Recent inspection of the water company finds many violations!

The State Water Resources Control Board recently inspected the water company and found many violations of their standards and regulations. Here is a summary:

  • Elevated levels of Aluminum above legal limits.
  • Well 3 which provides about 1/3 of all the water to our houses is in the process of failing. Its casing is cracked and sediment is entering the system.
  • The pumps and their housings are in bad repair.
  • On a number of occassions, the company has replaced water mains without doing the proper disinfection to make sure contaminants do not enter the system.
  • Their is not enough information regarding backflow prevention devices on private wells that some people have on their properties.
  • They have not responded to customer complaints.

The list goes on. Click below to get the full report.

SWRCB Letter 2017

East Palo Alto Water Company Status in Limbo

Shareholder meeting ends without a vote

East Palo Alto, California – Oct. 7, 2017 – The Palo Alto Park Mutual Water Company (PAPMWC) shareholder meeting held on Sept. 23 ended without a planned vote for the board of directors. Palo Alto Park is an old East Palo Alto neighborhood whose drinking water is supplied by the PAPMWC. After a meeting that lasted 6 hours, the incumbent board attempted to call for a vote, but would only allow the shareholders to vote on 2 of the 5 open seats on the board. Challengers from Neighbors for Better Water, a coalition of concerned homeowners, blocked the vote, stating that such a vote would be a violation of state law and the company’s bylaws. The president of the board, Mr. Fidel Alas, then proceeded to other business, and adjourned the meeting soon afterwards. At stake is the future of water service for over 680 homes in East Palo Alto, and is another example of East Palo Alto’s water woes.

PAPMWC is one of over 2000 mutual water companies in the state of California. These companies are private corporations, whose shareholders are the property owners in the district. As private corporations, they do not have the government oversight that most utilities have. The State Water Resources Control Board (State Water Board) does have the ability to inspect the operations and review the water quality reports these companies produce, but they have little ability to force mutual water companies to fix identified problems. After a recent E-Coli scare in Butte City, the Board asked a judge to appoint a court-appointed receiver to run the mutual water company there , but the judge denied the request, instead insisting that the water company remain under local control.

In 1924, a real estate company subdivided the area and the first four property owners formed the PAPMWC. Its water comes from a number of wells that tap deep aquifers underground, and it stores some of the water in a large tank at the corner of Addison Avenue and Garden Street. A similar company, called the O’Connor Tract Water Company, was started at the same time, and serves about 300 homes in East Palo Alto and Menlo Park. After a number of recent pump failures and water quality citations from the State Water Board, many local residents have become concerned that the current management, which has been in place over 20 years, is unable to adequately maintain and operate the company.

“Based on recent neighborhood canvassing, our estimate is that 90% of area residents do not drink or cook with the water”, said Norm Picker, one of the challengers for the board of directors. “The water tastes horrible due to high levels of iron and manganese. Also, lots of sand is seen in the water periodically due to routine semi-monthly distribution line flushing and frequent unplanned and unannounced system shutoffs. The result? Residents spend hundreds and even thousands of dollars to purchase bottled water or in-home filtration systems. Additionally, the water is very hard and corrosive, damaging fixtures and leaving calcium deposits on shower walls and drains. Iron and manganese are not hazardous to most individuals but are regulated as secondary drinking water standards. The secondary standards are related to taste, odor and appearance. ”. On June 5, 2016, the State Water Board cited the water company for violating the iron level, and demanded that within 30 days the water company create milestones and a timeline to install an iron and manganese removal treatment system. According to the State Water Board, the company has so far not complied with this order.

Other resident’s concerns include frequent unannounced system shutoffs and losses of pressure. In 2016, the Menlo Park Fire District sent a letter to the city warning them of a potential disaster when the PAPMWC was unable to guarantee pressure to the fire hydrants in the area on the 4th of July due to a pump failure. Every July 4th, there is widespread use of powerful illegal fireworks in the Palo Alto Park area.

In response to these concerns, area residents have banded together and created a neighborhood association, Neighbors for Better Water, collecting shareholder proxies in an attempt to unseat the current board or directors. Shannon Pekary, a coalition member, explains, “City, county and state officials have all told us the same thing, that only the shareholders can fix this. Well, we tried, but we were denied a fair vote. Unfortunately, it looks like our only recourse is the civil courts, which are very expensive.” According to their Facebook page, Neighbors for Better Water is actively searching for pro-bono legal representation. They are also urging area residents to continue to sign and send in proxies to help them in their legal battle.

So far, the Palo Alto Park board has not set a date for a follow-up shareholder meeting.

Impact Fees

Many of our neighbors are complaining about Impact Fees, which the company is charging people for a variety of things, from parking a camper in their driveway, to doing major renovations.

