Jamie Spends Real Money

The number of registered voters in this county is 12,379. The average number of working people here is 5,445. Of those, 796 are government workers. Those 796 government workers earn more than all the people employed in agriculture, the construction industry, and health care combined (in excess of 1,000 people).

If you're doing sums in your head, you might notice that the working people in San Juan County are a minority of voters (44%), and private-sector workers are an even smaller minority of voters (38%). 

The taxation policies of our county are regressive in several ways. First, the taxes themselves (sales and property taxes) are regressive methods of taxation. Second, the taxes often fund programs that have debilitating regressive effects that are even worse than the taxes. For example, county requirements for land development impose expenditures of tens of thousands of dollars in fees, reports, and evaluations which are beyond the out-of-pocket funding ability of working class people. None of the burden of development costs can be included in a mortgage. All of it has to be paid for out of pocket.

If you are wealthy enough to own enough land, you might be able to take advantage of one of the special programs to reduce your property taxes (e.g., open space designations or conservation easements). The effect of this is also regressive, since it amounts to cost shifting away from larger parcels towards smaller parcels more typically owned by working people.

And it gets worse every year. The pet "solution" proposed for many of our "problems" is an ever growing call for more taxing districts -- more regressive policies. One "solution" currently being discussed for our affordable housing "crisis" is to create a tax to provide a revenue stream to build more affordable housing. This isn't a solution. In reality, it isn't even intended to be a solution. This is simple vote buying. The affordable housing projects on our islands are going broke because they were non-solutions in the first place. They never were economically viable, and federal and state funding for these unsustainable developments have dried up. The future slums of San Juan, Orcas, and Lopez have powerful voting blocks behind them however ... and if politicians once again stiff workers in the county to pander to these voting blocks, it won't amount to much electorally. 

Without some disruptive economic event to grow the working middle class, private sector workers are unlikely to ever again be fairly represented here. San Juan County will continue to be the playground of special interests that impose restrictions on others, but give themselves a pass. Anyone who professes to believe that new government programs will help workers is either on the make or a complete fool. The last thing the existing patronage system wants is to shift power to workers and the middle class, even if they are willing to pay lip service to it from time to time. In reality, the entire funding and functional purpose of the government apparatus here is to provide special treatment for the connected while keeping workers in their place.

Make sure Councilman Jamie gets special treatment

Dispatch the boat for Sam. She doesn't want to wait for the ferry.

Guest Post - OPALCO By-Law Change

Proportional Representation ... It's Time

OPALCO elections are upon us, and here is a guest post by Rob Thesman, the author of the OPALCO by-law change.

If you’re an OPALCO member, you’re being asked to vote up or down on a bylaw change contained in the ballots that are being distributed. While opponents are characterizing the bylaw change as “dangerous”, “unnecessary” and “irresponsible”, the truth is those people are simply trying to avoid fairness and balance on OPALCO board representation.

You only need to understand the numbers 2,432 and 345 to see the importance of making this change. The change itself is simple and straightforward, it’s two sentences: “At the end of the existing Article III – Directors, Section 1, General Powers, the following paragraph shall be inserted:

“As soon as practicable and at least once every ten years thereafter, the Board of Directors shall reapportion the number of directors seats attributable to each of the Districts listed in Article III – Directors, Section 2, Qualifications and Tenure, so as to align the representation of cooperative members as closely as possible with the actual number of energy members within each District. Furthermore, from time to time the Board of Directors shall update the boundaries of the above-referenced Districts so as to facilitate the goal of proportionate representation of the members in each of the Districts on the Board of Directors.”

That’s it – two sentences, directing the board to more fairly apportion the board seats. The separate districts covering San Juan, Orcas and Lopez islands each currently have two directors while the district covering Shaw currently has one director. Looking at the number of members in each of those districts, San Juan Island has one director for every 2,432 members. Orcas has one director for every 1,812 members. But look at Lopez – Lopez has one director for every 1,185 members. And Shaw has one director for every 345 members!

The current system of apportioning directors gives some members more and others less representation due merely to where they live. The proposed bylaw change simply requires that the board fairly apportion the number of directors in each district, and to update the boundaries of each district, as necessary to make the board representation better aligned with the physical location of the co-op members. This does not change the total number of directors.

At the end of the reapportionment, every member of OPALCO will be represented by a board director. The language of the proposed changed disenfranchises not one single member. Board seats will be reallocated and districts will be redrawn with the simple goal of having each board seat represent the same number of members.

Opponents of the proposed change should consider how they will look their fellow county residents in the eye and explain to them that members on certain islands are so wise or special that they should have a disproportionately higher representation on the board than others.

Opponents of the bylaw change argue that no re-apportionment is necessary because all members vote on all directors’ seats. While it’s accurate to say that we all vote on all board seats, the existing bylaws specifically contemplate that directors will “represent” a particular district – it’s a requirement contained in Article III, section 2. But on a more practical level, who do you think represents you more, the director you run into at the grocery store or the one from an island you never go to? Does every director have an obligation to look out for the entire co-op? Absolutely, but the idea of representing a particular district is so important that it’s enumerated as one of only three requirements to run for a seat on the board.

One of the opponents of the change calls it costly because it will require an independent auditor. This is completely false. There is no requirement in this two sentence change that this redistricting would need to be “audited” before or after implementation and to suggest that is, at best, disingenuous.

Another argument made against the change is the ridiculous statement that that this might require redistricting “every six months”. A plain reading of the proposed change requires that the board calculate whether reapportionment should be done “at least once every ten years” after the initial reapportionment is completed.

In the final analysis, this proposed bylaw change isn’t dangerous, irresponsible, costly or vague. It’s two sentences that attempt to create a more representative balance of members’ opinions on the co-op board. Could it be that the opponents of the proposed change are really against it just because it endangers the overrepresentation they’ve enjoyed in the past?

We members of the co-op exercise our governance in two ways – directly through voting at the annual meeting and indirectly through the actions taken by the directors chosen from each district. The governance exercised by the directors is far more important in the day-to-day and long-term policy decisions of our co-op. It is a simple matter of fairness that no district should have a disproportionate weight in board representation. I urge you to vote “yes” on the bylaw change.

(Rob Thesman is an OPALCO member and the author of the bylaw change.)

Cranking Up the SMP PR Machine

It's wonderful that we have an independent, critical thinking press. We have Orcas Issues. We have the Journal too. And we have the Friends.

Where is the Friends video of this armoring project on Blakely?

The Biggest Stories Behind the Shortest Agenda Items

There is a brief agenda item for the upcoming Tuesday Council Meeting. It says:

COUNCIL & COUNTY MANAGER UPDATES: Appointment of Dale Roundy, Pete Moe and Richard Grout to the Planning Commission.

It would appear from the wording of the agenda that our Council has already decided who the appointments should be, but that would have required the Council to have taken action already, outside of a public meeting. That wouldn't do that, would they? But that's not the most interesting aspect of these appointments. Read on.

Let's look at each of these appointments. But first, let's explain the purported process being used by the current Council regarding appointments. Appointments for the Planning Commission (like most advisory committees) have a certain geographic assignment within the County. For instance, Dick Grout would be filling a position from San Juan. Pete Moe would be filling a position from Orcas. Dale Roundy would be filling a position from Lopez.

Furthermore, according to the out-of-date protocol being used by the current Council, the Councilman representing each vacancy brings forward a nominee for a vote before the entire Council. Therefore, Richard (Dick) Grout is Bob Jarman's nominee from San Juan Island (Jarman's residency district). Pete Moe is Rick Hughes' nominee from Orcas Island (Hughes' residency district). Dale Roundy is Jamie Stephens' nominee from Lopez Island (Stephens' residency district).

Let's look at the appointees from the bottom up and examine what they have to offer to the public good.

