Will EWUA become a private water company, if the recall succeeds?
By Steve Smith.
EWUA is already a private water company. It is owned by about 1,000 members. It is not a public nor a government entity. Each Member has a right to elect representatives who are responsible for overseeing how the Members’ private water company works. The recall is happening because those representatives are refusing to perform their oversight duties and are not permitting even past Treasurers access to the financial records.
When I was on the Board, there was a discussion about how to protect EWUA from being taken over by activists. Joe Cohen said to me that both he and Jim Nelson were concerned that people like Fred Klein would get on the Board and raise rates on the large water users and lower them on the small water users. The current rate structure charges everyone the same amount per gallon regardless of the number of gallons used. However, that is misleading. There is a minimum charge; that means that for about half of the users – the ones using less than the average, the rate is actually more per gallon than it is for those who use more than the average.
About ten years ago, Joe Cohen, Jim Nelson, and Clyde Duke all collected proxies to put themselves on the Board. This knocked Fred Klein and two others off. Joe Cohen told me the primary reason that Cohen, Nelson, and Duke wanted to be on the Board was to make sure that the current rate structure was put in place rather than one that charges large water users more for each gallon used, as had been planned. It is part of the reason that Nelson wanted Paul Kamin fired. Nelson would often attack Kamin in Board sessions.
So, ideas were discussed by the Board on how to prevent “activists” from taking over the Board. The concern was that activists would get on the Board and move the rates to very expensive for the large water users and very little for the small water users. The largest water user each year has been the Outlook Inn, which Cohen has been associated with. Duke owns the Athletic Club with a swimming pool and is usually in the top five water users. Nelson owns multiple vacation rentals.
How to protect the rate structure was a topic of conversation and how to do that was discussed by multiple Board members. As with any group, not everyone agreed that it was even necessary or even how to do this, if it was desired.
One idea, favored by Joe Cohen, was to set up a governance committee that would filter who was allowed to be a candidate for the Board. It would be promoted under the guise of making sure that “highly qualified” people would be on the Board, “people whose experience and skills would enhance the Board.” Cohen favored the Opalco policy that does this and was used to keep Dwight Lewis off of their ballot. The same attorney who represents Opalco was hired by EWUA to draft a similar policy for this purpose. That policy is not in place yet, but it is one of the primary motivations for the revisions to the bylaws that have been advocated for by Burke, Nelson, Cohen and their allies.
Another idea was for Washington Water (WW) to buy EWUA. WW had approached EWUA multiple times over the years, asking if EWUA would be willing to sell. This would have taken the control out of the hands of the local Membership. The Members would get cash, and rates would be set by a tariff regulated by the State. That idea was not very popular. Again, it would mean giving up local control. WW has purchased other nonprofit systems before. WW is actually a large, California-based, publicly-traded, private water utility. WW still owns Rosario and the Highlands, which is a very good deal for the Rosario and Highlands residents. WW has put a lot of money into their systems, and most of it is paid for by all of the WW customers across the State, as the entire group is regulated by tariffs.
There are a couple of ways of taking EWUA out of its cooperative status. One is to sell to WW. Another is to search for local investors. There was no one way in particular discussed among Board members. Just the concept. The “privatization” ideas never got beyond the theory stage. There were no proposals on the table. No offers from WW. To change EWUA away from being a local cooperative would require a vote of the Members, and at least half would have to approve the sale. Changing who owns EWUA is not possible unless more than half of the 1,200 memberships approve the idea.
At the time the Board was discussing this, the problem EWUA had was that we had a small field staff who was getting older. Two long-time employees were retiring. Pay was low. It was hard to find employees.
So, instead of selling, we decided to start offering management services to other water systems. Paul Kamin had always refused to even consider the idea. But, with Kamin gone and a new GM who liked the idea, we started to explore offering services to Olga and Doe Bay.
The Board, myself included, thought that by expanding our services to other systems, we could then support a larger work force who would give us more redundancy if someone quit or got sick. We could pay our employees better. It was determined to be a good idea. I was President at the time, so the GM and I started discussions with Doe Bay and Olga. As the basis, we used the contract each group had with WW. We just changed the name to EWUA in place of WW. Eventually, we used the WW contract with WW itself, only this time with WW as the customer instead of the provider.
In my opinion, those were good changes for everyone involved, including the EWUA Members, and I still think they are. My fellow directors obviously thought the same or we would not have proceeded. There was unanimous support from the Board. These changes made EWUA much more resilient, and it was good for EWUA. These contracts are also very good for Olga and Doe Bay, as they now have a team of people (instead of just one or two employees) who have better equipment and are very well trained. This is far more resiliency for these small systems. It is a win-win, in my opinion.
Taking on management for WW in the Highlands and Rosario was a much larger challenge. EWUA would need two new employees, new vehicles, and one staff that was certified in not only clean water but dirty water.
WW wanted to buy EWUA. As a Board, we said, “no.” WW wanted to sell to EWUA. We said, “no.” We offered to manage WW’s systems for them. They said “no” for a long time. But, they eventually decided that it was the best for them. It is the only place in their collection of utilities where they are the customer instead of the service provider.
I was President of EWUA during the negotiations with Olga, Doe Bay, and WW. I worked closely with General Manager Dan Burke on those negotiations. I worked closely with the Board in those discussions. I still have all of the emails that cover those details. I think they were good improvements for everyone involved. It nearly doubled the revenue of EWUA.. Therefore, it made EWUA much stronger, as there are more employees who are trained on multiple systems and more ability to fund needed infrastructure changes in the future. There is a much deeper bench. I have nothing but praise for the work that SP, JM, DD, CK, and GC do, along with several others who I have not yet met. Rates are less than they would have needed to be without the services that EWUA provides to other water systems.
Everyone who knows me knows that I am willing to explore any idea and to plan for every contingency. Aloud, I argue both sides of every issue just to explore the strengths and weaknesses of each idea. It’s the way I brainstorm and seek ideas from others. For those of you who are interested in personality profiles, I am an INTJ. Search for those initials, if you don’t know what that means.
Burke, Nelson, Nigretto, Cleveland, and Templin are desperately trying to distract you from the issues with the current EWUA Board. They want you to talk about anything except their prohibiting oversight; removing directors who tried to do their job; the bullying and intimidation of other directors, staff, and EWUA Members; and seriously botching an election while refusing to correct it when they still had time and should have. There is serious financial mismanagement. Read the forensic report, and see what it says about the Board. It isn’t good.
Read the statements by Ron Claus, Carol Anderson, and Jim Cook. There are very serious problems with the Board.