2. Procedural Background
This application was filed on January 17, 2006, and reviewed by the Administrative Law Judge (ALJ) Division. The matter was reassigned on March 23, 2006, to the Commission's Water Division.
In D.00-06-010 dated June 8, 2000 Michael Mills (Mills) and Opal McAllister (McAllister) were ordered to form a legal entity to acquire Greenbelt and to file the requisite application to the Commission to initiate a transfer of ownership. Upon further review, and noting the absence of any objection to the sale, the Water Division concluded that an evidentiary hearing in the matter was not required.
3. Facts
Since approximately 1913 residents several miles north of the Village of Aptos along Redwood Drive in Santa Cruz County have been obtaining public water service, initially through individuals and entities no longer of record, and subsequently through the Aptos Water Company and its successor, the Monterey Bay Water Company.
In 1960, John S. Cavanaugh (Cavanaugh) and his wife Evelyn Cavanaugh (Mrs. Cavanaugh) and the Santa Cruz Land Title Company (Title Company) acquired approximately 290 lots along Redwood Drive in a rugged mountainous area. The Cavanaughs were developers and sold home sites along Redwood Drive. About 1970, the Cavanaughs obtained the Title Company's interest in the remaining lots.
After having provided water service to some of the Cavanaughs' developed lots, Monterey Bay Water Company sold out to Soquel Creek County Water District, which later severed the connections to the Cavanaugh properties. Lacking the funds for what threatened to be a long and expensive legal battle, the Cavanaughs installed their own well, storage tank, and distribution main to serve their developed properties.
By 1970, the Cavanaugh Water System was serving 17 customers. As the result of a complaint by three of these 17 customers, by D.77059 (April 7, 1970) the Commission determined that the system was a public utility. Further connections were prohibited until certain improvements were made.
By D.91980 in 1980, the Cavanaugh Water System was incorporated as the Greenbelt Water Company, Inc. (Greenbelt).
In late January 1997, the Cavanaughs stipulated in an agreement with Mills and McAllister, pending a final decision in Order Instituting Investigation (I.) 96-09-002, that the Cavanaughs would cede control of the finances and operation of the Greenbelt system to Mills and McAllister. The latter were to establish appropriate books and accounts, make system repairs as needed, operate the system, and remit the surcharges for the Safe Drinking Water Bond Act (SDWBA) loan repayment to the Fiscal Agent. Water Division agreed to initiate a rate increase for Greenbelt.
The second Pre-Hearing Conference was held by Administrative Law Judge Weiss in Santa Cruz on March 27, 1997, shortly after the death of John Cavanaugh. Mrs. Cavanaugh was unable to attend. However, representatives from the Fiscal Services Department of Department of Water Resources (DWR), the Santa Cruz County Health Services Agency, and the Office of the Santa Cruz District Attorney attended along with Mills and McAllister and customers.
Mills reported that each month he had been depositing the customer surcharge payments on the SDWBA loan with the Bank of America Fiscal Agent Account, and had also taken action as previously directed by the ALJ to reconcile past due customer accounts. DWR reported that as of March 1997 their books showed a loan balance of $137,127.40. Of this, $113,106.19 represented principal and $24,026.21 represented interest. But these figures did not include penalties because of missed payments. As of January 1, 2006, their books showed a loan balance of $16,242.84. It appeared to all present that it would be best to have Mills-McAllister continue operating Greenbelt.