Dick Grout - he was the Planning Director for San Juan County who urged the BOCC to fully plan under the GMA, way back in 1990. After leaving his county position, Grout was employed by the Department of Ecology for a couple of decades and headed up their Bellingham Office. Since his days as San Juan County Planning Director, Grout has been very vocal and involved in shoreline issues, even up to the current day where he has been a reliable opponent of the Honeywells. Grout also has been a candidate to be our County Manager in the past. TH readers may also remember that Grout has surfaced in previous TH articles, particularly as he was associated with an email about the Council campaign four years ago, talking about Lisa Byers and Laura Jo Severson.

Dick Grout, Jim Slocumb and myself are all willing to walk with Lisa for doorbelling. Jim can put together maps and information lists and can map out routes to walk. I truly believe it will be the difference in winning the election. I’ll point to Laura Jo Severson as my proof. Ron Zee, Jim Slocumb and me took a short grandmotherly type, new to the island, that couldn’t string together a paragraph and got her to within 99 votes of Rich Peterson simply by doorbelling. Think what an articulate woman from Orcas could do.

Why would Bob Jarman put Dick Grout forward as his choice for the Planning Commission? Seems like strange political bedfellows. Reports are, however, that both Jarman and Mike Thomas are still in trouble with Ecology over the Portland Fair wetland situation. Reports are that the Attorney General (AG) is investigating Jarman and Thomas quite seriously, and Jarman/Thomas can't seem to shake the AG. Reports are that Jarman has been going around town asking specific people for their help in getting Ecology to back off. Was Dick Grout one of them?

Dick Grout chimed in about the "civil investigation demand" related to the purported Medicaid fraud on San Juan Island. Grout revealed his extensive experience with the AG as well as his usual "guilty until proven innocent" attitude in a letter to the Journal this past November. Maybe Grout's AG experience could come in handy in helping Jarman fight the AG too? ... if he were properly incentivized, that is. As Grout says in his Journal letter:

I worked for the state of Washington for several years before I retired. My job included regular interaction with the attorney general’s office. I’ve worked with a number of assistant attorney generals to develop similar interrogatories and “requests for production” of documents. I know from that experience that you don’t get served with one of these demands unless the attorney general’s office has good reason to believe there’s a fire beneath the smoke.

Whatever the reason for putting Grout's name forward, it must be pretty compelling for Jarman to do it. It's out of character.

[Note: in the latest version of the January 26th agenda, Grout's name has been removed].

Pete Moe - **** edited because of extreme hypocrisy ****

Dale Roundy - what if you were in charge of the water supply for a village (e.g., Jamie Stephens) and there was groundwater contamination near one of your water supply wells ... and you didn't tell anyone? Well, let's clarify, certain people knew about it. The local Planning Commissioner (Barbara Thomas) was copied on emails. The local Land Trust knew (Sandy Bishop and Rhea Miller). Even some local self-styled "environmentalists" who frequently concern themselves with water issues (Madrona Murphy) knew. So did a former Land Bank Commissioner (Nancy Greene). The soil and groundwater contamination was known to be within a short distance of one of your lesser-used water supply wells, but overall the full extent of soil and groundwater contamination was still unknown. As far as anyone knew, the contamination had been in place FOR YEARS. The last laboratory result of groundwater contamination showed that there were concentrations of benzene 10,000 times higher than the drinking water standard, but you never bothered to test for that particular contaminant at the well head of the water supply well ... so you really have no idea if the benzene and other contaminants ever got into the water supply.

So certain people knew, but it's not like you sent out a notice to your water users, or breathed a word about it to the papers.

In this case, what do all the "people-in-the-know" have in common? Well, aside from being friends and keeping one another's secrets, they all have a stake in the property values of Lopez Village, where the contamination is located. For instance, they own property in the village ... or they make their living related to development/design of village buildings ... or their relatives work in construction projects in the village ... or they are just about to finance or get bank loans for projects related to their village properties. Even if your property is not directly affected, try explaining that to a bank! It would be quite a mess if something like soil or groundwater contamination were to start busting up property sales in the village.

But that's exactly what happened. Meet Dale Roundy. Dale Roundy owns a residence across the street from the Lopez Community Land Trust (the LCLT). The LCLT is run by Sandy Bishop and Rhea Miller, and Dale Roundy's wife is on their board. Dale Roundy wanted to buy a property in the heart of Lopez Village, and Roundy had an environmental review conducted first. The review turned up the fact that there was contamination in a nearby property, also in the heart of the village, that had never been cleaned up or even fully delineated. As a result, Roundy backed out. The sale collapsed. Other potential buyers behind Roundy backed out too. A minor stir was created as information leaked out to just a few people ... but they managed to keep a lid on it, and the whole thing died down.

Now Roundy is slated to be on the Planning Commission ...

Email from Jamie Stephens to the County Health Department Manager, Mark Tompkins

Shoreline Master Plan Update

This post comes to us by way of Merri Ann Simonson of Caldwell Banker in Friday Harbor.

As you may be aware, the Critical Areas Ordinance (CAO) went into effect in March 2014. The Shoreline Master Program (SMP) has been in the update process for the last few years and is currently out for public comment until December 8, 2015. Then it will be sent on to the Department of Ecology for their comments and then back to our County for final revisions.

The Council is holding continued public hearings on December 2, 3 and 4th this week in Friday Harbor. They'll take comments on Lopez December 1st and on Orcas on December 8th.

It is expected that the SMP may be in effect as early as spring of 2016. Many of the proposed regulations as contained in the SMP were established in the CAO or at least precedence set.

It appears that the non-conforming regulation currently in effect under the WAC will be updated in the SMP. The existing formula that regulates how much you can increase the size of an existing non-conforming home on the waterfront or near a wetland is not included in the proposed SMP. In my opinion, the draft SMP language to address a non-conforming home remodel is more discretionary on the part of the Planners during their decision process.

The proposed language is more relaxed as there appears to be no limit on the size that the non-conforming home can be increased. However, you must propose mitigation measures to address any potential negative impacts to the critical areas. This requirement will have to be met by retaining professionals to prepare reports acceptable to the County

A legally non-conforming structure is defined as one that is out of compliance with the current regulations, but was in conformance at the time of its construction. For example, a home that is 35 feet from the shoreline versus the current setback as required by the CAO, is considered a non-conforming structure.

In order to expand an existing non-conforming structure under the current regulation and formula, you will need to obtain a building permit prior to the effective date of the SMP. A Residential Pre Approval is not binding and will not survive a regulation change.

If you are the owner of a non-conforming structure and are contemplating a remodel or expansion, you should review the existing regulation as well as proposed. I have attached links below; one to the current non-conforming regulation and one to the PROPOSED language in the SMP. If you believe that the proposed regulation will be more difficult to comply with than the existing, I would not delay your application for a permit.

CLICK HERE TO VIEW EXISTING WAC FOR NON-CONFORMING CONSTRUCTION

CLICK HERE TO VIEW PROPOSED SMP LANGUAGE

CLICK HERE TO VIEW THE COUNTY WEBSITE FOR ENTIRE SMP

Links ... and ... Another Day, Another Allegation of Fraud in the County

A complaint of medicaid fraud has been filed with the state Attorney General's Office against San Juan Island Emergency Medical Services. The AG's office is investigating medicaid reimbursement claims for air ambulance services. Not much is available about this story yet, but there was a brief announcement in the San Juan Islander.

Regarding the mysterious lawsuit referred to in the previous post, some readers have been asking to see the actual court filings. Here is a link to the complaint. Here is a link to the first set of exhibits. Here is a link to the second set of exhibits. Here is a link to the third set of exhibits. Fascinating reading.

The county has said that it's all a big misunderstanding. Read and judge for yourself.

San Enumclaw County

The long awaited departure of Sam Gibboney from the Department of Community Development (DCD) finally occurred today when our County Manager reassigned Gibboney to Public Works, from whence she came in November 2013. To get Gibboney back into Public Works, our County created a new position for her as Deputy Director ... so since departing Public Works two years ago, and then doing such a bang-up job in Planning, Gibboney heads back to Public Works in a higher position than she left (she was previously Solid Waste Program Manager).

