Ashby: Work done on PERC proposal on his own, no EDAC involvement

March 16, 2011
Santa Paula News

Although Duane Ashby said he “Personally hates the thought” of selling city assets and later buying back same, he thinks such a plan is “The one with the biggest dollar sign that would do the trick” of propping up sagging city finances.

The proposal would sell city assets for a sum of up to $2.5 million and lease out city property for a solar facility among other suggestions.

Ashby posted the plan online following the March 7 council meeting after his attempts to present the proposed deal with PERC, the builder of the city’s water recycling plant who as Santa Paula Water owns the facility with Alinda Capital Partners, was interrupted by City Attorney Karl Berger.

Berger noted that a presentation of such a specific proposal must be agenized.

Ashby, who failed in his first bid for a City Council seat in November, said in an interview that his awareness of city finances prompted him to start thinking about ways to raise revenue for the city – its $1.2 million reserve spent and a $1.8 million deficit looming - during his campaign.

At the March 7 meeting Ashby first updated the council on the activities and recommendations of the Economic Development Advisory Committee, which he chairs.

When Ashby attempted to address the specific proposal – which he made clear was his own - Berger noted the subject best be agenized properly and addressed at another time.

In the interview Ashby said he first started approaching businesses and companies in January when it became apparent to him that the city was “fast running out of time.

“Can the city borrow money from a company or entity? No, they can’t,” but Ashby said the idea of selling and leasing back same was “kept on my list.”

He decided that in lieu of just suggesting same that he actually start making contacts and that Vice Mayor Bob Gonzales in January suggested he contact PERC, providing Ashby with the name and phone number of the company president.

Ashby said he had spoken with other businesses, “A few people that I knew and asked for suggestions… and right after that when Bob gave me his suggestion I stopped trying to talk anyone else.”

At the January 18 council meeting Gonzales had suggested the city considering leasing out or selling outright city held property or even borrowing against same as well as selling equipment or reworking the purchase contract with Santa Paula Water for the $58 million water recycling facility.

One month later at a February 16 council meeting Gonzales said he had a conversation with “several business people and found some that might want to participate and give us $300,000 each,” loans Gonzales said he was told are illegal.

Ashby said he met with PERC for weeks and finalized the proposal the Friday before the March 7 council meeting.

He spent that entire Friday at PERC’s Costa Mesa headquarters: “I took time off from work, lost pay, to work on this. I felt compelled to do this,” especially as Ashby said he believes that the city privatizing trash services is “grasping at straws.”

Even if the amount of money the city might benefit from contracting out the service are correct it would take time the city does not have to finalize an agreement and garner revenue.

The same for the promised $500,000 payment from Limoneira dependent on LAFCo approval of East Area 1.

“We can’t operate at a deficit; what would we do, close the doors? That’s why I was trying to get something done quickly.”

Ashby said as he a courtesy he cleared his presentation on the proposal with Mayor Fred Robinson on the Saturday before the meeting

Ashby said he told PERC the city was short nearly $2 million and he was trying to cover the deficit.

“They said after our discussion they can come up with $2.5 million,” PERC’s “top commitment” which would provide a budget cushion for next year.

Ashby said examples of assets range from “buildings, real estate, even the water tank, infrastructure, even if we own a fire engine. As long as it was something the city has the right to sell.”

Appraisals would not be a given as the city would lease back the assets at a rate that would depend on city cash flows and later be able to repurchase the assets.

“You can negotiate the buyback on what you want the lease payment to be… and the person giving you the money would make some sort of profit either through the lease or the repurchase price.”

Such a deal would also allow the city time to shop for a bond that Ashby said could then be used for early payoff.

“The whole point of this was to provide options… ”

The proposal includes leasing property next to the water recycling plant for 20 years at $500,000 paid upfront; energy from the facility would then be sold back to run the plant.

Ashby said such a move could save half to 60 percent of the energy bill at the plant and that PERC would give the city the solar facility at the end of the 20-year lease.

The plan also includes a concession agreement for sewer pipe infrastructure, the sale of the city’s Vactor truck for same, and several proposals regarding the sale of recycled water as well as storage and sale of fresh water.

“We can buy this water super cheap and store it,” at a probable minimum cost.

“Then when things are dryer,” Ashby said instead of paying water costs or reduce the pull from wells “we have water we can sell at retail… basically, we’d be buying at wholesale and selling at retail.”

Also listed is PERC’s offer to settle unspecified and city disputed costs for the new water recycling plant  “at the back end… ”

It is an issue that Ashby said he realizes has not yet been resolved.

There are more aspects to the proposal that Ashby said would “Have to be looked at individually; some would have to be a request for proposal if it makes more sense,” but he doubts there are many companies out there that might enter into such an agreement, and “I don’t know if we have time.”

When it comes to the involvement of the Economic Development Advisory Committee Ashby said there is none, although the group’s suggestions on trying to find a revenue source for police animal control and firearm training facilities have been discussed as potential revenue generators - issues already broached to the city council – are included in Ashby’s proposal.

The group has also discussed in general solar energy possibilities.

He said he had been working on the EDAC report presented to the council since September but its council presentation date was pushed back from January to the March 7 meeting.

Said Ashby, “Basically, there are some things that match, but EDAC did not participate or even know I was involved in anyway, shape or form,” in the discussions with PERC.

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