(July 20)  RIALTO—With little fanfare, the city of Rialto has terminated its relationship with New Jersey-based American Water Works Company, Incorporated.
The never consummated marriage between American Water Works and Rialto was a rocky two-year affair that began when former city manager Henry Garcia was overseeing the city and came to a close during current city manager Mike Story’s stewardship of Rialto.
It was Garcia, while he was wrestling with an aging and decaying municipal water system, who originally courted American Water Works. Pursuant to negotiations Garcia carried out with the New Jersey-based for-profit company, American Water Operations and Maintenance, Inc., a division of American Water Works that was to function as a local company known as Rialto Water Services, would take over operation and maintenance of the water district. The city was to retain the district’s water rights.
The company was to further take on all aspects of operations, maintenance and billing, effectively running both the water and sewer utilities for three decades.
Water and wastewater division employees were to be allowed to transfer into the city’s engineering or public works divisions if they wished, remaining as city employees with their public pension plans intact or were to be allowed to go to work with American Water, which would have been required to guarantee those employees would remain employed for at least 18 months with salary and benefits equal to those offered by the city. That guarantee was to sunset after a year-and-a-half.
Before Garcia departed as Rialto city manager to become city manager in Moreno Valley in January 2011, he had arranged for American Water to make $45 million in upgrades to the water system and  assume all debt owed by the city’s water utility division and fund all needed infrastructure improvements to the system.
In return, city officials agreed to allow American water to significantly increase the water service and sewer service rates to be charged to customers.
Roughly half of the city of Rialto’s of 99,171 residents receive their water from the municipal water system. The other half are customers of Western Water, a private company.
During his tenure, Garcia was unable to close the deal with American Water, but the city inched ever closer to it. When Garcia left for Moreno Valley in 2011, he was succeeded by police chief Mark Kling, who stayed in place as interim city manager for six months, functioning merely as a caretaker. During Kling’s run as city manager, no progress toward handing the management of the city’s water system to American Water was made.
When Mike Story was hired as city manager last summer, he aggressively addressed the city’s infrastructure and service needs, concluding as had Garcia, that the city did not have the financial wherewithal to undertake the water system upgrades on its own. He recommitted to making the deal with American Water. In March, the city council approved by a 4-1 vote entering into the 30-year lease of the municipal water system with American Water Works Co. As part of that deal, the city agreed to a 114.8 percent increase in water and wastewater rates by 2016, such that the average water bill of Rialto households utilizing 17,000 gallons per month will jump from the current rate of $26.27 per month to $64.14 monthly and increase the wastewater treatment fee from $25.97 to $61.46 as of January 1, 2016.
That move immediately provoked a response in the form of a petition drive by members of the Utility Workers of America, the union representing city water division employees, to force a city-wide referendum on the takeover. In less than seven weeks, over 6,400 signatures were gathered to meet the threshold of 3,800 valid signatures of registered voters needed to force the matter to a vote. The petitions created an opportunity for city residents to reject the takeover by means of a mail vote to be conducted by the city. If more than 50 percent of the ratepayers returned the mail-in ballots rejecting the takeover, it would not go into effect.
But in a crafty piece of sleight-of-hand, Rialto officials short-circuited that challenge when they quietly took action to find another company to manage Rialto’s water operations. With two swipes of a pen, the city of Rialto substituted American Water out of the picture  and entered into a contract with San Francisco-based Table Rock Capitol to take on the role of water service operator.
Table Rock, doing business as Rialto Water Services LP, will supplant American Water Works Co. Inc. as the city’s water and wastewater service provider, and will itself farm out the operation to entities expert at water and sewer operations. At present, Table Rock is in negotiations with West Valley running the water division and Veolia North American about running the city’s wastewater plant.
The city will need to get all parties to agree to terms stipulated in a 1,600-page concession agreement to actuate the takeover.
City manager Mike Story said, the takeover, management and improvements to the water system envisioned under American Water will now be carried out “unchanged” under the guidance of Table Rock. The 114.8 percent increased in water and sewer rates by 2016 will proceed as well.