To backfill Gibboney's position at DCD, the County hired Erika Shook from Enumclaw. Mike Thomas, our County Manager, came from Enumclaw. Our new Hearing Examiner is also the Hearing Examiner from Enumclaw. Bear in mind that our County's mysterious unofficial wetland scientist, "JT", also originates from Enumclaw.

Before Enumclaw, Shook worked for Triad Associates, and before that she worked for Snohomish County. She graduated in 1992 from the University of Washington with a BA in Urban Planning, so it makes perfect sense that another urban planner would end up in a rural county of only 16,000 people (not). According to the Draft 2016 San Juan County budget, we have 18 full-time people planning our future in DCD.

Apparently, Shook was hired without any public announcement of an open position nor using any competitive hiring process that we are aware of. While we do not know who our County might hire next, odds are they're currently working for Enumclaw. Enumclaw now serves as the minor league farm system for San Juan County government employees.

Anyone want to take bets on how long before Triad Associates gets a contract with Public Works too?

Mysterious Lawsuit

I know ... I know ... the TH disappeared again, but we'll be back in the saddle again soon. Life happens.

A lot has been happening. No shortage of things to inform you of ... just a shortage of time to do it. Here's a smattering of what's been going on:

• There have been more departures of key staff from the county. 
• The OPMA lawsuit ruling came down from the State Supreme Court, and the County won ... and the decision drives a truck through the daylighting requirements of the OPMA. If there was ever a case that illustrates our County's (and now our Supreme Court's) commitment to secret government, this is it.
• CSA and the Friends have both petitioned the Washington State Supreme Court to hear the CAO case. The Washington Appeals Court upheld the County position that the County CAO ordinance is legal. CSA believes our CAO results in unreasonable takings ... a Constitutional violation. CSA is now being represented by the Pacific Legal Foundation (PLF). You can find PLF blog posts about the case here and here.
• The County Council gave up on passing greenhouse regulations. Now, they are focusing on the Shoreline Master Plan (SMP) update. The SMP update is a mess. We haven't focused on it much, but we will try to get some info to you as it progresses.
• And of course, we are in election season. There are important elections for the hospital on San Juan, Port Districts, and School Boards. Too many to cover in a short post, but feel free to comment in the comments section.

However, while we wanted to quickly update you on all the goings on in the County, the main reason for this post is to let you know about a mysterious lawsuit that has been filed in Skagit County ... yes, Skagit County ... against San Juan County. We heard about this from an announcement on King5 News ... or that is to say, that we would have heard about it from King5 News if it weren't for the fact that King5 News is currently blacked out on our Dish Network because of an ongoing dispute. Instead, a TH reader sent us a video clip of the King5 News broadcast. It sounds like the lawsuit might be about Portland Fair, but we don't know enough to be sure.

We will be watching as this story develops

They Should All Take A Sick Day

At this morning's citizen access time, there was an appearance by Shireene Hale, former head planner in charge of our CAOs, and David Dehlendorf, current head of the San Juan County Democratic Party and persistent supporter of Shireene Hale. You can watch their appearances on video at this link.

Now, before we talk about the Hale/Dehlendorf appearances of today, let's walk down memory lane for a moment. When heading up the CAO effort, Hale frequently claimed that the public intimidated her. She referred to some of our CAO public participation meetings as "awful". She even asked sheriff's deputies to show up at public meetings. When a former Planning Commissioner jokingly suggested that she might want to take a "sick day" as a means of avoiding one potentially contentious meeting, Hale accused him of (wait for it) ... intimidation. She also accused a former County Commissioner of intimidation, because of comments he made during a CAO meeting.

The County didn't abandon the "intimidation" angle after Hale left. It was adopted by Gibboney and Mike Thomas in their recent efforts to dump former Building Head John Geniuch. When contractors and other islanders supported Geniuch, the County claimed an angry mob was being organized (yes, Gibboney really did use the words "angry mob" in an administrative law hearing ... but the judge was not persuaded). Gibboney and Thomas took the "intimidation" melodrama so far as to send out an email instructing employees to call the sheriff if John Geniuch was seen on County property.

Okay ... now for the events of today. Hale shows up at citizen access time this morning and says that Pamela Morais (our local County Catbert) and Mike Thomas intimidated her prior to yesterday's public access time. Hale said they pressured her into withholding comments about Portland Fair. Dehlendorf then followed Hale's comments by calling for Mike Thomas to be reprimanded ... even resign, for intimidating a private citizen into silence.

Ever seen that picture of a snake eating itself? Shreene Hale, the woman who invented intimidation as public-participation kryptonite used it in her public comments to accuse her former employer of intimidation tactics that she used when she worked there ... which aforementioned tactics said employer still uses against employees and the public (e.g., Shireene presently).

The ever-composed Mike Thomas, who is accustomed to helping people invent intimidation stories rather than be on the receiving end, found himself out-maneuvered ... caught off-guard. After Dehlendorf finished, Thomas asked to make some comments himself. It stings to be out-smarted by Hale, and it showed in Thomas' comportment. Thomas said he was offended by the public access comments (although he didn't say they were untrue).

In upcoming posts, we'll explore the codependent relationship that has developed between the Council and Mike Thomas. It seems wherever Mike Thomas goes, allegations of misconduct follow. Mike Thomas has now been accused publicly of intimidating private citizens. The Prosecuting Attorney found that he violated County policies and procedures. This, along with other allegations, would appear to violate the County's employment contract with Thomas.

But, we have reached the point in San Juan County where Mike Thomas doesn't just run San Juan County government, he IS San Juan County government. Whatever Mike Thomas says, goes. The job of this Council is simply to back up Mike Thomas. They have given him raises, cleared him of wrongdoing. Mike Thomas is bulletproof. As the Prosecuting Attorney declared when clearing Mike Thomas of Improper Government Action (IGA) in the Portland Fair situation:

Manager has the duty to "comply with all lawful governing body directives, state and federal law, Employer policies, rules and ordinances. ..." See County Manager Employment Agreement and San Juan County Charter Section 4.40 and 4.41. The IGA Report mentions similar obligations of employees in the Personnel Rules Section 15, but the Personnel Rules (which have not been updated since the adoption of the Charter in 2005 or Charter Amendments in 2012) were not written to apply to management level employees and do not apply to the County Manager. See Section 1.010 and Chapter 4 of the 1992 Personnel Rules.

No rules apply to him. This is why Mike Thomas can approve (or disapprove) any wetland study ... or anything else for that matter. He can do whatever he wants, and the Council (and the PA too) have backed him. The dynamic that has emerged within the employment ranks of San Juan County is that if you are loyal to Mike Thomas, your job is safe. If you aren't, you will be eliminated.

Looks like Gibboney is safe.

That Hole Is Getting Deeper!

On Friday, the Council came out with a memo regarding their investigation of the Portland Fair wetland affair. You can find the memo here.

Anyone who has been through the wetland process would think the memo is a late April Fools joke. No one ... and I mean, no one ... outside of the authors and their most blindly ardent supporters would fall for it. But that's not the worst part.

It was written and signed by the Council -- Jamie Stephens and Rick Hughes, with Jarman recusing himself -- without any apparent input from the Prosecuting Attorney's Office. In fact, it is addressed to the Prosecuting Attorney, so the Council owns this one in its entirety. Given that the Prosecuting Attorney already found that Mike Thomas acted contrary to County ordinances and written policies, this Council memo suggests a significant rift between the Council and the Prosecuting Attorney over this matter. But that's not the worst part.

In the memo, the Council defends their man, Mike Thomas, to the hilt. We "learn" several surprising facts. We discover that Jennifer Thomas had no role in this wetland situation, despite documentary evidence in the form of emails from Sam Gibboney saying otherwise, and despite the fact that "JT"'s involvement was documented in the permit database.  Now we learn that "JT" never existed as far as this project goes ... a figment of everyone's imagination. But that's not the worst part.

