Questions remain after EDA changes city grant

Deborra Brannon

The Economic Development Agency’s withdrawal of its $3 million grant funding from the city of Mount Shasta’s interceptor pipeline repair and expansion project created a domino effect that:

• Knocked out Crystal Geyser’s $3 million commitment to the project, and

• Eliminated the possibility of including aspects of the company’s proposed plant operations in the Environmental Impact Report for the interceptor line project.

Work on the EIR had recently progressed through the Notice of Preparation stage. Public comment received on the NOP was expected to widen the scope of the environmental review to include some aspects of the planned Crystal Geyser plant operations in Mount Shasta.

The EDA’s Dec. 26 letter to the city suggested that the city’s request that an additional portion of the grant be alloted to environmental review was the result of “significant controversy involving the prime beneficiary,” which is Crystal Geyser.

The agency offered the city the opportunity to apply its $3 million grant funding to the Wastewater Treatment Plant upgrade project, an offer accepted by unanimous vote of the Mount Shasta City Councilors during their Jan. 26 meeting.

Crystal Geyser’s $3 million commitment to the project was based on the amount former Mount Shasta City manager Ted Marconi’s estimated as the industrial waste connection fees the company would incur when it hooked up to the city’s system.

The company agreed to fund the project at that amount “in lieu” of those connection fees, according to current city manager Paul Eckert.

The staff report attached to the agenda item for the Jan. 26 meeting stated that although the city had worked well with the federal agency for several years, there had been “an increased formality and change of tone from the EDA. Nothing on the City’s part would have seemingly caused the EDA changes in their tone or approach.”

Members of the group known as “WATER” (We Advocate Thorough Environmental Review) said they initially contacted the EDA to find out how to submit a Freedom of Information Act request for the grant documents as well as emails and other correspondence pertaining to the grant.

WATER member Vicki Gold said she called the EDA once or twice a week beginning in November to make FOIA requests.

“We wanted to get more information and to discuss the project as it was developing,” WATER member Roslyn McCoy said. “We were surprised to discover that the EDA was not aware of some project changes, such as the addition of Crystal Geyser to the scope of the EIR.”

The WATER group had other concerns as well, including Crystal Geyser job relocations and/or plant closures that would violate the terms of the EDA funding and potentially render the city liable for return of the $3 million to the EDA, and discrepancies between Crystal Geyser’s job creation figures on the EDA grant and figures on another application for a tax incentive program.

Mount Shasta City Councilor Jeffrey Collings said the WATER group chose to contact by phone, email, and FOIA requests “everyone and their lawyers” without involving anyone on the city council or staff.

“They never said in public comment that they were concerned with Crystal Geyser violating covenants of the EDA grant,” Collings said.

Councilor Tim Stearns feels that the WATER group is more interested in “building a case... than making sure everything works out right,” and that the phone calls were part of an effort to make sure Crystal Geyser “goes away.”

Stearns said, “This group reintroduces the idea of Mount Shasta as being ‘business unfriendly’ – which is working contrary to what the city is trying to do,” such as attracting sustainable businesses that create jobs and spur the local economy.

Job relocation

On Nov. 21, 2014, A. Leonard Smith, the regional EDA director in charge of the grant process, sent a letter to the city referencing a Feb. 19, 2014 San Francisco Chronicle article in which Crystal Geyser CEO Doug MacLean stated that the company “will eventually phase out its Calistoga and Bakersfield plants and move its entire operation to Siskiyou County.”

According to the EDA grant “Terms and Conditions,” the City of Mount Shasta, as Grantee, had to attest that the EDA funded project would not be used “to induce the relocation or movement of existing jobs from one region to another region by a primary beneficiary of the award.”

Smith stated in the letter that, if MacClean’s statement was valid, it would be grounds to terminate the grant.

City manager Paul Eckert said that upon hearing from the EDA, “the city did its due diligence and met the EDA’s requirement by forwarding the concern on to them.”

MacLean replied in a letter to the city which stated, “we presently do not have any plans to close our Bakersfield or Calistoga locations.”

