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Stockton, CA court health and financial damage while "citizen" groups prolong legal action
Stockton attorneys argue to keep privatization deal

By Cheryl Miller
Record Staff Writer
Published Friday, November 14, 2003

Stockton residents would face "very real and very serious" health and safety threats if a judge voids a 9-month-old utilities privatization contract, city attorneys warned in a brief filed this week in San Joaquin County Superior Court.

Judge Bob McNatt last month ruled in favor of three environmental and civic groups that argued Stockton leaders broke state law when they approved the $600 million agreement without first weighing the environmental effects of allowing OMI-Thames to operate and upgrade the city's water, wastewater and stormwater systems.

Now the groups -- the Concerned Citizens Coalition, the Sierra Club and the League of Women Voters -- want the contract tossed. But attorneys for the city and OMI-Thames say private operations are too far under way to safely stop them now.

"This is an all-or-nothing situation -- if the Service Contract is set aside, the utilities cannot be operated," the city brief reads. "The city will have no employees to operate them. ... (The) contract must remain intact so that the residents of Stockton can continue to receive their water, wastewater and stormwater services."

McNatt will hear on Dec. 5 arguments on how the city should be penalized. Attorneys for the three citizens groups will file their own brief next week.

In its lawsuit, Concerned Citizens asked the judge to force the city to conduct an environmental review of the privatization project and to invalidate the contract, because the city wrote the pact without considering its impacts.

But McNatt said in an Oct. 28 scheduling hearing that he never intended to void the deal with his ruling, leaving both sides scrambling to interpret the decision.

Dean Cofer, an employee representative for Operating Engineers Local No. 3, the union representing many of OMI-Thames' utility workers, disputed the city's argument that it would need at least a year to hire back enough staff if it's forced to resume control of the waterworks.

"The same qualified people will be there regardless of who operates the plant," Cofer said Thursday.

The city and OMI-Thames also argued that voiding the contract would wreak "economic havoc." OMI-Thames claims Stockton already owes more than $6.7 million and would "explore remedies against the city" if the contract ends and the company cannot collect. The city argues that regulators could fine Stockton millions of dollars if operators don't clean up its wastewater discharge quickly.

Concerned Citizens members say both sides knew the financial risks when they forged ahead with privatization despite the pending lawsuit. They note that the 20-year contract forbids OMI-Thames from taking operating control of the utilities if either party is involved in an agreement-related lawsuit.

But on Aug. 1 -- after Concerned Citizens filed its suit -- City Manager Mark Lewis and Municipal Utilities Director Mark Madison signed an agreement with Gary Miller, OMI-Thames' executive vice president, waiving that provision. OMI-Thames began control of some operations that day.

Privatization opponents also point out that the contract includes an "escape" clause that frees the city from the agreement for a $1 million payment.

City attorneys have asked the court to let the contract stand while still requiring environmental studies.

Concerned Citizens wants the judge to order the studies and to revoke Stockton's approval of the contract.