The memo from the Council alleges that the determination of a non-wetland was made by Gibboney based on a review from Mike Thomas himself (is Mike Thomas a qualified wetland scientist?). Perhaps the most amusing lines in the whole memo are:

Although in this instance, the County was providing the wetlands review at no cost to citizens and paying for it from funds set aside in the CAO implementation plan, Mr. Thomas saved the County an unnecessary expense by his review, and Ms. Gibboney by her determination.

Saving money? They actually claim that Mike Thomas is saving taxpayers money, and the Council gives him a pat on the back as a result. But that's not the worst part.

The Council says there was no wrongdoing ... but there sure seems to have been a coverup. I guess we are supposed to believe that Annie Matsumoto-Grah wasn't ordered to rewrite her report? Chris Laws wasn't ordered to rewrite his report? Ecology wasn't prevented from providing a report, even after Ecology employee Doug Gresham went on the record about wetlands on the subject parcel? More shockingly, the official County enforcement file was redacted to remove all mention of Mike Thomas and Bob Jarman ... with all redactions ironically placed in a folder titled "Chris Laws Personal Information" -- ironic because Chris Laws refused to redact the file himself, and ironic because personal information is not subject to disclosure under the Public Records Act, and ironic because they are hiding Thomas' and Jarman's involvement among the whistleblower's own "personal" information. But that's not the worst part.

The County Charter requires the Council to take action only by Resolution or Ordinance. Nowhere is the power of "investigation" given to the Council. The word "investigation" doesn't even appear in the Charter. Moreover, the County is currently being sued all the way to the Washington State Supreme Court regarding violations of the Open Public Meeting Act (OPMA). The OPMA requires that all government actions be deliberated in public. Action is defined in the OPMA as (emphasis added):

"Action" means the transaction of the official business of a public agency by a governing body including but not limited to receipt of public testimony, deliberations, discussions, considerations, reviews, evaluations, and final actions. "Final action" means a collective positive or negative decision, or an actual vote by a majority of the members of a governing body when sitting as a body or entity, upon a motion, proposal, resolution, order, or ordinance.

The Friday memo is neither a Resolution nor an Ordinance, but it is clearly an action taken by the Council. It was not deliberated in public. It is a conspicuous violation of the Charter and the OPMA. The signature line says that Bob Jarman "recused" himself. Recused himself from what? It is obvious that the Council worked on this memo out of public view and came to conclusions and then signed their name to their final decision. On its face, this memo alone would appear to present enough evidence of procedural misconduct to justify its own separate whistleblower complaint ... which, if it were to occur, would be the fifth this year. But that's not the worst part.

The worst part is the situation in toto. It is inconceivable how badly our County government has deteriorated, and it is time to publicly call for investigations. We, at the Trojan Heron, feel it is time for the State, or even the Federal government, to investigate corruption here in San Juan County government. As a friend of the Heron says, it is time to take the keys away.

Most Official County Response?

As a brief interlude ...

As some of you may know, Stan Matthews recently retired, so he's no longer the County public spokesperson.

A reader sent me the video below purporting to show the new County spokesperson providing the official County response to the ongoing controversy over the Portland Fair situation. I also was sent a related video purporting to show Mike Thomas and his wife being interviewed about their involvement in that controversy.

Enjoy!

When is a Wetland not a Wetland?

We’ve been reviewing the statistical and demographic train wreck that is San Juan County, but we want to pause for a moment to update everyone on some current events.

During public comment at the County Council meeting last Monday (June 8), some citizens finally brought to light a situation regarding wetlands that has been brewing for some time. We’ve been following this story quietly, letting events unfold. Now it’s time to summarize some of the salient points and let the general citizenry evaluate this situation for themselves.

It’s a controversy involving wetlands … specifically some purported wetlands on San Juan Island in a development called Portland Fair. Now, before we get into the details of this story, we have to first state that we, at the Trojan Heron, have a particular point of view about “wetland science” and “wetland scientists”. Namely, if you were to send 5 wetland scientists out to an identical property, you are likely to get 10 different opinions about the presence of wetlands on that property. No matter how much mumbo jumbo may be spouted about the integrity of wetland science, the only repeatable aspect of this “science” is its non-repeatability. We’ve seen this time and again. For example, Adamus insisted his methods were essentially 100% correct regarding the presence and location of wetlands in the county, but we’ve seen numerous instances where the official county wetland consultant (Scott Rozenbaum) has disagreed with Adamus’ work, and so on. It invariably occurs that every wetland scientist is absolutely convinced about the veracity of his or her wetland determination for a particular property, but with inevitable regularity, that determination differs violently from that of every other wetland scientist who evaluates that same property. We won’t go into why that happens here … just suffice to say that such occurrences are a basic fact of life in the confusing wetland world, and it plays out in the story we are about to relate.

Our story begins with Sheryl Albritton. Albritton is a resident of San Juan Island, and she also happens to serve professionally as a critical area consultant. She was interested in buying a piece of property adjacent to her home. After performing due diligence on the property, including discussing wetland issues with the County (Annie Matsumoto-Grah), Albritton and her husband declined to purchase the property because they felt the parcel was too heavily impacted by critical areas issues, specifically wetlands.

Subsequently, another couple purchased the land, and Albritton soon noticed that the property was being developed in ways that she understood to be illegal. Albritton filed a complaint with the Washington Department of Ecology regarding the filling of wetlands on the subject property. Albritton also objected about San Juan County staff being overruled by management when they tried to perform wetland reconnaissance for the subject property, as per the San Juan County Code.

When the Washington Department of Ecology receives a complaint like Albritton’s, they fill out an Environmental Report Tracking System (ERTS) form and notify the local Code Enforcement Officer, who in our case is Chris Laws. Laws received the ERTS complaint for this situation, and he then had the responsibility to conduct an investigation, assisted by Ecology as appropriate.

Laws’ investigation found that County employee Annie Matusumoto-Grah had previously provided written information to Albritton saying that the subject parcel was potentially heavily impacted by possible wetlands; however, the new owners nonetheless had received County approval for their development from Annie Matusumoto-Grah … but Matsumoto-Grah’s approval came at the specific direction of Sam Gibboney, head of DCD, who stated that County Manager Mike Thomas walked the site with “local wetland expert JT” and found no signs of any wetlands. The “JT” evaluation circumvented the “normal” wetland ordeal that would typically afflict any other property owner in a similar situation.

Matusmoto-Grah had requested from Gibboney the identification of the mysterious “wetland expert JT” and his/her qualifications, but Gibboney refused to provide any information. Matsumoto-Grah nonetheless documented the situation as best she could in the county permitting database.

As Laws' investigation went on to discover, the new owners of the subject parcel had asked their local councilman for some “help” with their development project. This councilman, in turn, went to County Manager Mike Thomas to ask for a favor for his neighbor/constituent. While Mike Thomas has no expertise in wetlands that we know of (he’s a planner by background), his wife, Jennifer, is a wetland scientist. In fact, some of Jennifer Thomas’ work can be found in San Juan County's CAO Best Available Science on wetlands. Jennifer Thomas, as it turns out, is “JT”.

Jennifer Thomas’ drive-by and walk-through property inspection superseded the formal wetland reconnaissance required by the CAO County code. Apparently, wetland science includes the protocol that when (through your connections) you can get the right bureaucrats to say there isn’t a wetland on your property, you can avoid all the onerous requirements of the CAO ... while everyone else is thrown to the wolves.

In case you are keeping score regarding the opinions of the professional wetland scientists associated with this property, here’s the tally so far: Adamus thought there were wetlands on the subject property (hence the original advice by Annie Matsumoto-Grah), Sheryl Albritton thought there were wetlands. Jennifer Thomas (whose work is in the County BAS blessed by Adamus) didn’t think there were any signs of wetlands.

