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State Wants Firms to Get Share of Water Funds

Critics say 2-year-old Prop. 50 allows only nonprofits and public agencies to benefit.

March 12, 2004|Nancy Vogel | Times Staff Writer

SACRAMENTO — California health officials are preparing to reverse a long-standing state policy by letting private companies tap voter-approved water bond money that has historically been restricted to public water districts.

Several public agencies and consumer groups are fighting the move, arguing that voters had no indication that for-profit firms might benefit when they passed Proposition 50, a $3.4-billion water bond measure, two years ago.

State health officials are just now drafting rules for dividing up the Proposition 50 money and are being heavily lobbied to make sure procedures allow private firms to compete for shares. The firms gained the support last year of a key lawmaker who presides over state water issues.

"We have a multifaceted water system in California that runs the gamut from public to private," said state Sen. Mike Machado (D-Linden), who heads the Senate Agriculture and Water Resources Committee. "So we have to try to deal with all aspects of it."

Officials at the state Department of Health Services say they are inclined to agree. Next week the department is expected to complete guidelines that will allow private companies to compete for $485 million in Proposition 50 money.

Machado said he would try to make sure the rest of the bond money was similarly available to investor-owned companies.

In 2002, proponents heralded Proposition 50 as a way to protect, expand and clean California's water supplies and to preserve river parkways and wetlands. The official state voter guide included the statement that bond money "would be available for expenditure by various state agencies and for loans and grants to local agencies and nonprofit associations."

Previous water bond measures in California, including those passed in 2000 and 1996, limited grants of the bond money to public agencies and nonprofit groups, although private companies have been able to get loans through a fund for safe drinking water.

"Water in California is enshrined in our state Constitution as a public trust," said Juliette Beck, coordinator of the "Water for All" campaign of Public Citizen, a national nonprofit consumer advocacy group. "We think it's imperative that public funds go to support public water systems and never end up in the coffers of multinationals or private companies, period."

Officials with the private water companies, however, argue that their customers are taxpayers too, and therefore should be entitled to the benefits of a statewide bond issue that all taxpayers will be paying back over the next 25 years.

"Twenty percent of the state's population is served by these utilities; everybody pays for the bonds, so everybody should be able to compete fairly," said Christine Frahm, a lobbyist for Southern California Water Co. in San Dimas. The company would like to use Proposition 50 money to help pay for the replacement of main water pipes in Norwalk and Artesia, she said.

Stan Ferraro, a vice president with California Water Service Co., which serves 460,000 people from Los Angeles to Chico from its headquarters in San Jose, is also interested in getting Proposition 50 grants for his company. He said state aid would help keep customer rates from rising.

"It purely is saving our ratepayers from us having to go out and borrow the money," Ferraro said.

But public agencies and consumer advocates argue that taxpayer-financed water bonds should not be used to aid investor-owned companies, some of which are subsidiaries of large, European-based corporations. There is not enough money available to pay for all the worthy projects sought by public agencies, they argue.

The state health department's original draft guidelines on distributing Proposition 50 money banned private water company applications.

But the agency reversed itself after private water firms -- which have spent more than $800,000 on lobbying in 2003 and so far in 2004 -- stated that the Proposition 50 language passed by voters did not unequivocally restrict the money to public agencies.

"Unless there's some specific section that prohibits the funding to go to private entities, since the private enterprises provide water to consumers and it improves water quality, our read of it is, it's acceptable," said Rufus Howell, assistant chief of the department's Division of Drinking Water and Environmental Management.

That position is supported by a legal opinion issued Feb. 27 by the state legislative counsel's office at Machado's request.

Unlike previous water bond measures, Proposition 50 was not written by the Legislature, but largely by Joe Caves, a Sacramento attorney who has worked for various environmental groups. Many lawmakers, as well as public and private water purveyors, supported the bond issue, and private water companies donated $52,500 to the "Yes on 50" campaign.

"We didn't put in a prohibition," Caves said. "We just didn't speak to the issue."

Last year, Machado introduced a bill that would make private water companies eligible to tap Proposition 50 funds.

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