admin – Neighbors for Better Water

2024 Annual Meeting Notes

Finances

While the president and bookkeeper attempted to give a rosy picture of the state of the Company, many of us pointed out that the finances are such a mess that there is no real way to tell. The financial statement had a basic accounting error in the amount of over $93,000 which nobody could explain. It also had an adjustment of over $150,000 from the prior year which the bookkeeper said was related to a billing error. Many members asked for an audit, and I pointed out that the bylaws require an annual review by an outside accountant, which is not being done. The Company gave no assurances that an audit or review would be done, and they used the proxies that members signed for them to approve the treasurer’s report, despite the errors.

The Company also declared that they are going to continue raising water rates and will be installing meters at all the houses.

Election

Instead of electing the two people listed on their proxies, the Company declared they were electing two other people that were not on any of their proxies, people that had not campaigned.

We have followed up with the Company to ask for documents and accounting information to research more about the election and the finances. More detailed notes are below.

Notes on the Annual Meeting

The Company announced the following totals for proxy votes:

– Company: 571.51

– Neighbors for Better Water: 191.58

Note: We believe our total was over 300. We are still waiting to hear back from them on why they discounted so many of our votes. We also protested earlier that 2 out of the 3 vote counters were the same ones that were found to have wrongly canceled votes in 2019.

Minutes

We tried to correct the minutes from last meeting because they did not show that the Company had lost our lawsuit against them for the 2019 election. They used their proxy votes to prevent that correction.

Treasurer’s Report

Eva Bruner, the bookkeeper, gave the treasurer’s report. (Eva is not the treasurer, Niambi Lincoln is the treasurer). She stated:

– The Company broke even

– Water rates were going to increase

– Meters are going to be installed on all houses within the next 7 years per state law

– The Company is receiving a grant of technical assistance from the state

– The Company received funds for Covid relief for specific customers

Questions from the audience were asked:

– Shannon Pekary asked why the financial statement has a basic accounting error in it, that the starting retained earnings for this year did not match the ending retained earnings from last year, by $93,000! Ms. Bruner said she didn’t know.

– Ms. Lincoln was asked why the phone bill was over $25,000 for such a small company, and whether board members were receiving phones. She stated that the phones were special, that they needed to be on all the time, have video chat and picture taking capabilities (like a standard cell phone). She did not answer the question on who was receiving company phones.

– Delphine Hill asked when the last financial review or audit had been done. Ms. Bruner answered that one had not been done since 2017 when she started as the bookkeeper. Ms. Bruner and Fidel Alas said later the cost for an audit would be $20,000 and they would have to figure out how to raise that money.

– Carlos Romero asked why the allowance for doubtful accounts went from $230,000 in 2023 to $75,000 in 2024. Ms. Bruner said it was a billing error.

The board asked for a vote to approve the Treasurer’s report.

Shannon Pekary voted his proxies against approval, because:

– The financial statement was obviously flawed and appears to show over $93,000 unaccounted for.

– The Bylaws require an annual financial review by an outside accountant, and that is not being done.

– Niambi Lincoln is the treasurer and the general manager, a violation of good governance practices and separation of duties.

Niambi Lincoln voted her proxies to approve the treasurer’s report anyway.

Board Election

The Company announced that their two candidates for board were withdrawing from the election, and that they were going to elect two other people: Sharifa Wilson and Barbara Jacobs.

The candidates were allowed to make statements and questions were asked of the candidates. During this time, Niambi argued that the wells are not failing, but Shannon stated that according to the state water board, the wells ARE failing.

The Company voted 355.37 votes for the new candidates, and Neighbors voted 191.58 for Shannon Pekary and Ramiro Macias.

President’s Report

Mr. Alas gave the president’s report on the Company. He said that the Company offices are still closed due to Covid and meetings have to be by appointment, though they hope to open the office this year.

Shannon Pekary asked how he can give such a rosy picture about the Company when the financial statement is a mess, the Company is under an enforcement action from the state water board, the governance is horrible, the bylaws are not followed, and we have failing wells. Out of 150 water systems in the South Bay Area serving more than 500 people,ours is the only one shown as failing.

