A brief review of the history is necessary to understand the Hillcrest Water System (HWS) problem. Early in the year of 2000 the city annexed the Walton Area without the proper water infrastructure to support its' new citizens. Water was supplied by same private company that supplied water for many years.

THE ANNEXATION FLIER:

 In an Walton Annexation flier the City stated that Hillcrest customers would receive a State Certified Water Supply from the City. How could the City guarantee this when they didn't have sufficient surface water or the piping necessary to connect the Hillcrest customers to the City's surface water plant nor did they own the Hillcrest Water Company? In addition, the City said that "If desired by area residents" the City will assist you in creating an assessment dis trict process that is used for water line extensions. This statement would lead one to believe that connection to City service water was not a mandatory requirement before or after annexation

 Prior to the City's purchase of the Hillcrest Water Company (HWC) In September 2000 in a newspaper article, the City Utilities Director said that the HWC wells would give the city a back up water supply for future droughts and emergencies. Certainly, this is a benefit to the entire city!

 In a newspaper article a City official said that the City will not require home owners to install water meters on their properties, if they have an existing home, However we have now been told that all homes connected to the HWS not having an existing water meter will be charged for one.

 In this same article the Utilities Director is stated to have said that after the HWC company purchase, that the City Council will have to decide who will pay for upgrades - indicating that the city wanted to purchase the HWC even before the City Council knew who and how the city would pay for the upgrades!

 As a side note and not part of this water discussion, it should be noted that the City promised Walton area residents that they would receive City police protection - it has been over eight years and the Walton area is still waiting for the City to fulfill this promise! 

CITY MEMO TO THE SUTTER COUNTY LOCAL AGENCY FORMATION COMMISSION (LAFCO

In February 21, 2001 The Yuba City Administrator made a plea in a memo to LAFCO to provide city water service within its' Sphere of Influence (SOI) - which inclu ded a large area outside city limits. Also indicated in this memo was that primary conduit for this water service would be the Hillcrest water System (Walton was already within the City limits). Again, this indicates that development in the SOI would be a benefit to the entire city for future city development - a desired planning goal for Yuba City!.

It is also stated that the HWC water system would not meet recently passed arsenic rules and that the costs for these improvements has not yet been estimated. 

In this same City memo the City states that they intend to convert HWC customers to surface water. However, the City did not determine who will pay for the required water plant and water distribution improvements?

Later in this memo it states that the City intends to have all the these costs borne by the Hillcrest customers. One would guess the City  didn't know and did know in the same memo who will be burdened with these costs! Doesn't this sound like bureaucratic doubletalk?

How can they make a determination that the Walton citizens will pay all costs without a Proposition 218 vote by the Hillcrest water customers and especially when they didn't require this as condition in the Walton annexation flier?  In the Annexation flier in 2000 and in this memo the statement that the HWS can request conversion to surface water. There was not a condition or mandate for conversion to surface water in the Annexation flier. Could it be that annexation would have been a more difficult sell to the Walton residens if they knew that they would have to  have to pay $20,000,000 dollars in the future for connection to City surface water?

Isn't this gracious of Yuba City to purchase a suspect water system in the city's name that provides benefits to the entire city; doesn't know how much it will cost to fix the problems or who will pay, and then determines that Hillcrest water users will pay the entire cost of the project without having a chance to vote on the HWC acquisition?

SUTTER COUNTY LETTER TO LAFCO:

On March 22, 2001 Sutter county sent a letter to LAFCO concerning Yuba City's requested expansion of it's water service into the SOI. This letter considers the Yuba City request to provide water service beyond the city limits into the Sphere of Influence including the areas served by the Hillcrest water Company. As stated in the letter, Yuba City did not have sufficient water rights to serve all of Hillcrest customers. The letter noted that LAFCO did not need to evaluate if the City has sufficient water rights but to evaluate t he if the City can provide service (through the acquisition of Hillcrest) beyond it's City boundaries . This is a clear indication that the City was using the HWC purchase to be able to gain water service rights to provide water to the SOI even though the City did not have enough surface water rights to even support the HWS system customers. This is clear indication that the City was using the Walton Annexation and the HWC as stepping stones for future City growth and development. Again, this is a definite Yuba City benefit.

Before I start I would like to thank Mayor Ramirez, Councilman Gill and their staff for providing an abundance of information on the Hillcrest water system. Based on the information presented to date I have made the following conclusions;

When the Walton area was annexed, the City did not have the infrastructure to support the annexation.  After more than seven years, the city has not completely fulfilled all of their promises. Why did the City rush to annex the Walton Area?  The City needed this annexation as a stepping stone to further City growth. When the City purchased the Hillcrest Water Company we became part of the city’s water system and expected to be treated as any other water customer. However, we were placed in a separate water user category within a separate financial account. Now the City contends that the Hillcrest Water Company was purchased for the Walton Area. The City implies that Walton Area residents are responsible to either fix the system or switch to surface water. If we decide to choose surface water it would be like paying a seven year old retroactive reconnection fee at today’s prices. If we fix the system we will be fixing the city’s water system.