But wait … there’s more … while Laws was conducting his background investigation, Professional Wetland Scientist Doug Gresham of Ecology was undertaking his own evaluation in parallel. Gresham visited the subject property to conduct his own wetlands review, and he determined that there wasn’t just one wetland present, but three.

Okay … those are the “facts” … and then the alleged cover up began. The details are sketchy, but based on information pulled together from various sources; this is what appears to have happened since then.

Laws asked Ecology to formalize their 3-wetland finding in a report so he could place it in the enforcement file. A couple of days after agreeing to Laws’ request, Gresham of Ecology called Laws to tell him that he could not finalize his report because he was told by his superiors (the notorious Erik Stockdale) not to finalize it … because of political pressure.

Matsumoto-Grah, who had documented in an office memo the coercion and interference of Mike Thomas and the refusal of Gibboney to provide any information about “JT”, was then instructed to re-write her official statement to exclude any references as to how she felt about the involvement of Mike Thomas or Gibboney vis-a-vis normal staff procedure related to wetlands.

Based on the information gathered during his initial investigation, Laws filed a “whistleblower” complaint against Mike Thomas with Prosecuting Attorney Randall Gaylord for Improper Governmental Action (IGA). Reportedly, Laws has been the subject of harassment and intimidation within the County ever since.

And that’s where we will leave it for now … but there is more to tell … and more to come ...

The SJC permit database documents the involvement of JT (Jennifer Thomas) in securing the permit.

What's in a Number?

Let's look at the numbers for our county from the state data book. These are the official numbers from the Office of Financial Management (OFM). The 2014 numbers aren't ready yet, so we'll take a look at the 2013 figures.

The total population of our county is 16,000. We rank 32nd out of 39 counties in that regard. 

Based on information from the data book, we are able to get a rough idea of the number of adults in our county ... and that number is 13,448. It's probably a bit more because we don't have exact numbers for 18 and 19 year olds, but we'll use 13,500 as an approximate number of our adult resident population.

So, we have 13,500 adults, and according to the latest figures available from our County Auditor, we have 11,985 registered voters (down slightly from 2012). That means we have about 1,500 unregistered voters, which is about the same number of voters as live on Lopez (2,000 registered voters). We might, therefore, think of our 1,500 unregistered voters as the equivalent of a "missing island" of unrepresented residents. No telling why they are unregistered ... they might be disengaged ... or some might be non-citizens. We don't know their status, but considering that some of our most important elections have had margins of victory of one hundred votes or less, the "missing island" could be influential if it were ever able to become engaged.

Among registered voters, we generally have quite high voter turnout (~8,000 votes), so our elections are determined by about 60% of the adults in the county, or about half the overall population).

More people die here every year than are born. Whatever population stability or growth that we experience comes from net migration here.

Regarding employment, our average number of employees according to the state data book is 5,201, and this figure is in line with data from the Bureau of Labor Statistics (BLS). The BLS data also shows that monthly employment peaks at about 6,400 jobs in August and dips to about 4,700 jobs in January. We interpret that to mean that our county is able to provide about 4,700 year round jobs and about 1,700 seasonal jobs ... meaning that 25% of our jobs are seasonal. Overall employment is flat, and statistics from the Regional Economic Analysis Project show that we lag both the state and the nation in job growth.

Government, according to the state data book, provides 971 jobs or about 19% of total average employment. It is our second largest employment sector, as measured by number of employees (accommodation/service jobs are our largest); however, since our government jobs are relatively highly paid, government is our largest employer by dollar volume at 24% of wages paid. On a per capita basis, the total compensation of government employees is 27% above our county average. The only employment sector that pays significantly more than government work is utilities. 

Our biggest employment sectors are government, accommodation/service, and construction. No other employment sector breaks double digits percentage wise. We think of ourselves as an agricultural community, but agriculture/forestry/fishing/hunting combined don't even crack the 1% threshold. The much touted "recreation" employment category (i.e., think Friends and PSP targeted awareness of "Our Environment is Our Economy") is our lowest paid employment sector, with wages 37% below the county average. It accounts for 2% of our employment.

Looking at the numbers above, you will notice that we have 13,500 adults, but only 6,400 have any kind of job. More of our adults (7,100) don't work than work. The state data book also gives us some insight into the incomes of these two groups. Total wages paid in the county is $163 million, but total income earned by all residents in the county is $854 million. If we assume that our workers have little to no income beyond their wages, then that would mean that the average income of workers here is about $31K, whereas the average income of adult non-workers is $83K.

In other words, it would suggest something we already know ... that jobs here are not creating wealth here. We import our wealth. The data also show that we have the lowest percentage of workers and lowest earned wages (as a percentage of total income) of anywhere in the state. In terms of average wages, we are 37th out of 39 counties ... and yet, on an average basis, we rank 2nd of 39 counties in terms of per capita income. Averages do not tell the story of our economy here ... so beware.

We will delve more into the state data book numbers in the next post, especially as it relates to property values, taxes, and the (dis)connection of government to the local economy.

The Incredible Shrinking Buildout

Not very long ago, the word "buildout" was standard fare in the government lexicon of this county. It was equal measures of bogeyman, planning-speak, and rallying cry. "Buildout" is the theoretical maximum population of the county if all parcels were developed. The whole "buildout" topic was fertile ground for predictions of a dystopian San Juan future.

And speaking of a dystopian future, one of my favorite examples of fictional Friends writing was their 2002 Spring newsletter titled Managing Growth. The subtitle was "News from the Voice of the Environment, Spring 2002." It's a hoot and a classic, and I urge everyone to read it. In addition to wild predictions of growth and the Friends bragging about how they were saving us, it contains a profile of then-President Lynn Bahrych.

Lynn Bahrych, University of Washington professor, high-powered Seattle attorney, heroine of the Comp Plan battles, and delightful companion — a true renaissance woman. How did FRIENDS get so lucky as to get Lynn Bahrych as Board President?

Delightful. It actually says "delightful."

As entertaining as that description may be, the best aspects about that Newsletter are its predictions of horrifying growth and related effects. It says:

• More than a million people will be added to the State of Washington’s population in the next decade and, without a dramatic change in trends, San Juan County will get considerably more than its fair share of them. [Note: the State's population grew by 830,419 from 2000 to 2010, almost all of it to urban areas. San Juan County received 1,592 people, which was less than its pro rata share.]
• San Juan County’s population and housing growth are not only out of control, but they’ve actually accelerated relative to other counties since the adoption of the current Comp Plan.[Note: our current growth rate of about half of one-percent per year is far less than the state's. We are one of the slowest growing counties in the state.]
• The projected build-out population numbers are so huge that the Plan offers virtually no control over growth for at least the next twenty years. Only as County population approaches the build-out level will the Plan start to manage growth rates. Although the Comp Plan is coy about build out numbers, the County Planning Department has projected a buildout population (without guest houses) of between 45,000 and 57,000. [Note: see later in this post.]
• The impact on traffic is likely to correspond to the growth in population: a 40-50 percent increase in the next decade, a doubling of traffic volumes by 2020, and worse if the BOCC’s liberal approach to guest houses prevails. Nancy Spaulding, a 30 year resident of San Juan Island, comments: “In the time we’ve been living on the island, we’ve seen our small road turn into a busy highway. [Note: as a result of the Scenic Byway and the availability of federal money for road building, our Public Works Department has been building roads out of step with our rural character, despite citizen complaints. Growth in government, not growth in population, has been driving road building.]
• Another consequence of growth will be an increase in crime, probably at a faster rate than the increase in population. As we live closer and closer together, and as the gap between “haves” and “have nots” widens, we can expect significant growth in crime rates. Attorney and FRIENDS Board member Maile Johnson comments: “Growth breeds crime at an accelerating pace – if current trends continue, the County will need court space beyond anything the BOCC has considered.”[Note: we've seen drugs and crime grow here, but it hasn't been because of growth. If anything, it's been because of lack of growth and opportunity].
• Finally, there will be the summer crowds ... there’s no reason to expect a change in the traditional summer ratio of one visitor per resident. (Or, putting it another way, whatever the population, it will double in the summer.) Lynn Bahrych, President of FRIENDS, asks pointedly: “Can you imagine a July Fourth with 200,000 people in the San Juans?” [Note: for the most part, the Friends have steadfastly supported tourism and tourism initiatives such as the Scenic Byway; however, when it is in their financial interests, they oppose specific tourist initiatives, such as the "buildout" of the Lopez Islander Resort or the sale of Helen King's B&B.]

