This week, the Davis City Council will receive a report updating them on the activities of the Woodland-Davis Clean Water Agency.
The staff report notes: “The Davis City Council rescinded the water rates at the December 6, 2011 meeting that would support the cost of design and construction of the surface water facilities. Therefore, the WDCWA anticipates a delay in issuing the draft request for proposal for the procurement of design and construction services for the project.”
While the city’s lack of a rate study, along with the fraudulent 14% rate claims, were chief causes for concern and major impetus for the city council taking a step back, and one should not underestimate the importance of the delay for getting the Design-Build-Operate process right.
Much has been made of Veolia’s Israeli operations, and some points have been made about problems with United Water and the federal investigation into their Indiana operations. However, the Vanguard’s more extensive inquiry into the past practices of both Veolia and United Water should have cast rather serious doubt on their abilities to act as the project’s operator.
Even if one assumes that the third company in all of this is clean, the fact that two are so tainted has at least the potential to undermine the entire competitive bid process.
Back in October, the Clean Water Agency met and discussed the issues of ethical concern. At that time, the Woodland representatives were far less concerned about any ethical dilemma than the Davis representatives.
At that time, neither the CWA nor its staff seemed inclined to expend much energy in investigating allegations.
The most serious known at that time was regarding United Water, which itself is not the main company, but part of the CH2M Hill “team” that is also bidding to become the choice to design, build, and operate Davis’ water project. United Water faces serious legal issues, and an indictment which claims two of its managers at a Gary, Indiana, plant “intentionally manipulated water quality monitoring results at the facility over a five-year period between 2003 and 2008.”
As we reported previously, “The indictment charges the company with 25 counts of Clean Water Act violations and one count of conspiracy to defraud the U.S. Government by tampering with E. coli bacteria monitoring results.”
The question that staff posed to the board was whether they needed to expend money and resources to investigate disputes. After all, they argued, there are two sides to every story, but they believe it will be difficult to investigate either matter on their own.
As Davis Councilmember Stephen Souza pointed out, the charges are substantial and they create tremendous ethical and moral problems if they are true. He said that he is unsure that he wants to go through a process with a company who has done something that we may have to disqualify them for.
Staff made the point at the time that Veolia was a much more difficult problem, in that it might be a more political than a legal one. They called it a slippery slope in terms of trying to evaluate who is right and wrong in that situation.
Woodland Councilmember Bill Marble, one of the directors on the board, argued that he is comfortable with the current ethical components for consideration. He said he agrees it is a slippery slope with regard to the Israeli-Palestinian debate – one that he does not believe a local agency can or should decide.
However, since that time Vanguard has uncovered a number of troubling failures involving both Veolia and United Water.
Reports the New York Times, “Veolia, a subsidiary of Veolia Environnement, based in Paris, has had environmental problems elsewhere in the region. In a 2005 Richmond case, the nonprofit environmental organization Baykeeper and the West County Toxics Coalition sued the company, accusing it of discharging sewage into the bay. Veolia and Richmond, also a defendant, settled the case, agreeing to major upgrades.”
One the key issues is the trend away from private companies. The NY Times notes, “Because three other systems – Fairfield-Suisun and Petaluma in the Bay Area, and Stockton in the Central Valley – recently severed ties with private companies, people are closely watching this fight to see if the trend continues.”
Recall that Fairfield-Suisun was run by United Water.
“Mike Di Giorgio, president of the Novato board, said he was not bothered by Veolia’s potential profits because he was confident the contract would save ratepayers significant money,” the Times reports. “A 2002 report by the Pacific Institute, based in Oakland, noted that supporters of privatization usually argue that the private sector will deliver more or better services, while opponents say it could lead to higher costs, the potential for lost jobs or benefits and reduced local control.”
“The devil is in the details, and the details are in the contracts,” said Peter Gleick, the institute’s president. “We’ve seen over and over where small municipalities rarely have the power or ability to negotiate good contracts.”
Environmental groups cite problems with Veolia over how the company is run and compliance with environmental regulations.
“Veolia has a long record fraught with environmental problems, negligence and expensive service,” said Adam Scow, the California deputy director of the nonprofit Food and Water Watch. Veolia has had problems with spills in other communities around the country, Mr. Scow added.
All of this would suggest that a thorough background check should be in order. The city and consultants claim that the DBO process itself can ensure that the cities of Davis and Woodland would avoid the problems present in other communities.
In October, the CWA seemed content to push off concerns until the future and hastily move the ball forward. Now that the pause button is pushed, perhaps this will encourage the CWA to take these matters more seriously so when a final project is ready to roll out, the issues and concerns laid out here and elsewhere are thoroughly addressed.