At the time of annexation we were connected to the Hillcrest Water Company and there was no overwhelming demand by the Walton Area residents to make this purchase. This company could have continued as a private water utility regulated by the California Public Utilities Commission. For whatever reasons, the City decided to make this purchase. There are several written indications of intent contained in city documents to use the Hillcrest Water System to further City growth. I will quote from one document dated February, 2001 as follows:

 “Yuba City requests that LAFCO, under government code 56133, authorize the City of Yuba City to provide water service within its sphere of Influence at your next meeting – March 22. .” The primary conduit to provide this service will be the Hillcrest Water System, which the city is in the process of acquiring”.

One can only conclude that the City purchased the Hillcrest Water Company to provide water for future build out and growth in the City’s Sphere of Influence. This growth was needed to collect new developer impact fees which benefits the entire City

The City knew that at the time of the purchase that there was an arsenic problem with the Hillcrest wells. After seven years, we are told that this is a Walton Area problem and its residents must pay to correct it at cost somewhere around 20 million dollars. Why didn’t the City address this problem sooner with a more permanent solution instead of taking a patch as needed approach? An earlier solution might have cost much less than it would today. One might conclude that the City used the Hillcrest wells as a temporary solution to further city growth and then deactivate them when no longer useful.

When the City purchased the Hillcrest Water Company, the City was obligated to accept the liabilities of that purchased. This included existing connections of Hillcrest customers. When the City purchased the Hillcrest water system we were officially connected to the City’s water system. To be fair and equitable any improvements to the City’s water system including the Hillcrest water system should be shared by all Yuba City residents.

Thank You
Don Kessel - Ad Hoc Advisory Member

I would like to thank the Mayor and the City Council for the opportunity to speak tonight.

Over the past several months we have heard comments from City officials and City staff that their actions are in our best interest. I want to explain why we are reluctant to accept unconditionally what the City has proposed for the Hillcrest Water System project.

In the July meeting, an arsenic problem was used as a reason to encourage Walton residents to connect to surface water and pay for it through an assessment district. At that time Hillcrest Water in our region met the EPA arsenic standard and is still meeting that standard.

During this meeting, the City presented solutions to correct the arsenic problem. What wasn’t indicated in this meeting was that the project design included infrastructure to support future growth. Had a challenge not been made to these proposals, inappropriate costs would have been assigned to our Walton residents? Miles of new and oversized piping are also designed into this project. To date, our existing piping has been adequate. Why is so much new and oversized piping required?

In October, 2006 a meeting was held in which the City’s Sutter Heritage Plan was discussed. At this meeting they discussed a proposed housing development near Walton and Pebble Beach. Also at this meeting the following information was revealed: “Sewer and water fees, including connection fees and installation of major trunk lines…shall be incorporated into the cost of the development and shall be part of the development agreement.” How could the city promise surface water for this development if the city didn’t have infrastructure to support it? If the City doesn’t require the developer to put in the major trunk lines, where are the funds coming from?  Just by coincidence, there is a 30” pipe and other growth infrastructure built into the Walton Area project.

Also discussed, was a proposed $60,000 impact fee. Why was this fee significantly reduced? Did the City over state their first estimate? Or could it be that the developer couldn’t sell homes with a $60,000 impact fee attached? One wonders if Yuba City citizens are now subsidizing developer fees.  Without new impact fees the City cannot pay its existing debt service!

With the housing slump and deteriorating state and national economic conditions how will the City continue to make these payments? The answer is simple and obvious - through increased taxes and fees from all its citizens!

California law states that. “The department shall not approve an application for a project with a primary purpose to supply or attract future growth.” The Hillcrest Water system was originally purchased for growth for the City’s Sphere of Influence. The City’s Hillcrest Water project clearly indicates design for future growth. We have been told that the low cost loan was for us, however, the City also benefits from this loan for the growth they added to the project. How does this affect the status of the loan?

The City has not discussed their responsibility or its program to protect the City’s water wells from contamination as specified in California law. The law states that a program to protect well heads should be implemented. We would like to know what has been done over the last seven years to protect Hillcrest wells from contamination?

The City is now requesting a 41 thousand dollar engineering study to determine the “most economical solution” solution and to define specific benefits and cost to each Walton Area resident. It should be noted that an engineering study is required by Proposition 218 before a vote can be taken by its citizens. Based on the number of citizen protests collected, the City is now aware of citizen dissatisfaction. The City now needs to plan to follow Proposition 218 procedures.

In summary, there aren’t any specific benefits for Walton area residents. Our well water is meeting EPA standards and there is adequate infrastructure to support it. Without the Hillcrest water project, future growth and annexation in this area will be difficult. Without this growth there will be no new homes, no new impact fees, and no funds to pay City debt service. The Walton conversion to surface water is an important part of the City’s puzzle for continued growth - and costs should be shared by the entire City.

Thank You.
Don Kessel