But back to buildout specifically ... when our County adopted its first Comprehensive Plan around 2000, it was required to downzone in rural areas and upzone in "urban" areas. The result was that 75,000 acres in the county (out of 110,000 total acres) were downzoned. According to estimates from Planning Commissioners at the time, more than 10,000 development rights were eliminated in order to bring our Comprehensive Plan into GMA compliance. After that happened, the Friends then pushed to do away with guest houses too, and they were largely successful.

The net result is that, several years before the current job-killing CAOs even appeared, our longterm ability to grow and build in these islands was crushed. And, in addition to the Friends, many familiar names participated in (and benefited from) these events. Note that Tom Cowan was a BOCC member who approved of our GMA participation, who later that same year was a driving force in founding the Land Bank, and who still is a Land Bank Commissioner to this day, who went on to found the Marine Resources Committee and the Marine Stewardship Network, and who has had a long and successful career as a consultant for Ecology, and who has worked on everything from the San Juan Initiative to Puget Sound Partnership activities. Rhea Miller was a BOCC member during Comp Plan downzoning, which coincidentally also resulted in upzoning in certain areas to allow for rural residential clusters. Rural residential clusters is the scheme that was invented to "solve" our affordable housing crisis via developments such as the Lopez Community Land Trust, which Miller co-runs. She's not alone ... one of the former executive directors of the Friends runs the San Juan Community Home Trust. These people worked to restrict housing by tens of thousands of units and also eliminate relatively low cost and affordable guest houses, while promoting their own pet high-density developments. The list of beneficiaries of the "new GMA economy" invented during the 90s and 2000s is long, and they still hide in plain sight at CD&P (or DCD as it is now called), the various Land Trusts, the Conservation District, the LIO, the Madrona Institute, the Stewardship Network, and on many of our county committees.

The effect of the GMA and the war-on-buildout was to eliminate many private opportunities for growth and economic development, and replace it with a growing mountain of government sanctioned bureaucracies, committees, and quangos ... attachment points for the revolving door of government officials and insiders ... places where careers were built and riches were made, lubricated by grant funding that poured in to "save the San Juans". It's as if government growth body-snatched the private growth that might have happened.

Government grew while our private economy perished. The San Juans weren't "saved" ... the San Juans that everybody knew and loved were legislated out of existence for 30 pieces of grant money, and the GMA has been the Via Dolorosa.

Where do we stand on buildout today? Nearly 60% of parcels have some development on them already. We estimate that a further 20% of parcels are protected from development (e.g., Land Bank, parks, National Park, National Monument, etc.). Consequently, we are probably close to 75% built out (i.e., 60% out of 80% available), and if we consider that many people own more than one parcel and will probably never build on every parcel they own, our buildout proportion may be even higher. We are probably close to full buildout.

The Office of Financial Management puts out growth projections every five years for every county in the state. Each county projection consists of a high, middle, and low projection trend. The projection used by our County in planning documents and forecasts has been the middle trend; however, we have consistently failed to achieve the growth trend of even the lowest projection since 2002. The most recent growth projection for San Juan County has a flat middle growth trend, and the lowest growth trend projection shows a decline.

We have a growth problem. (Except for tourism) We aren't growing at all.

Our Phenomenal Growth Rates

San Juan County had a larger population in 1920 (3,605) than in 1960 (2,872). For most of San Juan County's history, population growth has been negligible.

Then the 70's hit. The population of the islands doubled. The Growth Management Act (GMA) was enacted in 1990. We were not required to fully plan under the GMA because our population was less than 50,000, but our growth rate exceeded 20% over the previous decade. That triggered a special provision of the GMA which allowed us to opt out of fully planning if our County Commissioners were to vote for exclusion. However, our Board of County Commissioners (BOCC) at the time affirmed our full participation in the GMA via Resolution 113-1990 (see below).

While we had phenomenal rates of growth for several decades (103% during the 70s, 28% during the 80s, and 40% during the 90s), we were growing from a low base. In raw numbers, we only added about 12,000 people to our population from 1970 to 2010. Annualized growth over that time was 3.2%. Since 2010, annualized growth is far less than 1% ... we are essentially back to negligible population growth.

A few other curious points that may be of interest to some readers ...

In 1990, the Land Bank was formed. At its inception, it was forecast to protect 5,000 acres and 10 miles of shoreline over the next quarter century. According to the Land Bank's annual reports, it had achieved this goal by 2013.

More people live in King, Pierce, and Snohomish Counties than in all the rest of the state combined.

The 12,000 people added to San Juan County's population over the 40 years from 1970 to 2010 is equivalent to about 6 months of population growth in King County (based on their growth from 2004 to 2014).

Lopez Island (population 2,177) is approximately the same size as the island of Manhattan, which has a population of 1.62 million. In fact, if current rates of growth in Washington state were to continue apace, the entire state wouldn't achieve the current population of just New York City until another 25 years.

A Failed State is the Friends' Success

When the future of the county is discussed, we often hear the admonition that "We don't want to become Nantucket ... or Jackson Hole!" Truth be told, no community should ever want to be us. By almost any measure, we are an economic and demographic wreck ... all the more so because most of the people who live here are in denial about it.

Today we begin a series of articles about the economy of San Juan County. We are not who we think we are, and this series will focus on facts, not marketing hype. We will show the facts and numbers as presented in government statistics and university studies, not tourist brochures.

We begin with income inequality. We present two simple items of information - one from the New York Times and another from a 40-year study of income inequality of the Pacific Northwest prepared by Eastern Washington University.

The 2014 study from Eastern Washington University can be found here. It shows San Juan County to have the greatest income inequality of anywhere in the Pacific Northwest. The study looked at 143 counties, including all the counties of Washington, Oregon, and Idaho; and 24 counties in western Montana.

The New York Times information can be found here. It's based on research from Harvard University, and it's focus is income mobility ... how likely you are to change your station in life? It shows that growing up in San Juan County is a misfortune for the future earnings of our children compared to growing up somewhere else in the nation. We are below average in helping poor kids up the income ladder ... but for average or rich kids, we're a tragedy. After growing up in San Juan County, the future earnings of average-income and rich kids is negative compared to growing up somewhere else in the nation. In fact, for those cohorts, we are at the the bottom of the pile. Growing up almost anywhere else is better for the future earnings of our children than growing up here.

As you sow, so shall you reap.

A friend sent me the photos below of notes from a community meeting on one of our islands. The meeting was convened to discuss the growing drug problem in these islands. People were asked to write down the root causes of the drug problem.

TACKA Morgan - Part Deux

The analyst currently known as (TACKA) "W.D. Morgan" has been following the various OPALCO conversations in the media, and she wanted to post a response ... but as she worked on her response, it kinda ballooned into a new post.

So here is the new post from W.D. Morgan.
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It might be worthwhile for the people buying into the “dark conspiracy” storyline of Chom & Steve Ludwig to just take a step back and look at the really big picture. A couple of people have made comments along the line of “well, if OPALCO is raising revenue over the period through 2019 to the tune of $27 million and all they have to do is buy a $15 million cable, then why can’t they just drop the rate increases to let members keep the ‘extra’ $12 million”.