—David M. Greenwald reporting
Here is some new information on VEOLIA. Remember VEOLIA, a French corporation headquartered in France, is one among several of the largest for-profit multinational water services corporations. Last year Paris, France, after 75-plus yeas of private operation of their water system by both Veolia and Suez, took operation back operation into the public sector.
http://www.reuters.com/article/2012/01/06/veolia-idUSL6E8C60LI20120106
UPDATE 1-U.S. suit accuses Veolia of misleading investors
Fri Jan 6, 2012 4:28am EST
* Lawsuit names former CEO Proglio, current CEO Frerot
* Plaintiffs seeking class-action status
* Veolia made 2 profit warnings, broad restructuring last year
PARIS, Jan 6 (Reuters) – A suit has been filed in the United States against French waste and water company Veolia Environnement and several top executives alleging that its financial statements from 2007-2011 were overstated and misleading.
“Veolia considers that any allegation that its financial communications may have been misleading is without merit, and the company intends to seek the dismissal of the complaint,” the company said in a statement on Friday.
The suit has been filed in the United States District Court for the Southern District of New York. The company, which also provides transport and energy services, said it had not yet been formally notified of the suit.
The lawyers for the plaintiff, Barbara L McClay Trust, are seeking class-action status and have 60 days to gather participants who owned the U.S.-listed shares between April 27, 2007 and Aug. 4, 2011.
Under U.S. law, a judge later determines whether the suit should be assigned class status and designates a lead plaintiff and law firm to represent them. Such class-action lawsuits for alleged securities law violations can go on for years; French transportation group Alstom and media and telecoms group Vivendi have faced similar cases in recent years.
The complaint names Veolia, its former CEO and current board member Henri Proglio, current CEO and chairman Antoine Frerot, current chief financial officer Pierre-Francois Riolacci, and former CFO Thomas Piquemal.
The complaint, filed on Dec. 27, alleges that Veolia violated U.S. securities law by materially overstating its financial results via improper accounting practices and had poor internal controls. It also claims that the company failed to record writedowns in a timely manner for its transport business in Morocco, its environmental services business in Egypt, as well as its marine services unit in the U.S. and Europe.
As a result, “the defendants lacked a reasonable basis for their positive statements about the Company and its prospects,” wrote the plaintiff in the complaint.
Veolia was forced to issue two profit warnings last year as it undertook major restructuring of its business in the United States and launched a large asset sale programme to reduce debt and exit some countries.
The shares were the worst performer on France’s blue chip CAC index last year, declining 61 percent.
Veolia shares were up 2.1 percent at 0957 GMT, while the CAC 40 index was up 0.85 percent.
Here are some questions:
How many successful versus unsuccessful projects are each of these water utility companies currently operating?
Is the bar being set so high that no company can meet opponents of the surface water project’s professed standards of acceptance?
Or is the only way opponents are going to be satisfied is via public operation of the surface water project no matter how high the cost to citizens?
If yes, public operation is the only acceptable standard, then where does the institutional knowledge on how to operate a surface water project come from?
“How many successful versus unsuccessful projects are each of these water utility companies currently operating? “
This is a good question that I think the CWA should have to answer.
“Is the bar being set so high that no company can meet opponents of the surface water project’s professed standards of acceptance? “
This is not a good question.
“Or is the only way opponents are going to be satisfied is via public operation of the surface water project no matter how high the cost to citizens? “
What makes you believe that public operation will be more expensive? SMUD delivers public power at a much lower rate than PG&E. One of the advantages is that you don’t need a profit margin and there will not be people at the top siphoning off money.
“If yes, public operation is the only acceptable standard, then where does the institutional knowledge on how to operate a surface water project come from?”
I don’t believe that public operation is the only acceptable standard. I do think that there is institutional knowledge on operating surface water projects, in fact, the guy in charge now of the CWA has such knowledge.
The city lacks any technical or demographic need for the surface water plant, which is why I think getting into the details of THIS project makes no sense to me and is a waste of city and volunteer resources.
Also, the same bunch that gave us the JPA (and tried to give us Viola Water, United Water), and the fraudulent rates are still in charge. They are even working with the WAC. Until there has been some public accountability of what led up to the Sept 6 debacle where the CC was set up and made fools, I dont really take seriously anything those water consultants and staff have to tell us.
From our analysis of the legal and relationship structure of the JPA, and some historical events, the only ones in any sort of strategic or funcational charge of this process is West Yost, the water consultants. This is a water-consultant driven project.
Who is the current chair of the CWA? I trust that it is not the Vanguard poster here who, in spite of claims of “open mindedness,IMO, has clearly demonstrated that this is not the case.
Not being that familiar with these acronyms, Is CWA the
Davis surface water citizen advisory commission which is what I am addressing here?
WAC = Water Advisory Committee
Elaine Roberts Musser was elected by the committee as chair.