When contacted by email, Judy Yee, Crystal Geyser’s executive vice president of Marketing and Business Strategy, replied, “The EDA grant did not induce Crystal Geyser to consider the closure of any plants or the relocation of any current Crystal Geyser employees, consistent with the grant application.”

Job creation

The number of jobs Crystal Geyser said it was creating in the Mount Shasta plant without relocating jobs from other areas didn’t make sense to the WATER group.

“The job figures in the EDA grant don’t match up with Crystal Geyser’s current plans,” McCoy said.

They produced a Crystal Geyser application dated Dec. 31, 2014 for a CalCompete tax incentive program through GoBiz stating that only 12 new jobs will constitute the company’s “net increase of full-time employees” in its California workforce between 2013 and 2018.

The EDA grant pre-application submitted by former city manager Ted Marconi states that, once operational, the Crystal Geyser facility in Mount Shasta “will create 60 immediate new jobs with the potential for 150 in the future.”

Yee stated in an email, “As a result of the Mt. Shasta operations Crystal Geyser will have an incremental headcount increase of 12 additional persons in addition to what Crystal Geyser currently employs (140 employees), for a total of 152 people on our company payroll by 2018. The Mt. Shasta plant will open with approximately 40 of those jobs and ultimately employ about 60 people.”

In response to an email, Crystal Geyser declined to further clarify the issue.

Additional WATER concerns

Members of the WATER group pointed out that no mention of any possible project controversy was mentioned in the grant-related Economic Development Assessment Program environmental narrative.

They also challenged a statement in the narrative claiming that the city had discussed the proposed project at City Council meetings.

“I find there is no evidence that supports the claim by the city that they had discussed this proposed project at any City Council meetings as of the date of this application, 12/5/2012,” McCoy stated in an email.

Stearns said the Interceptor Line Project had been on the capital improvements list since the 1990s and, as such, had been included in staff reports over time.

As to McCoy’s emailed statement that “The city did not disclose past controversy over this water extraction issue, leaving out an important element,” Stearns said he does not recall controversy about water extraction during Danone/Coca Cola plant operations.

He said the controversy did not begin until after Crystal Geyser’s plans were announced.

The expansion of the interceptor pipeline system capacity beyond the city’s current needs is also of concern to the WATER group.

McCoy said the project ought to be scaled to “meet the citizens needs and the state requirements” only.

Eckert explained, “If you’re going to do an interceptor line replacement, the state says you have to increase its size in order to accommodate growth.”

He said the city will proceed with that project regardless of the loss of EDA funds to pay for it, and the system will be upsized.

“It’s not only critical for compliance with the state, but also for the overall environmental well being of our community,” Eckert said.

Collings commented that the system’s present size simply doesn’t function effectively.

“Our wastewater treatment plant handles 600,000 gallons of effluent every day, but when it rains there are two to three million gallons coming through the same lines, causing surcharges and forcing us to place a moratorium on sewer line hook ups,” he said.

Stearns said it is his understanding that part of the Spring Hill area served by the pipeline is zoned commercial but cannot currently be developed due to the line’s limited capacity.

“We have wanted to build our economic base. Part of our priority is to create job opportunities so our residents’ children can come back and live here,” he said.

EIR

The EIR for the interceptor line project will no longer be expanded to include Crystal Geyser operations, now that the company is not linked to the project through the EDA grant.

But the WATER group feels the city can pursue an EIR on the plant operations anyway.

“The city has been urged to exert its sphere of influence and go to the county and say ‘we need an EIR.’ We want this water extraction permitting process complied with by the city and the county,” McCoy said.

Collings said according to legal advisors the city has no jurisdiction over CEQA on Crystal Geyser plant operations.

“We could only link the plant through the EDA grant legally, through the interceptor line project. That linkage was the only thing that allowed us to include Crystal Geyser in the EIR,” Collings confirmed.

He said it had been the city’s intention to do an EIR according to the “maximum legally allowable scope” of the project and then request possible project adjustments of Crystal Geyser.

“That seemed most vital to the community,” he said.