Open Comment

Shannon Pekary said that the Company had finally reduced his bill to the correct amount after winning multiple lawsuits in small claims court. He also asked to attend the board meetings of the Company, which he has a right to do according to state law.

Delphine Hill said that the state water board expressed that they are having difficulty with the management of the Company.

April Pekary stated she would like to get answers to the questions on the financial statement. Niambi Lincoln said she could set up an appointment later.

Ms. Rose asked for a financial report from Neighbors for Better Water. Shannon later stated she could contact him at neighborsfbw@gmail.com to get answers to questions.

Annie Jenkins, Syrtiller Kabat and Elvira Macias all asked for an audit.

Niambi Lincoln stated she was happy the Company will be receiving technical assistance from the state.

Meeting Adjourned

Our Wells

The state of the wells at PAPMWC

Well 7 is normally not used because it has high levels of manganese, iron and aluminum. While these are not considered health hazards, they do affect how the water looks, tastes, smells and how it impacts appliances.

Well 6 has failed 3 times in the last 2 years. The casing is cracked. The State Water Resources Control Board believes it can fail catastrophically at any time. Without Well 6, the company cannot meet peak demand. It will be taken out of service to make temporary repairs, but cannot be operated at full capacity.

Well 5 is damaged and can only produce about a quarter of the flow that well 6 produces.

Well 3 completely failed many years ago. The company submitted plans to the state to drill a replacement well in 2021, but the plans were rejected because they were incomplete. It’s been over 2 years, and the company still has not successfully submitted complete plans.

Our conversation with the state water board:

According to Van Tsang, a supervisor at the State Water Resources Control Board:

Attached is the daily log that PAPMWC is required to submit when Well 7 is in use. According to the log, Wells 5, 6 and 7 currently produce 78 gpm, 280 gpm and 300 gpm, respectively. According to the Source Capacity Planning Study prepared by PAPMWC, dated December 7, 2023, the maximum day demand based on daily water usage data from January 2017 to July 2023 is 593,000 gallons.

Combined production from Wells 5 and 7, or Wells 5 and 6, cannot meet peak demand during the summer months. We are uncertain about the fire flow requirements for the community; water systems should work with the local fire marshals to determine the fire flow requirements.

Yes, production from Wells 6 and 7, together, can meet peak demands.

No, Well 7, alone, cannot meet peak demands.

There is no immediate threat during the fall and winter seasons when water demand is low, unless Well 7 fails.

No, the maximum day demand does not take into account unusual surge in water demand, like a fire or main break.

Including this incident, the well casing for Well 6 has failed three times in the past 2 years. All the repairs made are temporary and the well can catastrophically fail at any time.

From PAPMWC’s website:

Public Notification Update: Well Activation and Water Quality Advisory

To meet current water demands, Well 7 was activated on November 6, 2024, while Well 6 is temporarily out of service for repairs. Well 7 will only be used if Wells 5 and 6 cannot fully meet system demand.

Please note, the water quality from Well 7 is not as high as from our other wells. In the past, Well 7 has exceeded Secondary Maximum Contaminant Levels (SMCL) for iron, manganese, and aluminum. These exceedances do not pose a health hazard but may have aesthetic effects such as:

Aluminum: Colored water
Iron: Rusty color, sediment, metallic taste, reddish/orange staining
Manganese: Black to brown color, black staining, bitter metallic taste
We encourage customers to conserve water to reduce strain on the supply. Simple actions like fixing leaks, taking shorter showers, and reducing lawn watering can help.

We appreciate your patience as we work with the State Division of Drinking Water and contractors to drill a new replacement well (Well 3R).

Thank you for your understanding and cooperation.

History of Our Fight

In 2017, Neighbors for Better Water (NFBW) was formed by concerned residents in East Palo Alto who are in the Palo Alto Park Mutual Water Company district. Many of these residents had experienced illegal charges and rude treatment from the staff of the water company, and were very unhappy with the quality of the water. Additionally, when they brought these concerns shareholder meetings, they discovered that the company was run by one family, and they had very little interest to change.