[url]http://www.davisenterprise.com/local-news/city/water-advisory-committee-gets-five-more-members/[/url]
CWA = Clean Water Agency, i.e., joint powers agency.
[quote]”While the city’s lack of a rate study, along with the fraudulent 14% rate claims, were chief causes for concern….”[/quote]Fraud? Where? By whom? Chief causes for concern in whose mind?”[quote]”Is the bar being set so high that no company can meet opponents of the surface water project’s professed standards of acceptance? ”
“This is not a good question.”[/quote]The question is fine; the answer is not a good answer. What companies do meet your standards?
The nature of the process for the current surface water project brings to mind the description of the high-priced energy industry lawyers and consultants “licking their chops” when they sat down across the table from the State negotiators to create the energy deregulation plan, resulting in the CA consumer being royally screwed. Only an in-depth analysis,by those who have no economic “skin in the game”, can forestall a local Davis replay of that fiasco.
[quote]Who is the current chair of the CWA? I trust that it is not the Vanguard poster here who, in spite of claims of “open mindedness,IMO, has clearly demonstrated that this is not the case.[/quote]
And how has the current chair of the CWA demonstrated not being open-minded?
[quote]The city lacks any technical or demographic need for the surface water plant, which is why I think getting into the details of THIS project makes no sense to me and is a waste of city and volunteer resources.
Also, the same bunch that gave us the JPA (and tried to give us Viola Water, United Water), and the fraudulent rates are still in charge. They are even working with the WAC. Until there has been some public accountability of what led up to the Sept 6 debacle where the CC was set up and made fools, I dont really take seriously anything those water consultants and staff have to tell us.[/quote]
I take it your position is that you are opposed to the surface water project no matter what?
[quote]ERM: “Or is the only way opponents are going to be satisfied is via public operation of the surface water project no matter how high the cost to citizens? ”
DMG: What makes you believe that public operation will be more expensive? SMUD delivers public power at a much lower rate than PG&E. One of the advantages is that you don’t need a profit margin and there will not be people at the top siphoning off money. [/quote]
I don’t know that public operation will be more/less expensive. I don’t know that private operation will be more/less expensive. All of that remains to be seen. One of the things you neglect to mention in public operation is that public employees have to be paid health benefits and pensions, which gets us into the whole conundrum of whether the city can truly afford all the costs that go alone with public employees operating a surface water project. It is important to look at all sides of the equation, and not assume anything…
[quote]I don’t believe that public operation is the only acceptable standard. I do think that there is institutional knowledge on operating surface water projects, in fact, the guy in charge now of the CWA has such knowledge.[/quote]
Yes, it appears we are very fortunate in having both Pinkerton and Diemer heavily involved with the CWA. They both bring a world of expertise to the table that is desperately needed, and a fresh perspective…
“One of the things you neglect to mention in public operation is that public employees have to be paid health benefits and pensions”
Questions to ask based on this: Are SMUD employees considered public employees? You don’t think that Veolia or United Water pay their employees benefits and retirement? You want to save money by denying low level workers benefits and pensions?
[quote]Questions to ask based on this: Are SMUD employees considered public employees? You don’t think that Veolia or United Water pay their employees benefits and retirement? You want to save money by denying low level workers benefits and pensions?[/quote]
Pensions and health benefits of private employees becomes irrelevant in a DBO process because that is controlled for in the contract, which is a fixed cost. If the surface water project is publicly owned, public employee salaries/pensions/health benefits are subject to the whims of the employees union, campaign contributions to City Council members and various other political considerations. There are up and down sides to public/private operations that have to be recognized…
“Pensions and health benefits of private employees becomes irrelevant in a DBO process because that is controlled for in the contract, which is a fixed cost. “
That sounds good, but if you look at some of the failures, part of the problem has been that they have in order to win bidding kept their costs down, the costs were kept down on the personnel side, and that led to customer complaints about poor service and other problems, which ultimately led other communities to have to pump more money in later.
Now our staff claims that those problems can been analyzed and caught in the DBO process, I remain skeptical of that.
[quote]That sounds good, but if you look at some of the failures, part of the problem has been that they have in order to win bidding kept their costs down, the costs were kept down on the personnel side, and that led to customer complaints about poor service and other problems, which ultimately led other communities to have to pump more money in later. [/quote]
Ah, but you have not addressed the other side of the equation: the ever escalating costs of public employees and their salaries/pensions/health benefits.
Secondly, in a DBO process, punishments can be built in the contract for poor performance…
I am not saying here which is better, public or private operation. Both have pluses and minuses, that have to be recognized…
Elaine: SMUD operates more cheaply than PG&E despite being a public entity, you are on the WAC, do the research and figure out how that is. I’m not necessarily advocating for a public operator, only that we fully explore that option.