VIEWPOINT: Time to settle accounts
by Jim Belna
On October 10, three years after the city council voted unanimously to take over our local water system from Golden State Water, the same five council members voted to accept a generous proposal by Golden State to put an end to the failed attempt. We can now definitively quantify the cost of this fiasco at a little over $11 million.
It is important to understand that this massive loss didn’t just happen by accident. Rather, it was the foreseeable consequence of passionate but uninformed citizen activism, reckless decisions by the city council, and self-serving advice offered by financially-interested lawyers and consultants.
Many supporters of the takeover believed in good faith that it was a reasonable response to higher water rates. The same cannot be said for the council, the staff and their lawyers.
During the course of the past five years, all of the many legal, financial and operational risks of this effort, and the profound errors in their projections and assumptions, were spelled out for them in detail. They were repeatedly warned that this precise result was likely to occur. But as this information inconveniently negated their preferred narrative, they simply ignored it.
Although it is unwise and sometimes even illegal for public officials to participate in governmental decisions that they have a financial interest in, the city attorney’s own law firm was chosen to analyze the “pros and cons” of the takeover. To no one’s surprise, the council approved the lawsuit, which allowed the firm to bill the city millions of dollars for the ensuing litigation.
Perhaps that explains why the city council and staff failed to identify what we now know to be the enormous costs and risks of the prospective takeover. If you examine the entire public record, you will not find a single instance where a city official mentioned that Golden State had the right to challenge the city’s taking of their property—much less that such a challenge would be difficult for the city to overcome, and cost millions of dollars to litigate.
Similarly, you will not find a single instance where the public was warned that we might be responsible for paying Golden State’s legal fees, or that we could lose more than $10 million and have nothing to show for it; nor did anyone ever tell us that the city of La Verne’s water agency, which was designated as the future operator of Claremont’s system, had repeatedly violated the federal lead content standard and filed inaccurate water quality reports with the state.
The council also hid critical financial information from public scrutiny. At a town hall meeting in 2013, the staff presented a series of graphs which purported to show that the takeover would break even almost immediately at a cost up to $80 million, and within 17 years at a cost of $120 million—but the council refused to allow the public to see the financial study upon which the graphs were based. It was released only after the city settled a Public Records Act lawsuit, at which time the city attorney admitted (in direct contradiction to her prior assertions) that there was no information in the study which would prejudice the city’s interests.
The financial study—which was prepared under the direction of the city attorney’s law firm—understated the relative costs of city ownership by more than $100 million. The study also relied on the false assumption that Claremont was being penalized by Golden State’s regional rate structure.
Even after these serious mistakes were brought to the attention of the council and staff, they still maintained that the study’s projections were accurate; and it was only when City Manager Tony Ramos was questioned in court under oath that any city official publicly acknowledged that the takeover was not expected to reduce water rates for Claremont residents.
If a self-inflicted financial loss of this magnitude had happened in any other city, the culpable parties would be identified and held to account. Incompetent officials would be disciplined, the city attorney would be fired, and malpractice lawsuits would already be underway.
In Claremont, we gave the city manager a performance bonus, the city attorney still has her job, and the council has decided that it is time to move on.
The members of the council have repeatedly stated that they are willing to take responsibility for the consequences of a failed takeover attempt, but it is now obvious that they have no intention of doing so.
As a matter of public integrity, we must insist that their actions—and those of the staff, consultants and lawyers—be subject to a thorough and candid examination.