While I don’t know for sure, my guess is that impact fees originate from the fact that we are all “supposed” to be charge pretty much the same amount for our water. The current fees I think are $58 plus $1 per share, which for a standard 5,000 sq. ft. property comes out to $60/month.

However, some houses have one person living at a house, and some have 10. How is that fair?

Well, the fairness part is primarily I think due to the fact that the major cost of delivering water to each house is the plumbing and equipment. The amount of water we use has some expense, but is not the major expense.

When someone does a renovation on their house, the water company is supposed to do a review of the plans, and could potentially charge a fee for the expense of reviewing the plans, and whatever additional burden the new renovation will have on the system. However, without meters, its not possible to measure this burden. So, the water company appears to be trying to make up for this by charging “impact fees”, from $2,500 to $5,000.

These impact fees have no basis in law, nor does the water company explain how they compute them. The amounts seem excessive. They also appear to be charging them in situations where there is no impact to the water, including when people change out the windows in their house, or just park a camper in the driveway.

There was also a Class Action Lawsuit many years ago that ended with a judgement against the water company, ordering the water company to stop charging these fees until they put them in the Bylaws, and making sure they were only charged when there was an actual impact to the water. The company appears to be ignoring this court order.

Your Rights as a Shareholder

As a property owner in the Palo Alto Park Mutual Water Company area, you have shares in the company. You have one share for every 2500 sq ft of land you own, and these shares give you certain rights. However, for rights to matter, you must exercise them. Here are some we know about, but its not an exhaustive list.

Vote at the Shareholder Meeting

Your shares give you votes at the annual shareholder meeting. You can vote on board members, on changes to the bylaws, and on various matters that come up at the meeting, like approval of minutes, agendas, etc.

If you cannot attend a meeting (or don’t want to), you can allow someone else to vote on your behalf by appointing them as your proxy using a proxy statement.

Shareholder meetings must be noticed at least 10 days before the meeting is to take place, and the business of the meeting must be clearly stated.

Attend and Know About Board Meetings

Assembly Bill 240 (AB240) put certain requirements on the boards of mutual water companies. In particular, it makes all board meetings into public meetings similar to how the Brown Act works for governmental meetings.

AB240 does the following:

  • Requires that all board meetings have an agenda that is publicly posted before the meeting. The board must stick to the agenda, except in exceptional or emergency situations.
  • If you request it, the board must send you a notice of all board meetings. You can ask to be notified by mail or email.
  • If you have a fee or penalty, you can demand that the board meet with you in closed session to discuss it.
  • Requires that the minutes of all board meetings be sent to any shareholder that asks.

Inspect the Accounts of the Company

Both the Bylaws of the company, and California Corporations Code 1601 give you the right to inspect the financial records of the company at any reasonable time upon written request.

Inspect the List of Shareholders

California Corporations Code 1600 allows any shareholder with cause (a good reason) to get a list of all the other shareholders in the company. 5% of the shareholders can join together and request a list of the shareholders for any reason at all, and get them within 5 days of the demand.

To make requests of the board, you should send your requests directly to the members of the Current Board, since we have some evidence that the central office is not forwarding mail on to the board members.

Unfortunately, our current board of directors has denied us ALL of these rights. That is one of many reasons why they must be removed.

About Proxies

A proxy statement is a legal document that lets you give your vote at the annual shareholders meeting to someone else. Why would you want to do that? Because shareholders meetings can be LONG,   and can stretch for hours, or even days. If you don’t want to wait until the vote is called, then a proxy statement will let someone else cast your vote for you.

A “proxy” is someone listed on the proxy statement that pledges to be there at the meeting for you and cast your vote. Most proxy statements have multiple proxy holders listed so that if something happens to one of them at the time a vote is called, then the remaining proxy holders can still vote. Being a proxy holder is a huge commitment, since it means you have to attend an entire meeting, even when the board drags it on for hours in an attempt to discourage people they don’t like from voting.

Proxy holders must work together to try to vote according to the wishes of the people they hold proxies for. In the case of a board election, if a member of a slate of board candidates decides to withdraw, then the proxy holders should vote for a different person that represents the will of the people they represent.

Additionally, giving your proxy to a group of people that you agree with gives them some additional powers. If proxy holders clearly hold the majority of votes at a meeting, then they can vote on a variety of things at a meeting, including approvals of minutes, agendas, changes in bylaws and more. It can help the meeting go quicker and more smoothly.

