER GUYS WHO HAVE PROSTRATE PROBLEMS, GET IN LINE!

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    4. 8:53, thanks for your excellent memory.

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  12. Fay is the "Treasure of Sierra Madre"

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  13. Question: How did the city spend the water bond money? Infrastructure repair? Or did it simply monetize future water revenue? That $19 million is three years of general fund money. Some of it has to be around still, no?

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    1. The $19 million includes interest that has to be paid life of the bonds. The money we actually got is somewhere around $7 million. Pretty rotten deal, eh?

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    2. Where did the $7 million go?

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    3. Why not default and privatize the water company?

      Government is very good at telling private entities they cannot raise their prices. It makes the beauracrats look like good guys. Think of all the fun that junior associate from Latham could have holding hearings and scolding the water company over its attempts to pick the voters' pockets. And the headlines he could grab by refusing the rate increases.

      The bonus would be no one would ever lend us money again. Good.

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    4. Old Timers used to say the Water Dept revenue was a cash cow and that the money was spread around in all kinds of sneaky ways.

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  14. Google: Flushing Toilets with Grey Water. You will see that much effort has been put into this thinking. Why are we flushing our toilets with drinking water? There are strict health regulations but a simple habit can be followed while you are learning more. Do not flush after each use. In your household this should not be a problem, you are family after all and can withstand a little yellow hanging around for three or more uses. Learned this from a friend who living in a community with a neighborhood water district left over from when the land was a farm before the housing lots were carved up: If it's yellow, leave the fellow--if it's brown, flush it down.
    Years ago, a canyon old timer told of her practice to collect the shower water in buckets as it warmed up for her shower and used that to flush. If you have ever lived where there was no running water and a cistern was used to scoup water from to flush with a handy bucket, you will know that it does not take much water to flush--especially if you have now installed a low flow toilet.
    I have another friend who has a well at her desert cabin and too much toilet paper clogs the septic tank. So, TP is not put in the toilet but in a waste can. If you camp much and use the out of doors for your camp potty you know how to do this, too, TP is carried out in a ziplock bag.
    Now if this is all too much gag factor for you urbanites, well, enjoy feeding the city coffers in water fines.

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    1. What if you are already doing what you suggest, but now they are asking you to do with less water. Yard, already with native plants; dishwasher, use only every-other day; wash, only full loads. What else?

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    2. This comment has been removed by a blog administrator.

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  15. Perhaps someone in the building business might want to go into the outhouse business. Could be a market here soon.

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    1. Sierra Madre will become "Potterville".

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    2. Up on One Carter the modern families will be demanding "5 holers."

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  16. http://www.calrecycle.ca.gov/organics/xeriscaping/

    Every drought cycle the importance of xeriscaping comes up. This is an excellent web site and there are many others. Some areas of your yard need plants that will need to be watered but little by little you can reduce that safely. In the Very High Fire Hazard Severity Zone you need a swath of green for protection up close to the buildings.

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  17. Plant oak trees. Need no water after they are established (maybe a little supplement in winter, fake rain if winter rain is low) and they act as an air foil for burning embers in advance of a fire storm (Eaton Canyon Nature Center buildings burned to the ground but the oaks are still there.)

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  18. What do good citizen do when their interest are betrayed by their elected representatives?They RECALL them!If ever there was a need for change,it is now!Their allegiance and alliance rest with others!

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  19. 1.The city has been praising the residents for conserving water since the Jan 2011, effective from water rate increase,
    2. the city has stated since the water rate increase, residents are using less water & the city is receiving less water revenues, and does not have enough money to pay its bills,

    3. SOME ONE MUST BE INCOMPETENT..

    THE CITY HAS SHOWN THAT IT CAN NOT DO THE MATH CORRECTLY

    NOW THE CITY REPORTS THAT WATER USAGE IS UP
    WHAT IS IT / UP OR DOWN

    City reports daily city water usage
    April 2012 / 1.5 million gallons a day
    April 2013 / 2.56 million gallons a day

    \ Does this daily water usage include the water the city has failed to pay for?

    3. The city has failed to pay for the water & sewer which the city has used for the past 5+ years, the city is fraudulent cooking the books as to the reported water usage which the city reported using,.... This is Fraud...

    4. I believe that the city management is playing with themselves once again at the residents expense,

    5. The city council would like to enforce an "Ordinance", which city staff created, not by the vote of the residents, but by the city allowing them self the power to create a "water surcharge penalty" for "residents water usage",

    6. Now the city states that they will be reading all water meters monthly, not every 60 days, with the goal to promote water fines,to create more money for the city....
    6-a The city is a water user just like "all" residents,

    6-b the residents own the "Water Enterprise" / not the city,

    6-c If the city can have fraudulent, yearly water meter reporting's,
    6-d If the city can "play GOD", if the city can decide to pay or not to pay for the water which they use(s),
    6-e Then "all" residents / "all" city water users should have the same privilege's to pay or not pay for the city water which the residents also use,

    7. The city is "ORDERING" / "ALL" water users to reduce their water usage again, by an additional 20% per monthly (example June 2012 vrs June 2013),

    8. If you do not comply, if you do not reduce your water usage by 20%, all water users will pay the city....

    1st Violation will be in the amount of (2 x / TWICE) times the Tier 1 water rate,

    2nd Violation will be in the amount of (3 x / THREE) times the Tier 1 water rate

    8. Example: if you are paying $1,000 month for water

    1st Violation will be $1,000 + $2,000 = $3,000

    2nd violation will be $1,000 + $3,000 = $4,000

    9. Our water department employee stated
    a. Our water reservoir has dropped 40' in the past 12 months,
    b. that the city has 4 wells,
    c. well (1 & 2) are ready to suck air / not water
    d. well (3 & 4) has 15' of free standing water until these wells suck air / not water,

    10. The city employees have failed to address where the new water will come from?
    10-a If the city does not have the foresight to find new water reservoirs, then they need to be fired, leave their retirement burdens and lets find competent people who can!

    a concerned resident

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    1. thanks for the chilling report..It's worse than I imagined and it may only the tip of the iceberg....!!!!

