Category: News

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

Judge Weiner of the San Mateo County Court has issued a judgement in favor of Neighbors for Better Water and has declared them the winner of the 2019 board election.

In her judgement, Judge Weiner states that the previous board acted in “bad faith” by denying shareholders the right to vote who were late in paying their bills, but only those shareholders that voted for Neighbors for Better Water. She also states that the shareholders Hill, Macias, Chaudhari and Pekary are installed as board members.

The current board of the water company is appealing the decision, using Company (member) funds, and so the judgement is stayed on appeal and does not yet take effect.

References:

https://neighborsfbw.org/wp-content/uploads/2023/08/Notice-of-Entry-of-Judgment-as-filed-062623.pdf

https://neighborsfbw.org/wp-content/uploads/2023/08/CIV-00851-Final-Statement-of-Decision.pdf

The water company’s own rules, and state law, allows the water company to put a lien on a property if the property is behind in its payments. Apparently the water company is now putting illegal liens on everyone’s properties, even if they pay on time. The following is from a property owner in the area.

Just wanted to raise something to your attention, in case it can help you and your case.

We’re refinancing our house and the title company called with a strange finding as they were about to fund the transaction / close title this morning.

They noticed the house title had a lien on it from the water company and advised that I may be delinquent on my bills, that’s the only time they see a utility company put a lien on a property. A bit of research confirmed this practice being dependent on unpaid / delinquent bills. I’ve always paid the water company on time.

I called the water company when they opened and quickly escalated the conversation when the first person I talked to didn’t have a good explanation. The next more senior person explained they have a lien on every single house, and charge 2 months of water payments in advance with any sale or refinance
I asked about the $60 fee they added, and they explained it’s for all the paperwork required (which is ridiculous, they just send the bill to the title company for the advance water payments and the fee!).

This feels sketchy to me, I’m not even sure if it’s legal. If it’s not legal – I would be inclined to pursue legal action.

Update

Sept. 2021. In testimony in our court case against the company, the general manager admitted that they do, in fact, put a lien on all properties in the water district.

We have heard that the water company is beginning to force people to pay for the installation of water meters in certain properties, and charging an outrageous amount of money for them. Here is a letter from one home owner:

Dear Shannon,

My husband and I are new residents of the City of East Palo Alto. In September, 2019, Palo Alto Park Mutual Water Company informed us that we have to replace the fireflow protection meter installed at my property. The cost would be $2,700. Since the previous owner told us that he replaced all water meters(we have 2) and complied with PAPMWC’s requirements in order to obtain all permits required to final construction/remodeling, I requested by phone and email a copy of the latest (2018) approval of the water meter replacement, to which the company never responded.

The Division of Financial Assistance offered Prop 1 assistance to help PAPMWC produce the planning documents for construction of equipment upgrades.  The DFA has set up the Prop 1 funding where they assign their own work team to complete the work.  In this case, it would have been Sacramento State University and other assorted private consulting firms rounding out the team.  However, PAPMWC turned down that particular assistance.  Depending upon the developed workplan, this could have entailed as much as  $400,000 in assistance provided without cost to the community.  Instead Niambi’s sent a letter to them indicating that PAPMWC wanted to continue on the path with CRWA assistance to complete the funding application while also using its own engineering firm.

There was several attempts to explain to Niambi the service that Prop 1 funding would provide, but to no avail.  Eventually, DFA determined to withdraw all help using third party assistance providers to PAPMWC.  PAPMWC is now on their own for planning or constructing any system infrastructure project.

Click here for the letter the state has sent to PAPMWC. https://neighborsfbw.org/wp-content/uploads/2019/12/Palo-Alto-Park-Mutual-Water-Company-Rescind-Letter.pdf

Eric Lacey, the head of the State Water Resources Control Board, had this to say about the water company’s plans for obtaining grant money from the state when I asked him to corroborate the company’s recent statements that they are about to receive a grant.

It’s my understanding that Rural California Assistance Corporation, RCAC, has been contracted to perform the income survey. I’ve heard they are backlogged and  it could take a year to a year and a half to complete the survey.  Only after it is completed will we know what state funding can be made available. 

The Division of Financial Assistance (DFA) has also agreed to perform an income survey for the Palo Alto Park MWC service area.  I’m not sure of the status, but I believe they have, or about to, award the contract to a third party consulting firm.  This is a lengthy process that could take many months to complete.  (The last one I saw completed for a 30 home system took 9 months!)  You’ll know that it is underway when community members get contacted directly about the income survey.  The completion of the income survey and its findings will determine if PAPMWC is qualified for a grant or loan, or a combination of the two.