Shareholder Meeting September, 2017

In September of 2017, NFBW went to the shareholder meeting with enough proxies to elect a new board. Board president Fidel Alas realized that he was going to lose, and so he refused to have an election for the entire board, and instead only allow a vote for 2 board members, even though the notice for the meeting included an election for the entire board. He shut down the meeting without having an election, and the old board continued to run the company though they were all past their term of office.

Special Shareholder Meeting May, 2018

NFBW then presented a demand from a moajority of the shareholders to hold an election, and the board refused. We then went to court and the court agreed with us and forced them to have another election. The problem was, the court left board president Alas in charge of that election. In May of 2018, after two days of vote counting, the inspectors of the election declared NFBW the winners. Mr. Alas the next day threw out the result, started the count completely over with his own personally appointed inspectors, who threw out most of NFBW proxies for illegal reasons and declared themselves the winners.

NFBW then filed another court case to have the court decide the election. Despite state law stating that courts must set a date for such matters within 10 days of filing, the court refused, citing a lack of resources due to the governor not appointing enough judges. They then scheduled a pretrial hearing 3 months later. That date was delayed, and delayed, and delayed again. In the mean time, the previous board tried to derail the court case.

Special Shareholder Meeting August, 2019

The illigitimate board held a special shareholder meeting to change the Articles of Incorporation, and later the Bylaws, ostensibly to improve the company. The real reason was to change the schedule of voting for elections so that they could hold all new elections and declare our lawsuit moot.

At this meeting, they claimed to rewrite the Articles, turning the company into what is known as a Mutual Benefit corporation (not to be confused with a Mutual Water Company, which is what the company is, but the word Mutual means something totally different here). The problem was, state law says that Mutual Benefit companies cannot have partial votes for members, but most people in the company had just that, partial votes. The other problem the company had was that in order to change it to single votes, the company was required to get the approval of EVERY shareholder in the company, not just a minority.

The company simply ignored the law and did it anyways, claiming they had a majority of shares by proxy. When the shareholders at the meeting asked to see the proxies and count them, board president Alas and general manager Lincoln simply said no.

Shareholder Meeting December, 2019

Since our lawsuit was still pending, we were forced to again gather proxies and challenge the family for control of the company. After counting of proxies for a week, we were declared the losers by a very slim amount. After reviewing the proxies ourselves, we realized that we had, in fact, won again, but again, we were ignored.

We then filed another lawsuit challenging these results. That lawsuit was joined with the previous one, and again, our request to have a 10-day hearing, as provided by law, was denied by the courts.

We were finally granted a trial date in May of 2020, but Covid hit, the San Mateo County court system shut down all civil trials, and we waited, and waited.

Trial June, 2021

Testimony for the trial began in June of 2021. We had 3 days of testimony, then a 1 month break, then 3 days of testimony, then a 2 month break, and then 1 day of testimony. Testimony has completed, but we are now waiting for the court reporters to deliver transcripts of the testimony so our lawyers can complete the final arguments. As of Nov. 29, we have not heard from the court, and they have not told us when the transcripts will be available.

Read News Article: Troubled Water

Complete Article

Below are some excerpts and quotes from the article “Troubled Water” by Kate Bradshaw of The Almanac:

The day he left East Palo Alto to attend his grandmother’s funeral across the country, Justin Turner’s water was shut off.

He had to leave his wife, nine months pregnant and due to deliver any day, at home without water, after trying fruitlessly for months to have a simple question answered by his water company, the private nonprofit Palo Alto Park Mutual Water Company: Why is my bill so high?

“They’ve probably been the least cooperative of the water districts we work with as far as being forthcoming with information,”

– Harold Schapelhouman, Menlo Park Fire Protection District Chief

“I don’t think staff is working for improvement. I think they’re primarily showing up and doing what they’ve always done,”

– Eric Lacy, State Water Resources Control Board

“I think the City Council has been very concerned, but we don’t have jurisdiction … I personally hope that the court will intervene in a way that they do help that entity to become more responsive to the needs of their customers,”

– Ruben Abrica, East Palo Alto City Councilmember

Ramiro Macias

Resident of East Palo Alto for 25 years
Works at Sequoia High School in Facilities
Previously work in the PC Board Manufacturing for over 25 years
Hobbies: Gardening, reading, and sports

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.