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CC 07-20-2021 Item No. 23 Municipal Water System_Written CommunicationsCC 07-20-21 #23 Cupertino Municipal Water System Lease Written Comments 1 Cyrah Caburian From:John Ennals <djsennals@gmail.com> Sent:Tuesday, July 20, 2021 9:39 AM To:City Clerk Subject:Re Water Company Lease Attachments:Note to council re Water lease .pdf CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. My name is John Ennals, living on Florence Drive and a customer of the city owned water company. The current lessee was decided at a meeting of the Council July 21 1997. Two proposals were reviewed and considerable opposition to the lease was expressed by residents in a packed chamber. What became clear was the following: The city had operated the water company for more than 35 years with no problems. The rates charged to residents were signiﬁcantly lower than those charged by the two private companies. Somehow the council thought this was "unfair". Rather then challenge the private companies to do better in their operation, they elected to allow them to pay the city a considerable sum, several million dollars, to raise our rates. What also was a deciding factor was that the agreement to transfer the Month Vista Water Company to the city apparently had a proviso that any surplus greeted by the company could only be used to beneﬁt the customers, not the whole city. Despite the low rates the company had built up over a million dollars in reserve funds that the city desperately wanted to get their hand on. This represented about a years company revenue! So by leasing the company the city got the lease's money , and this reserve. The city attorney represented that tis was legal. Since it appeared those in objection were going to loose, I sought to minimize the damage: I suggested that at least the city do two things: 1, lay off the one an a half employees that operated the company to save money - they said"Oh no, we will and other things for them to do" 2, give the contract to the bidder who forecast lower rates for the customer, not the one who paid the city more up front money. This met with some agreement on the council, and within a minute it was approved by a 3 to 2 vote. The meeting broke up, and I was approached by a suited gentlemen who introduced himself as a San Jose Water executive. He told me that what I did not know was this was a done deal with Cal Water. The pretense of open bidding was to satisfy the legal requirements. Now he had to get busy and actually prepare to take over the system - they had done no pre-work. My concerns today: I see the city staff report contains the same type of arguments as the one 24 years ago. I challenge the statements in option 3, City Operation. We have 35 years of experience in operating the system successfully, and more cheaply than the private companies. The lease was not justiﬁed at all by any stories of high costs of operation, or inability to ﬁnd qualiﬁed staff. It ran just ﬁne. It was a also acknowledged that in leasing the company we would no longer qualify for any State or Federal grants usually available for small utilities to use in needed capital investments. The reason for the lease was purely to get city hands on the excess reserve funds. Now I see the criteria for evaluation of proposals again based on the amount of money the city can get out the the lessee. Yes I see the phrase “best qualiﬁed to continue to provide equal or better service to the customers of the system” , but you have given away any control over pricing - the most direct beneﬁt to the customer. What I am asking: 1)Seriously consider operating the water company - we operate the sewer system efficiently every day, why not the water company? Find the employees who used to run it! A proper proposal should be considered, not this paragraph 3 that has no data to base its fear of taking responsibility. 2) Change your evaluation criteria to make beneﬁts to those served by the water company an important part of the decision up front, not wait for the late persuasive arguments as in 1997. 3) actively pursue operators other than Cal Water and SJ Water. The City of Sunnyvale was suggested as a possibility by Councilor Sinks in 2019. Just putting RFPs in the paper is not enough, Please remember that every dollar the city takes in from granting the lease, and operating the system comes from the pockets of the 4,500 residents that are served, not some magical entity lessee who can print money.