Utilities vote won't end battle

By Cheryl Miller
Record Staff Writer
Published Tuesday, February 18, 2003

They've endured six years of debate, flipped through thousands of pages of studies and selected a multinational company they think can run the city's utilities.

Now, as Stockton City Council's flirtation with utilities privatization reaches the altar, its seven members have one last choice to make: Should they sign a 20-year, $600 million contract that would give international conglomerate OMI-Thames operating control of Stockton's water, wastewater and stormwater system?

The City Council will decide Wednesday at a 5:30 p.m. hearing. The event is likely to draw hours of testimony from critics and supporters as well as widespread attention from the media and industry watchers eager to witness the fate of one of the biggest privatization deals in the country.

Based on previous votes, a slim council majority appears ready to approve the contract. But even the pact's most ardent backers know that decision will settle little.

Opponents say they are ready, almost resigned, to immediately launch a referendum campaign to overturn the council's vote. And that election battle, likely participants predict, will be more intense -- and costly -- than the previous years of debate.

"We will be ready on Thursday morning," said Sylvia Kothe, co-chair of the Concerned Citizens Coalition of Stockton, a group battling the city's privatization efforts.

"After the resolution is voted on at council, we will begin our (referendum) action in order to get the process moving," Kothe said.

Contract supporters are ready, too, to wage a pro-
privatization campaign. Mayor Gary Podesto, privatization's biggest backer on the council, appeared in a media campaign over the weekend designed to drum up support before Wednesday's vote.

"I think this is the right thing for the city, the right thing for the citizens, so I'll work in any way I can to make sure this happens," he said.

As for a possible referendum by opponents, "They can do whatever they want to do," the mayor said.

Concerned Citizens will need to gather 4,760 valid signatures within 30 days to put a late spring referendum before voters. Kothe said coalition members, who have already canvassed most of Stockton's voter precincts, can complete the task by the end of the month.

"We've got a great volunteer force that's promised to get out," she said.

The outcome of the contract battle holds huge consequences for Stockton, its elected decision-makers and OMI-Thames. State regulators say the treated wastewater the city dumps into the San Joaquin River contains too much ammonia.

Stockton faces millions of dollars in fines if its wastewater plant isn't upgraded. OMI-Thames has offered to make the fixes for $57 million, an eye-popping number but a relative bargain compared with what its competitors offered to do the job.

The Stockton contract would be the first of its kind for OMI-Thames, a partnership between Colorado-based engineering firm OMI Inc. and Thames Water of the United Kingdom.

Contract advocates say the company has an incentive to make its Stockton operation a well-run showpiece so it can attract other U.S. municipal utilities in an increasingly competitive privatization market.

"I think it's probably the best contract of its kind in the country because of what we've been able to build into it," Podesto said, "and actually from some of the questions that Concerned Citizens raised."

Critics, however, maintain that OMI-Thames cost projections aren't realistic and that city officials are bent on completing the deal before the March 4 election, when Stockton residents will decide whether all future, big-ticket privatization contracts should go to a public vote.

As Wednesday's vote approaches, council members say they haven't been pressured by lobbyists from either side.

"I'm really just sorting through my mind the elements of the contract, whether the elements are going to meet the criteria we established and what are the risks of going with the contract," said Councilwoman Leslie Baranco Martin, an engineer and attorney who is considered a potential swing vote on the contract. "I'm just trying to weigh what my role should be in making my decision."

Councilman Larry Ruhstaller planned to walk some of his district's neighborhoods over the weekend and talk with constituents about the contract. Ruhstaller supports the deal, but he also wants a council decision tied to a public vote.

"If this subject had not been brought up by the voters, if they hadn't said, 'Hey, we want to vote,' I wouldn't have thought twice about asking them. I don't ask them to ratify a street-paving contract," he said.

"But (Concerned Citizens) did go out and get 18,000 signatures for the initiative. ... At a certain point you go, you know, there's enough smoke here, there's probably some fire. I think we need to look into this and see how we educate the public about what the issues are and let the chips fall where they may."

* To reach reporter Cheryl Miller, phone 546-8252 or e-mail cmiller@recordnet.com


Stockton's proposed contract with OMI-Thames totals almost 900 pages and weighs as much as a heavy bowling ball. Critics question the validity of its financial projections, but supporters say it offers the city a good deal.

Here are some of its provisions:

* Contract length: 20 years

* Cost: $600 million. OMI-Thames will charge
$57.8 million to build a wastewater-treatment facility that complies with new pollution standards. First-year operations cost for the water, wastewater and stormwater systems is $18.4 million.

* Termination fee: Stockton leaders can terminate the contract "without cause" for $1 million.

* Renewal: The city can renew the contract for up to five additional one-year terms.

* Ownership: The city retains ownership of assets, control of water rights and ability to set rates.

* Penalties: OMI-Thames pays fines of up to $16,000 for exceeding pollution-discharge standards, failing to maintain records, flunking odor standards or causing water-quality problems.

For more information:

* The city has placed copies of the contract at the Cesar Chavez Central Library, 605 N. El Dorado St., and at the Troke Branch Library, 502 W. Benjamin Holt Drive, for public viewing.

* The city of Stockton's Web site, www.stocktongov.com, also offers links to the contract as well as consultants' comments and a critical report issued by the Pacific Institute of Oakland.

* Consumer advocacy group Public Citizen also has authored a report critical of the OMI-Thames deal. It's viewable online at:

* Information about OMI Inc. is available at:
www.omiinc.com. Thames Water's company Web site is: www.thames-water.com.

-- The Record

Foes to rally

Opponents of Stockton's utilities privatization contract will host a rally and news conference on the steps of City Hall at 4:30 p.m. Wednesday, prior to an expected council vote on the $600 million pact.