By Miriam Raftery
July 28, 2015 (Pine Valley)—Angered by the inflammatory and possibly unlawful actions of Pine Valley Municipal Water Company’s chairman Flip Boerman and board, Pine Valley residents/shareholders will convene a town hall meeting on August 2nd at 3 p.m. in the Pine Valley Community Center.
“We need to begin legal action,” Bob Zaidman wrote in an e-mail to East County Magazine.
Shareholders are steamed that at the PVMWC annual shareholders' meeting in late June, Boerman refused to allow questions of board members before an election of officers. Votes were counted in secret with no outside observers. At that meeting, shareholders objected to the board’s decision to sell 5 million gallons of water to Rough Acres, a new water company formed that would supply a solar project in Boulevard and potentially other developments. Shareholders presented demanded that the board send a ballot to all shareholders to vote on rescinding the sale to Rough Acres.
Instead, Boerman sent a deceptive “rate survey” to shareholders asking them to vote on banning all outside water sales, not just to Rough Acres. Shareholders had discussed this option at the meeting and specifically rejected banning other water sales, as a tape of the meeting makes clear.
Yet the ballot language on the reverse side of the survey asks people to vote either to “continue the policy of utilizing outside sales, as a way of supplementing the company’s income” or “stop all outside water sales and raise my water rate that will show on my next bill.”
Ironically, Boerman at the meeting observed that a letter previously sent by the Committee to Save Pine Valley Water included errors in the amount of water to be sold to Rough Acres. The actual amount in the contract is a maximum of 5 million gallons total. The Save Pine Valley Water group's letter had incorrectly said it would be 6 million gallons a month over 5 years.
Yet in his own rate survey letter to shareholders, Boerman cited the Committee to Pine Valley Water’s inflated figures to claim that 6 million gallons a month would mean $40,000 a month in lost income, and used these fictitious figures to claim that each ratepayer would have to provide a $3500 payment per meter for those five years, or annual payment of about $700 to make up this “loss.”
Why did Boerman misrepresent shareholders’ intent regarding stopping only water sales to Rough Acres?
Why did he inflate the amount of water to be sold and use false numbers to try and scare ratepayers into voting against banning water sales?
Why didn’t he instead provide an honest calculation of how much income would be lost by banning only the 5 million gallons in the Rough Acres contract, and limit any potential rate increase to that far smaller loss?
East County Magazine has e-mailed Boerman to request responses to these questions and others, also advising that Calaware’s General Counsel, Terry Francke, has informed ECM that a cure and correct order should be issued for the elections. We asked that the board also be copied, but we have received no response. We also asked for bylaws and articles of incorporation, but have not received those either.
Residents voice additional concerns. Zaidman told ECM that Pine Valley Mutual Water Company has “refused to show a six year span of their audits” though ratepayers obtained these with outside help. “The Water Company financial statements are very evasive,” he says, “missing details of employees’ names and salaries, benefits, insurance co-pays, retirement funds, vehicle purchase and usage details…Both our Board and our management have currently employed family members of the Pine Valley Mutual Water Company, and the company’s denial of financial details prohibits us from exploring those relationships.”
He adds that Boerman told an independent auditor earlier this month that those details are private and he does not need to disclose them to the shareholders because PVMWC is a private corporation.
So just what recourse do shareholders have and who is in charge of overseeing elections and other actions of private mutual water companies? That’s about as clear as mud.
We asked CALAWARE’s general counsel, Francke: is it illegal to refuse to allow discussion of candidates or questions of candidates before forcing a vote in an election?
He replied, “Yes” and cited government code section 54954.3(a). He indicated that the citizens/ratepayers or the district attorney is authorized to send the board a “cease and desist” letter and demand that the action be rescinded and corrected within 30 days.
However, a county representative advised ECM that mutual water companies are regulated by the state, not the county.
Then an aide to the Secretary of State’s press secretary told us “counties oversee election complaints for water companies.”
Wes Strickland from the Private Water Law blog site advised ECM that mutual water companies don’t have to abide by the Brown Act, but are governed by AB 240 which established a new Mutual Water Company Opening Meeting Act under the Corporations Code.
“For a mutual water company, elections for directors and other internal governance matters are controlled by the nonprofit Mutual Benefit Corporation Law. Mutuals are not subject to the laws related to public agencies like the Brown Act or Public Records Act…but there are sometimes similar requirements in the corporate laws. There are also some laws that specifically cover mutuals.”
Strickland disagreed with Francke and said corporate laws don’t require nominees for board positions to answer questions at a shareholders meeting unless stated in the company’s articles or bylaws (which PVMWC has failed to turn over thus far.) “That said if I were advising a board, I would recommend that the board answer questions at the annual meeting in a free and open way, as a matter of member relations.” He acknowledged that when meetings get contentious, however, “It’s a fine line for a board between being open and being harassed.”
Member votes are generally by show of hands unless a member asks for a written ballot, however director elections normally are handled by written ballot with members’ names on them to prevent multiple voting, as was done in the PVMWC elections. Despite concerns over the lack of a vote count observer, Strickland says “there is no requirement that a board allow any member who wants to observe” but adds that he would allow a “member of a dissident group to observe the vote count” provided they had a positive demeanor and could be trusted to maintain confidentiality, for example.
Pine Valley Mutual Water Company is listed with the Secretary of State’s office as entity number C0106809 and some records can be requested for a fee.
This was not the first time there has been a revolt by ratepayers over water sales in the PVWMC district.
“In the hot summer of 2011 Pine Valley’s section of The Old Highway 80 was plagued with 6000 gallon super tankers lining up at our main hydrants. They took processed and potable water from morning till night to be used as a wash and slurry for the Cal Trans (Horse Thief Canyon) road grinding project,” Zaidman said, adding that the deal was “calamatous…We had disel smoke permeating the Valley and many like myself with breathing disorders were choking on it. There was an angry shareholder reaction to it back then…”
Fed up with the current situation, he stated, “The election was a sham…We need to recall the Board and perhaps seek new management. We are planning a shareholder run.”
Meanwhile the drama continues, with shareholders alleging that Town Hall flyers are being removed from local bulletin boards.
Another oddity is that after word about the August 2 shareholders’ meeting got out, another group has begun circulating and posting notices around town urging residents concerned about the blasting of a large rock formation on Old Highway 80 and Pine Creek Road to show up at the shareholders’ meeting, Bob Ames-Smith told ECM. “They should be contacting the planning group instead,” he says, adding that he suspects the flyers may be an attempt to disrupt the shareholders’ meeting.
(The blasting is part of a multi-million dollar road widening approved in response to a boulder that fell from the rock formation, nearly striking a car several years ago.)
Shareholders have been circulating a petition, meanwhile, ECM has learned. Jennie Munger, in a post on the Ranter’s Roost forum for rural land use issues, referred to the water company’s survey as “ridiculous” and “threatening.”
Munger urged fellow Pine Valley shareholders, “Please, no one should feel intimidated by this survey and Boerman’s threats. Indicate your desire to discontinue outside water sales, no matter what the threat. They cannot raise our rates because of a survey,” she maintains. “I am beginning to think Mr. Boerman believes us to be collectively stupid….We are in the right and you have to believe we will prevail.”