If you change your mind after you sign a proxy statement, its not too late. You can do the following to make sure your vote is counted:

  • You can appear in person at the meeting and vote. Or,
  • You can sign a proxy for the opposing side. As long as you put a date on the new proxy that is after the date on the earlier proxy, the new proxy will be the one that counts. Or,
  • You can sign a statement and send it to the proxy holders saying you are withdrawing your vote. You would only do this if you decide you want to abstain from the vote and cannot attend in person, but you have to trust that the proxy holders will honor your request, since you won’t be there yourself.

Since a proxy statement is a legal document, it must be printed and physically signed. Click below to print out the proxy for Neighbors for Better Water, sign it, and mail it to us to help us replace the current board of directors with a group that lives in the community, and will be fair and honest in the management of the water company.

Proxy2

Kumar Chaudhari

Hello, my name is Kumar Chaudhari and I am a candidate for the board of directors for Palo Alto Park Mutual Water Company. I have lived in East Palo Alto for eight years and, except for the water, love living here. I am a teacher at Woodside High School.

My main role at my school is as a special education teacher. I also teach algebra to students who traditionally struggle with mathematics, and run our fledgling maker space as well. Part of the reason that I have so many roles is that, throughout my teaching career, I have been a go-to person when something needs to be figured out and it needs to be done well. I’ve learned how to develop effective teams, cultivate resources to assist me, and how to facilitate improvement within bureaucratic organizations. This is what I will bring to the board, this ability to problem solve and get things done.

For most of the eight years of living here, I’ve always been concerned about the quality of water, but also thought it was just something that I had to accept and just work around. More recently, one of my neighbors approached me and asked if I’d be willing to help out in their effort to improve the water service in our area. This story, from a trusted neighbor, was almost unbelievable. At the first meeting of the Neighbors for Better Water, I heard story after story that insulted my sense of justice. As I went into the community, I continued to hear story upon story of individuals simply being wronged, and of a company abusing their power through questionable practices and incompetence. I came to realize that these stories were the norm, not the exception, and that Palo Alto Park Mutual Water Company, whose sole purpose for existence should be serving the water needs of its residents and homeowners, was not doing so. Sure, I could just live with it, like I have for the past many years, but my sense of justice and commitment to being a good member of this community called for more action and I eventually decided to take on a larger role and offer to serve on the board of directors in order to help to make the changes that this community deserves.

As such, my priorities will be:

  • Eliminate the conflicts of interest that interfere with the proper oversight of our water company
  • Make the company’s finances and rate structures, status of infrastructure, and decision making transparent to the public
  • Implement the changes that have been advised by the California State Water Resources Control Board in order to improve water quality
  • Work toward steady incremental improvements to fix the infrastructure that is currently being neglected (inoperable pumps, leaky tanks, and poor piping)
  • Actively work to mend the conflictual working relationship with the city of East Palo Alto in order to facilitate improvement of the streets and the general standard of living in our neighborhoods

Shannon Pekary

Hello, my name is Shannon Pekary and I am a candidate for the board of directors for Palo Alto Park Mutual Water Company. I and my wife April have lived in East Palo Alto since we were married, in 1991, and we have raised our 8 children here. I have lived in the Palo Alto Park service area since 2009. I am the Executive Director of the Ravenswood Youth Athletic Association, which helps run the soccer club that plays at Cesar Chavez school.

My experience as the director of a nonprofit organization gives me a unique insight into the management and finances of our water company, which is also a nonprofit corporation. I also have an engineering degree, which will help me understand some of the technical aspects of delivering safe water to our neighborhood.

One of the reasons I am running for the water board is that I have become very concerned about how the current board is using our finances. From their own financial statements, payroll and contractor fees account for about $400,000 dollars of the $660,000 of income. That is WAY too much money for staff, especially compared to other similar water companies. After showing us their broken pump at the shareholder meeting, and listening to the complaints of many of you, it is clear to me that they are not using our money wisely.

I am also concerned about the safety and appearance of the water. in 2016, the State Water Resources Board ordered the current management to create a plan to clean up the water. The plan they have created does not include a real plan to remove the manganese and iron, but rather to try to reduce it using over-chlorination, which is a cheap and poor substitute and can cause other problems.

Neighbors are reporting that the water company is charging more than $5,000 to install a water meter at new construction and renovations. Water meters do need to be installed, that is a state requirement, but $5,000 is WAY too much for this. Mutual water companies are supposed to run at cost, and there is no way that a meter costs this much to install.

As a board member, my priorities will be:

  • Investigate claims of illegal charges and return money to those who have been overcharged.
  • Overhaul the bylaws so that paid staff and their relatives cannot be on the board.
  • Do an audit of the books and make sure all the income is accounted for.
  • Make sure that the office is running efficiently
  • Reduce staff expenses and use that savings to fix equipment
  • Create a long-term plan to consistently deliver clean water to our houses at a reasonable price.