USDA forces water system reorganization

Last Friday, representatives from The United States Department of Agriculture met in Cathlamet with about 20 shareholders and customers of the Skamokawa Westside Water (WW) system and informed them of the USDA intent to foreclose on the water system.

Stunned by the news, shareholders and customers of Westside Water learned their system was both in arrears and behind on its operational documentation.

“At this point, what we’re hoping is that someone is interested in acquiring the system and will take it over,” said USDA Rural Specialist Bruce Whittle.

Whittle told the shareholders if they wanted to maintain ownership in their system they needed to step up and take control. Whittle said the USDA was no longer interested in dealing with WW’s current management and the USDA really didn’t care who took over the water system.

“The USDA is not in the water service business, and if something concrete is not settled here today we are going to actively look for an outside entity to take over your water system,” he said.

Whittle informed shareholders they must act in unison to bring the water system immediately into compliance by paying three outstanding back payments, by bringing all paperwork up to date, and then by re-submitting it to the USDA, as required by the loan.

The shareholders were also shaken to learn that the documentation originally signed to apply for the loan to rebuild WW had set forth conditions that the group was now out of compliance with. The water system they viewed as an asset has now become a liability.

Westside Water shareholder Kent Martin said that about six months prior to this meeting, one of the WW shareholders had sent a letter out to other shareholders calling for a meeting. The letter said the organization needed to discuss why customers were not receiving their water bills. The letter did not define a place and time.

Several in attendance at Friday’s meeting said they had simply stopped paying their bills.

“As far as I know water bills haven’t been sent out for the past three years,” said Martin.

Whittle said the USDA was only the facilitating agency for the federal government and that the WW board was ultimately the group in charge for making sure the District ran smoothly.

“The board has to follow its organizational documents,” said Whittle. “If the manager isn’t doing the job, it is the board’s responsibility to remove that person and re-elect someone else, but this has not been done.”

The problem at Westside Water has more to do with a failure to communicate, Whittle said, than a lack of money. He said that over a two-year period he had tried to contact West Side Water President Steve McClain at least 14 times.

Whittle said that after talking with McClain, he doubted there were many records to tell where the system stood financially. and that shareholders are responsible for the operation of their water system and that system needs new leadership.

USDA Programs Director Peter McMillin told the group that the agency simply wants to resolve the situation.

“We really don’t want to foreclose, but you all need to address this issue today,” he said.

He told the group they had few options and asked the shareholders to come up with a plan to reorganize immediately. McMillin said that if the shareholders could give him a plan on what they would do to reorganize, he would give Westside Water two weeks to reconstitute itself.

He also wanted the group to replace McClain immediately.

WW shareholders asked to meet in private and left the room. Shareholder Jon Peterson stepped froward as interim president.

Upon returning to the meeting the shareholders requested that the USDA give Westside Water until the middle of January to reorganize. Shareholders said they needed that time to deal with paperwork and to research the technical aspects of running a water system, as well as finding and re-billing those customers who are in arrears.

In an interview after the meeting, McClain said the USDA had painted a drastic picture of his management of the water system. Westside Water had the money in the bank to pay its bills, and in August of 2008, he had talked with Whittle at Vista Park.

McClain said that during their discussion Whittle asked him not to make any more payments to the USDA until McClain had moved the water department’s original bank account at the Bank of The Pacific to a new account at Bank of America.

“I have no excuse,” said McClain.

He said he had dealt with the USDA for 11 years prior to the recent threat of foreclosure and didn’t realize there was a real urgency on their part.

“I got behind on the paperwork and before I realized I needed assistance, it was too late,” he said.

McClain, who is a shareholder in Westside Water, said that, in addition to his job as Port District 2 manager, Vista Park manager and high school coach, he has managed Westside Water for 15 years without pay.

“I often thought about quitting, especially when I was out fixing a waterline in the mud or freezing rain,” said McClain.