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In a hotly contested process that logged more than 32 hours over three consecutive days in East Palo Alto, the board incumbents of the Palo Alto Park Mutual Water Company on May 10 were declared the winners in an election battle with a resident coalition called Neighbors for Better Water.
Beginning on May 8, the water company board, shareholders and attorneys spent three tense days counting, re-counting and contesting the validity of two inches-thick binders of paper proxies that finally culminated in a vote at 10 p.m. on May 10.
The results: a surprise upset over the previous day’s proxy count, indicating 835.87 shares for the incumbents compared with the challengers’ slate of 307.58 shares.
The previous day, at a May 9 meeting that ran past midnight, the proxy count looked quite different as the challengers to the board were reported to hold 821.739 shares, while the company was reported to have only 114.893 shares, according to Ramiro Macias, an appointed witness to the process and a challenging board candidate. Those findings were validated by two of three witnesses to the process, Macias said.
(Each side appointed two inspectors for the election.)
The proxy count changed between the two days, at least in part, because the board secretary decided on the third day that proxies collected after Sept. 20 of last year by Neighbors for Better Water would not be counted.
Neighbors for Better Water, a group of water company shareholders who want new leadership on the board, has sought since September to hold an election in an attempt to vote in a new slate of board members. The board oversees the company, which distributes groundwater to a little under 700 households, mainly in East Palo Alto and a number in Menlo Park.
In March, Irene Laudeman, a shareholder in the water company and supporter of Neighbors for Better Water, filed a lawsuit after the group’s request for an election for all five board members was not addressed at the water company shareholders’ annual meeting last September.
Whether or not it was legally permissible for the board secretary to discount the proxies signed after Sept. 20 is likely to be contested in court.
Two attorneys from the law firm of Mayer Brown, Cristina Henriquez and Jennifer Carlson, have actively advised their clients from the Neighbors for Better Water group throughout the process.
At different points during the three-day election proceedings, the attorneys for Neighbors for Better Water raised questions about the legality of the board’s election process.
“I suggest you advise your client on what the law is,” Carlson said at one point to an attorney for the incumbents’ side, James Cai.
“We’ll let the court decide,” Henriquez said to the board at another point.
Members cite concerns about water quality, difficulty in receiving responses to their questions and impact fees as their main reasons for seeking new leadership on the board. The group put forth a new slate of resident-shareholders to serve on the board: Shannon Pekary, Delphine Hill, Norm Picker, Kumar Chaudhari and Ramiro Macias.
In response to the lawsuit, the San Mateo County Superior Court ordered that a shareholders meeting be held to host an election by May 11.
The private water company, which was established in the 1920s and predates the city of East Palo Alto and U.S. 101, gives shares and voting power to homeowners based on the square footage of their land holdings. Water is distributed based on a flat monthly fee and is not metered.
One of the concerns with the water company among supporters of Neighbors for Better Water is the company’s practice of assessing impact fees. Several water company shareholders told The Almanac they felt they had been unfairly hit with fees of thousands of dollars for real or perceived modifications to their homes and were unable to receive explanations for the impact fees.
Incumbent board member Jacqueline Lewis said that all water customers receive information about impact fees on a customer rate sheet.
Invalidated proxies
After the May 9 deliberations, the board reconvened Thursday for a re-count.
Water company general manager and sitting board chair Niambi Lincoln asked to review original copies of all of the Neighbors for Better Water proxies signed after Sept. 20, 2017.
Previously, Neighbors for Better Water had gathered proxies in advance of the board’s annual scheduled board meeting on Sept. 23, 2017. On the forms, they had requested that shareholders return the forms by Sept. 20 in advance of that meeting. The requested election to fill all five board seats was not held on that date, so the group continued to collect proxies and filed a lawsuit. Eventually, it received a court order for a shareholders’ meeting to take place.
According to water company bylaws, the official person to determine election results is the board secretary in this case, Alberta Mitchell, said former water company manager Katherine Loudd. Loudd is the current board treasurer and the mother of the new company manager, Niambi Lincoln.
Mitchell, in comments before the May 10 recount, made a personal statement: “I feel like the election was unfair,” she said, referring to the previous day’s proxy count that showed the coalition’s slate ahead. “I came into this naive, trying to do what the court had ordered.”
She said she was “tired” and “disgusted” and that the board’s opponents, the neighbor coalition, were seeking to “win by any means necessary.”
Attorney for the incumbent board Vikram Subramanian said that the deadline request listed on the Neighbors for Better Water proxy form invalidated any proxies received after that date according to contract law, but didn’t cite a specific code.
“It’s a technicality,” he said, but added: “They drafted the proxy, not us.”
While both the current board and Neighbors for Better Water group campaigned to collect proxy signatures since the September board meeting, only those collected by the current board were counted.
In some cases, Neighbors for Better Water supporters said, people had signed forms for both sides.
More than once throughout the counting process, the board and water company management went into closed-door discussions for at least an hour.
Water quality questions
As the tense proxy-counting process was unfolding, the water company was sent a strongly worded letter by the California State Water Resources Control Board regarding concerns with its water quality reporting.
A May 9 letter was sent to water company board President Fidel Alas as a follow-up to a reported Jan. 16 violation of the state’s “secondary minimum contaminant level” for iron. The water resources control board requested daily reports of the water company’s chlorine residual levels, but some of those reports contained data that the state’s Division of Drinking Water “could not decipher,” the letter said. It also said the water control board “found several incomplete reports.” Requests by the division for clarification “did not receive a response,” writes Eric Lacy, district engineer with the state division of drinking water at the water resources control board.
“The incomplete reports and noncompliant values recorded by operations staff signifies a lack of understanding of, or a disregard to, the water system’s regulatory compliance and operating requirements,” he wrote. “In addition, PAPMWC’s delayed response or unresponsiveness to the Division’s inquiries regarding the performance and operation of the water system raises significant concerns regarding your actions to potential system failures. This also reflects the level of service the water system provides to your community and your response to customer complaints.”
The letter demanded that the water company by May 14 take a number of steps to record and verify the status of a new system that “monitors and operates the wells, boosters and chlorine injection system,” which was replaced about two months ago and, Lacy reports, has not been confirmed with the state to be “recording accurately or functioning properly.”
The water resources board has demanded that the water company submit a set of schedules, plans and procedures for its operations and maintenance by June 15.
The Almanac is awaiting comment on the election outcome from the coalition’s attorneys from Mayer Brown, and did not receive an immediate response from Subramanian of SAC Attorneys, representing the water company.
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This news article does not accurately reflects what happened. A more truthful telling would be that this is headed to court, and that the current regime lost definitively in the proxy count, but was unwilling to accept defeat. I’ve heard some really wild stories coming from this meeting, including accusations of forgery, the water company asking for proxies in exchange for debt being forgiven, and other malfeasance on the part of the water company. This meeting should have taken no more than a few hours, but was stretched over days in an attempt to change the outcome. I’ll be surprised if the result – which was essentially the water company board declaring victory despite evidence to the contrary – will not be immediately overturned in court.