Two things to consider:

First, let’s start at the 10,000 foot level: replacing the Lopez-San Juan underwater cable isn’t the only thing OPALCO has to do over the next few years. BPA power costs alone are expected to rise from $7.5 million annually in 2013 to $9.3 million annually in 2019. Spending on energy savings programs is expected to rise from $832 thousand annually in 2013 to $1.35 million annually in 2019. Depreciation was $2.7 million in 2013 and is expected to rise to $4.2 million in 2019. A word about the depreciation: first, depreciation isn’t a cash cost, it’s the recovery of a cost already spent. But, it’s indicative of the “using up” of the asset, so it’s an important number to watch; and if it’s an asset that you’ll need to replace, the depreciation must be matched by either savings or increased borrowing capacity to be able to pay for the purchase of the replacement asset.

And, oh Lord, we have a lot of assets that will need to be replaced. The biggest and most talked about it the Lopez-San Juan underwater cable. But remember, that’s just the start. Comparing our costs to the costs of mainland communities doesn’t make any sense, despite the apples to carrots comparisons that some of the “energy experts” around here like to promote. OPALCO serves a rural, not dense, service area with challenging terrain (rocks, hills, wetlands, etc. etc. etc.) THAT IS SEPARATED FROM THE SOURCE OF OUR POWER BY 5 MILES OF SALT WATER. Comparing OPALCO’s maintenance costs to some urban or suburban village on the mainland far away from salt water is pointless. All the things that make the San Juans special make it a difficult area to serve from a utility standpoint. [Want a market-based existence proof of that? Two words: Century Link.]

And, as OPALCO has noted, the marine environment is causing cable replacements to happen earlier than they originally thought. And the Lopez-San Juan cable is only the start – OPALCO has pointed out that they’ll need to replace at least 3 other underwater cables within the next 20 years. Remember – OPALCO will either need savings or borrowing capacity to fund those replacements. Oh, and the changing environmental concerns means that OPALCO can’t just leave the old cable in place – OPALCO must remove the cable being replaced. Maybe we can have a work party to take care of that – everyone bring your diving helmet!

Let’s climb a little higher to 30,000 feet and consider OPALCO’s forecasted income.  [Numbers here and above are drawn from OPALCO’s 2019 budget document, found here.]

Taking into account the new rates, here is the net margin that OPALCO is forecasting through 2019:

• 2015          $1.098 million
• 2016          $0.929 million
• 2017          $2.075 million
• 2018          $1.470 million
• 2019          $2.101 million

So, a total of $7.673 million in budgeted net income over the next 5 years. Not increase in net income. Total net income. On a total budgeted revenue of $139.2 million for that same 5 years. So the budgeted net income amounts to 5.51% of income.

Yes, gross charges for electricity and facilities are going up. But that net income is needed to cover increases in costs and reinvestments in plant and facility over the next 5 years – and OPALCO will need to save for repairs and reinvestments for the period after that 5 years is over as well. If the savings isn’t directly spent on those capital expenditures, it will be needed to demonstrate the ability to repay loans to fund those costs. As members of the cooperative, we should be asking questions regarding what the money is getting spent on. OPALCO has provided a lot of information about that already, but it’s incumbent on every member to satisfy herself or himself that the reinvestments make sense.

My second point, and I’ll make this much briefer than the first, is that it seems like a large part of the discussion is about the breakout between electric charges and facilities charges. Emotional arguments aside, this is simply a cost allocation issue – if most of the members agree that the money OPALCO is taking in needs to be spent on specified costs, then the remaining question is how is the allocation done between the marginal cost of electricity and the cost to have access to the grid. One way or another, all of that money is going to be collected from the members.

Let me break this subdiscussion down into two separate conversations: first – what is the reasonable way to charge for facilities costs vs the actual electrons people use. Second, what, if anything, should be done to assist those members most in need – Chom and others want to combine those into a single discussion, but they’re really separate issues.

What is the true cost to have a meter on your house? Well, the utility is paying the same costs to hang your meter, you’re using the same distribution lines, the maintenance gals and guys are maintaining the entire system and your meter is hooked up to the same underwater cable as everyone else. That’s true even if you have solar pre-heated water, even if you have a solar array on your roof, even if you have a windmill, even if you turn the switch off on your power cords, even if you have LED lights instead of compact fluorescents, and on and on. The costs to maintain and install the system and line up to your meter are the same irrespective of whether you only use the system on the coldest days in the winter or whether you leave your doors and windows open and the a/c on all year. Maintenance and repair on the system isn’t caused by the number of electrons running through your meter, it’s caused by weather, the marine environment, the passage of time AND THAT WE LIVE 5 MILES ACROSS AN OPEN OCEAN FROM OUR POWER SOURCE. Sorry, it just is what it is. Discussing a reasonable facility charge in the San Juans by reference to how a utility in Southern California does it, where their electricity distribution lines run a short way from the source ACROSS OPEN SAND, is pointless.

Lastly, the members need to have a discussion about what, if anything, it is reasonable to do to help our least fortunate members afford electricity. To conflate this conversation with the determination of what the facility charge should be is wrong-headed, but if your goal is to confuse members, it’s a good way to inflame the discussion. But we do need to talk about who should be assisted, what the income cutoffs should be, what the form of that assistance should be and what measures should be in place to ensure that no member is gaming the system. And we should have that conversation bearing in mind that OPALCO is a cooperative – WE are the utility, so every dollar someone doesn’t pay is a dollar that must be collected from someone else.

-- W.D. Morgan

Guest Column - The Straight Story on OPALCO

Utility costs are increasing, but TH doesn't believe the local press/blogs have adequately summarized all the moving parts related to OPALCO's current situation ... maybe because no one wants to ... or maybe because no one has done the research. That's why TH is publishing the following analysis by someone who has carefully analyzed the finances and plans of OPALCO. We have no dog in this hunt. This is just a straight-up analysis from a financial expert who is also a keen watcher of local dynamics. You can call her (or him) W.D. Morgan.

Enjoy!

___________________________________________________

There is an ancient belief that the gods love the obscure and hate the obvious. Without benefit of divinity, some of the self-described community activists here in the San Juans, like the gods, are trying to confuse OPALCO members. To what end is not clear, they just “want to ask questions” and “start a conversation”. No one here at the Trojan Heron is opposed to conversations or questions, we just like to make sure that the conversation isn’t premised on confusing correlation with causality, and other fun logic flaws. Then we can get back to arguing with and disliking each other for more concrete reasons.

First, no one here at Trojan Heron works at OPALCO, does any consulting for OPALCO or has any other connection other than as members of the cooperative. We’re not advocating for or against anyone running for the OPALCO board.

Our agenda? As always: question everything. Even question the self-proclaimed experts (because experts have done some of the dumbest, or most disastrous, things imaginable). Especially ask questions of the people who say they don’t have an agenda but simply want to ask questions themselves and have a conversation. Seems to me that we should have a community conversation about all the people (usually the same people over and over again) who want to have community conversations.

The OPALCO topic of the week seems to be their 2014 financial statements, their 2015 budget and, lastly, their proposed rate increases through 2019. Witness the article in the Island Guardian by Chom Greacen, a resident of the Lopez Community Land Trust and "founder of Palang Thai, a nongovernmental organization that conducts public-interest research and works for fair, sustainable, and democratic development of the energy sector".

While the lead-in to Greacen’s article in the Island Guardan promises “what’s behind the rising rate is worse” than the rate increases, you’re never let in on the secret. Only questions. More questions. And a supposition that there’s a dark conspiracy at OPALCO to bury the costs of a broadband build-out in your electric rates. The “proof” of that? Why ... it's the “curious patterns”. Patterns of increasing costs. Mysterious words are used: “grid control backbone”, “underground cable replacement” “computers/servers/software”. There are no conclusions, mind you. More questions. Words like “perhaps”. More questions.

Never mind that the answers to those questions are largely found in a single document.

