Category: News

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.

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

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.