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OMI-Thames Stockton privatization STOPPED by Superior Court

A Superior Court judge has tossed out a landmark contract that privatized Stockton's water operations, calling the City Council's approval of the $600 million agreement "an abuse of discretion."

Judge Bob McNatt ruled that the city should have considered the environmental impacts of handing control of its water, wastewater and stormwater systems to OMI-Thames Water before approving the deal.

The city had argued that the 20-year deal was legally exempt from an environmental review.

"It may well be that OMI-Thames can provide excellent service at a cost lower than municipal government," McNatt wrote in his ruling earlier this week.

"However, in order to allow the public and government to reasonably evaluate these possibilities, more environmental review of this issue is necessary than a simple declaration of exemption."

The ruling throws into question the current and future operation of Stockton's municipal utilities. OMI-Thames assumed operations of the waterworks systems this summer, and approximately 85 city workers became employees of the private company.

OMI-Thames also had taken the first steps toward a $57 million upgrade of the city's troubled wastewater plant.

With the contract deemed invalid, the city also may now have to seek voter approval of any new deals.

Stockton voters in March approved an initiative giving them the right to vote on any utilities privatization contract. But the vote came two weeks after the City Council approved the agreement with OMI- Thames.

The city has the right to appeal the decision.

The ruling is a victory for the Concerned Citizens Coalition of Stockton, the Sierra Club and the League of Women Voters, the three groups that sued the city.

"They'll have to go back now and do the environmental review that they should have done," said Brian Johnson, an attorney for Concerned Citizens.

What will really happen through the "relief" period?

Sewer service?
No change. OMI-Thames will continue to operate the systems previously run by the city for the near future. California Water Service customers will continue receiving water from that company as usual.

Attorneys for the groups that successfully sued the city now have five days
to prepare a proposed judgment that includes the "relief," or legal actions, they sought in their lawsuit -- chief among them an order to invalidate the OMI-Thames contract. The city then has five days to respond to the proposed judgment.

Judge Bob McNatt will issue the final order requiring Stockton's City Council to rescind its February approval of the contract. The city could then appeal to the Third District Court in Sacramento. City attorneys could seek a stay, or temporary reprieve, from McNatt's order until the appeals court hears the case.

The workers?
Ninety-one Stockton utilities workers became OMI-Thames employees this summer. OMI-Thames officials said they will honor the terms of their two-year contract with the workers' union. And, under terms of the union's severance agreement with the city, the workers could become Stockton employees once again if the city is forced to resume operating control of the waterworks.

Cost to the city of extended procurment?
(1) The city has paid $2.1 million in severance pay to its former utility employees;
(2) more than $1 million to the legal firm of Hawkins Delafield & Wood for help with the contract;
(3) at least $348,000 to HDR Engineering to analyze the city's waterworks operation costs;
(4) a similar amount to Alternative Resources Inc. to review the bids; and
(5) untold thousands more in city staff members' time in putting the deal together.

The city must seek voter approval of any large-scale utility privatization contract, according to Measure F, passed by Stockton voters in March. If the city wants to pursue a new contract with OMI-Thames, that will place the issue before voters -- possibly in 2004 when Stockton will choose a new mayor and three new council members.