As a side note, I learned last week that much of the grant funding that was once available has already been earmarked for other projects.  (We’re in that part of the funding cycle.)  At the moment, very little grant funds are currently available for new projects.

So, to answer your question: No, PAPMWC has not been approved for grant funding.  I believe that statement that they are is premature and possibly wishful thinking.

Article here

Neighbors for Better Water Files Suit Against Palo Alto Park Mutual Water Company

Neighborhood group seeks to replace the board of directors of East Palo Alto water company

East Palo Alto, California – March 14, 2018 – A coalition of home-owners have filed suit against the Palo Alto Park Mutual Water Company (Palo Alto Park), which provides water to over 600 homes in East Palo Alto. The group, known as Neighbors for Better Water, is seeking to recall the board of directors and elect a new board. The challengers from Neighbors for Better Water claim that the water company has selected particular residents for unfair treatment and have mismanaged the company.

The suit states that at the annual shareholder meeting in September of 2017, the Palo Alto Park board members would only allow shareholders to vote on two of the five open seats on the board, even though the terms for all five members were expiring. Neighbors for Better Water attempted to amend the agenda to elect five board members, but the president of the board would not allow the change and eventually adjourned the meeting without holding an election.

Palo Alto Park 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. Only the State Water Resources Control Board (SWRCB) has the ability to inspect the operations and safety of the water these companies produce, but the SWRCB has limited enforcement powers.

Palo Alto Park was started in the 1920’s to serve some of the poultry farms of the Ravenswood area that would later become a part of East Palo Alto. Its water comes from wells that tap deep aquifers underground. Since the founding of Palo Alto Park, the 101 freeway was built, passing through the water district, and the farms have become subdivisions serving many more homes and residents than had been originally intended. After a number of recent pump failures and water quality citations from the SWRCB, many local residents have become concerned that the current management, which has been in place over 20 years, is unable to keep up with the demand created by the growth in the area.

“Our rough estimate is that 90% of area residents do not drink the water”, said Norm Picker, one of the challengers for the board of directors. “The water appears to be very hard and is high in iron and manganese, and while these do not necessarily make the water unsafe, it makes residents nervous”. In fact, since January of 2014, the SWRCB has cited Palo Alto Park for elevated levels of iron, manganese and coliform in the water[1].

In response to these concerns, area residents banded together and began collecting shareholder proxies in an attempt to unseat the current board or directors. Shannon Pekary, a representative of Neighbors for Better Water, 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.”

The suit states that shareholder Irene Laudeman, a proxy holder for over 43% of the shares in Palo Alto Park, ordered the company to hold a special shareholder meeting to complete the vote that was supposed to happen in September of 2017. The company did not respond. The suit is asking the court to force the company to have a shareholder meeting to recall the board and complete the vote. The Palo Alto law firm of Mayer-Brown is providing pro-bono legal assistance to the group. A hearing is scheduled for March 28.

Contact:
Shannon Pekary, spekary@gmail.com
Irene Laudeman, irene@ilaudemanllc.com
Neighbors for Better Water, http://www.neighborsfbw.org

[1] http://neighborsfbw.org/index.php/2017/10/15/water-quality-citations/

• 2018-03-13 [Proposed] Order Dir Notice of Special Shareholders’ Meeting
• 2018-03-13 App for Order Directing the Giving of Notice of Special Shareholders’ Meeting
• 2018-03-13 Laudeman Affidavit ISO Order Directing Special Shareholders Meeting
• 2018-03-13 Memo of P’s and A’s ISO App for Order Directing the Giving of Notice of Special Shareholders’ Meeting
• 2018-03-13 Notice of Application for Special Shareholders’ Meeting
• 2018-03-13 Pekary Affidavit ISO App for Order Directing the Granting Special Shareholder Meeting

March 15, 2018. Shareholders Shannon and April Pekary have won their case in Small Claims Court against Palo Alto Park (case 18-SCS-00088). Shannon and April claimed the company over-charged them for over 9 years. The court agreed and issued a judgment in their favor for $6,978.83 plus costs.

This happened back in 2016, but it wasn’t mentioned at the last shareholder meeting.

According to court documents, Palo Alto Park sued the State of California for damage done to the pipes that run under 101 and that serve water to the group of customers on the west side of 101. Palo Alto Park lost and was ordered to pay the state’s court costs. The State’s arguments included a number of things, but basically they said that damage happened so long ago that its unclear what the cause was. It could have been weather, earthquake, lack of oversight by the water company, 3rd party error, etc., none of which the State claims they are liable for.