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    2. There's no icebergs left, they're all melting.

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    3. That doesn't make any sense. How can they be melting when there are none left?

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  20. People are using less water. Water revenues are down despite the increase in rates. (per Karen and Bruce)
    So how can the City be pumping 1,000,000 gallons a day more?

    Someone is no telling the truth.

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    1. At one point Inman said we've been using more water. A lot.

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  21. Nancy, Why weren't we told about the insurance?

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  22. Only by getting a water bill every month can you possibly pay close enough attention to your water usage to make affective changes and conserve.

    Can the city establish a minimum usage for a family of 2, 3, 4 etc. of water for health needs? Dailiy showering, 2 liters of water per day for drinking, laundry, cooking, kitchen clean-up. How do you get an exemtion if there is a newborn--more water needed to keep them clean and healthy.

    Water mismanagement in this city is going to turn us into a third world example of health deterioation.

    How do the schools have cope with the restrictions? Think of all the flushed for a little piddle throughout the day? What about the businesses where the coffee crowd has to likewise relieve themselves?

    Is it only the homeowner, appartment dweller? Who?

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  23. Dn't know about you, but on the front end I conserve to keep my utility bills down and on the back end to pay less UUT to this idiocy.

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  24. It is going to take some time to change our behavior and start the real at home savings...I just hung out a short line of laundry on a small retractable clothes line (Arnold's used to carry them) that cost a few dollars, small bag of clothes pins added to the investment of saving on electric and UUT.

    I know we are busy at work and play and raising our families, but the city staff is busy at work figuring how to get more of the money you earned today. Don't let them!

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    1. Has the City Council had a meeting recently that 1) did not increase or talk about increasing fees or taxes? or 2) impose rules to restrict our rights?

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    2. You still used water to do your laundry.

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    3. Soon the city will tax you on sunshine.

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    4. Here is part 3 - why won't they level with us about the bond debt?

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    5. You can get solar installed for no money out of you pocket.
      You will also pay lower rates.

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  25. Along with a "change in behavior" we need a CHANGE of the city's management and representatives as well.If the City continues to misrepresent the issue,the problems will only grow!

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  26. Take you most recent water bill.
    Add up the water usage for the year.
    Divide by 6.
    Subtract 20% from the average.
    That will be your water allowance for two months.

    Now look at the summer months water usage.
    You are being required to cut back almost 40% not 20 %.

    For the first time in my life I agree with Nancy Walsh.

    This isn't right considering all the new houses and the ALF that are being constructed.

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    1. They will build,take the money and run and we the dumb suckers will be left with the Bill!

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    2. Not this time.

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  27. Small water companies owned by cities, remember how water rights were bought up by cities to form city owned water districts etc..

    Now conglomerates' are buying up small cities water companies to become American Water Company. Small farmers were bought out decades ago.

    There's money in water much like GOLD.

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  28. The real issue here is not that everyone should be conserving water, which we are all doing.The real issue is that the city establishment has been lying to us and their aim is to steal money from us to support their goals. Their FRAUD AND MISMANAGEMENT is the issue.
    We should not be trying to placate these people, pretend that it's our fault.
    These people are criminals and they should be in jail.

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  29. My current water bill is graph is incomplete...it doesn't show consumption for June of last year. So I can't add up last year divide by 6 get an average and try to use 20% less per month.

    But how is this the fair way to allocate water for reasonable usage by reasonable people?

    The city letter of April 30, 2013 does not not mention penalties for using more than the 20% but only the continuing increase in tier 2 and 3. Ordinance #1312 with all three tiers and the meter cost being increased 7.54% "beginning with your next water bill."

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  30. By whose calculus is this supposed to get people to use less water?

    All you will do is get people mad.

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  31. I am more than happy to walk for another Prop 218 again. The last time not ONE person said NO and everyone eligible signed. And, while we are at it it IS TIME FOR A RECALL. We have proof of lying and corruption. Thanks for the facts and the suggestions.

    Many of us are ready to go.
    Enough is more than enough.

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  32. THE RESIDENTS NEED TO HIRE QUALIFIED CIVIL ENGINEER(S) / CONSULANT(S) AND INSTRUCT US WHERE TO FIND WATER ....

    WHY HAS THE CITY EMPLOYEES FAILED TO DO THERE JOB?

    THE CITY EMPLOYEES ARE INCOMPETENT!

    WE NEED NEW REPRESENTATIONB AT CITY HALL...

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  33. So why won't the water people tell me how in the h*ll I'm going to keep all my landscape from dying? Is the city going to pay to replace my plants?

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    1. Dead yards are the new city design.

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