Some of the things in Greacen's article simply aren’t accurate. For example the article states that a $7.5 million loan to the broadband subsidiary has “pushed OPALCO financially close the brink”. And what would make her think that? That OPALCO as of 12/31/14 needed to negotiate an exception to a loan covenant as to its TIER requirement (see below for more about TIER). Hmmm ... as long as we’re posing questions: how did a loan that hadn’t been made as of 12/31/14 and won’t be made per OPALCO’s own schedules until the years 2015 through 2019 (in the link, see page 12 of 20, explanation for line 30, debt) ... how did the as-yet-to-be-incurred debt push OPALCO “close to the brink” on 12/31/14? It must have involved a time machine. Or maybe it didn’t push OPALCO “close to the brink”. Or maybe OPALCO wasn’t “close to the brink” at 12/31/14 – for support see discussion of financial ratios below.

But, back to the cost of the broadband subsidiary.  Board minutes indicate that the start-up costs will be that $7.5 million amount, but the only out-of-pocket costs for members will be paid at $3/member/month for 24 months, beginning in 2015. The rest is either directly paid from cash flow from the new broadband business or indirectly from the cash flow of the new business as it pays down the intercompany loan from the parent.  The board minutes also specifically reflect that the costs of the new entity “are not included in the new rate structure”.

You’re encouraged in Greacen's article to find scheduled rate increases “alarming” ... 41% by 2019. You’re not pointed to the detail. It’s here - it’s a 12% increase in 2015, followed by estimated increases of 6% annually thereafter. And the explanation? It’s right here - and, hey, guess what – it’s consistent with what OPALCO has been saying for months. Electricity cost and electricity infrastructure costs are driving OPALCO rates upward.

The author pretty much accuses OPALCO of fraud when she goes into more detail about the “curious patterns” where she wants you to conclude that increases in headquarter facility costs, computers/servers/software and even underground cable replacement are really hidden broadband costs. Actually, you don’t have to look further than here to see that all the costs related to Island Fiber are shown separately from OPALCO operations down in “non-operating margins” where the revenue from and costs associated with “NewCo” (really Island Fiber/Rock Island) are shown.

And what about those patterns? It’s worthwhile remembering that correlation doesn’t mean causation. That when two numbers both increase, it doesn’t mean there’s a connection. It’s something that even people with graduate degrees forget or don’t notice, but it’s important. You can end up with graphs that show that suicides are "caused" by US science spending. Likewise, you can also end up thinking broadband is driving up OPALCO's rates, when there is precious little evidence to support that connection.

Greacen makes much of OPALCO’s TIER ratio, without explaining what it is. But it’s name dropped. And it’s “alarming”. What else would you need to know?

It’s useful to understand what a “TIER” calculation is (and isn’t) before discussing its relevance. TIER stands for “times interest earned ratio,” you’ll also see it commonly referred to in financial literature as the “interest coverage ratio”. It’s a leverage ratio designed to measure the amount of earnings a business has available to make interest payments on its debt obligations. The formula for the calculation is: earnings before interest and taxes divided by interest expense.

“Earnings before interest and taxes”, sometimes called “profit before interest and taxes”, is, just as it implies, the net earnings of a business before payment of interest and non-operating taxes. It’s the amount of money available to make the payments on the debt the business owes. “Interest expense” is just that – the interest on all debt, long and short-term, of the business.

What kinds of things affect a TIER calculation? Decreases in operating margins – as perhaps might be caused by relatively flat revenue caused by warmer winters while at the same time operating expenses increased because of BPA pushing through rate increases on purchased electricity? Yep. That's what happened. Also, having to pay to replace existing underground cable? Yep. That happened too.

It’s reasonable to expect OPALCO to explain their TIER calculations and the changes over the years, but to accuse them of financial fraud without acknowledging the answers they've already given ... or perhaps not even knowing that answers had been given to those questions ... is an overreach.

What other sort of analysis might be done on OPALCO’s financial statements. Let’s take a look at a couple of widely used ratios:

• Liquidity Ratio – measures the ability of the business to pay off current liabilities. A business’s Liquidity Ratio is calculated as: Current Assets/Current Liabilities = Liquidity Ratio. Usually, a business with a liquidity ratio of less than 1.5 is considered to be in financial distress. OPALCO’s liquidity ratio at 12/31/14 was $9,883,829/$3,438,051, or 2.87 (or if you work for CNBC, about 3). 
• Leverage Ratio – measures how much the business relies on debt. The Leverage Ratio is calculated as: Equity/Total Assets = Leverage Ratio. A business with a Leverage Ratio lower than .3 might be considered to be overly leveraged and in financial trouble. OPALCO’s leverage ratio at 12/31/14 was $40,662,189/69,270,631 or .59 – note that the leverage ratio cannot be higher than 1.0. At the December 2014 board meeting, the OPALCO board adopted a resolution requiring that the company maintain an equity-to-capital ratio, another label for leverage ratio, of at least 40% on an annualized basis.
• Quick Ratio – measures a business’s ability to meet short-term obligations and is calculated as: (Cash & Cash Equivalents + Marketable Securities +· Accounts Receivable)/Current Liabilities. OPALCO’s quick ratio at 12/31/14 was ($3,534,091 + $0 + 3,036,986)/$3,438,051, or 1.91. The industry averages for electric utilities is a quick ratio of between .85 and 1.0 – meaning OPALCO’s ability to meet short-term obligations is better than average.
• Long-Term Debt percentage – measures the proportion of a business’s total assets that was financed by long-term debt (technically, this is the remainder of the Leverage Ratio calculation, there will be a small difference in the two calculations related to current liabilities). OPALCO’s long-term debt percentage at 12/31/14 was $24,987,266/$69,270,631, or 36%. OPALCO’s long-term debt percentage is somewhat better (i.e., lower) than other electric utilities.
• Percentage of Cash and Short-term Investments – measures the percentage of total assets made up of cash and short-term investments; this, like the Quick Ratio, reflects the ability of the business to fund operations. OPALCO’s percentage of Cash and Short-term Investments at the end of 2014 was ($2,254,475 + $1,279,616)/$69,270,631, or 5.1%.

Is all of this still confusing? Maybe read through this ... it’s the budget document that OPALCO put together to explain the 2015 – 2019 activity and it covers not just the budgets but has narrative explanations of most things. If you just want the highlights, they’re covered in the first few pages and then you can drill down into whatever excruciating detail you’d like.

Actually, if OPALCO can be criticized for anything, it’s probably that they put out so much information. Monthly board packages often run 50 pages or more. Sometimes well over that. One worthwhile suggestion would be that members need to have someone at OPALCO curate the information, telling the members where to look to find executive summaries of information and where to look if they want to drill down into the detail.

Here’s the executive summary: by all appearances, OPALCO isn’t “close to the brink”. On the contrary, it’s healthy compared to others in the electric utility industry. Sure it’s reasonable to “ask questions and demand straight answers from the board and management” of OPALCO. It’s also reasonable to ask members to refrain from insinuating dark conspiracies as a community organizing strategy. Alleging fraud on the part of the management and board of the co-op where your only “proof” is various questions that have largely been answered is simply irresponsible.

OPALCO is a cooperative – when we talk about the “company” we’re talking about “us”. Where management isn’t perfect, we, the owners, should require them to improve. And management has to remember that perfect consensus will never be achieved – what they owe the members is that conversations are fully fleshed out and then the elected board decides what to do. Keeping in mind that not everyone will be happy.

Worthwhile conversations to have amongst the members would be to talk about relative merits of differing ways to try and equitably allocate costs, or to hear OPALCO’s ideas about what happens to its business model over time as more users switch to solar generation, or to talk about what we as members can do to assist those members most in need.

Those conversations aren’t helped when the opening position is accusing management of fraud. If I want dark conspiracies, I’ll watch The X Files on Netflix. Or I would if my broadband were fast enough. 

-- W.D. Morgan