Poseidon deal still a mystery

City has not released report on desalination plant that faces vote next week; opponents charge bad faith.The historic Poseidon vote is just days away, yet the public continues to know very little about the proposed benefits of the $250-million desalination facility.

A report on the tax benefits from Poseidon has yet to be released, although city officials said they hoped to make it public today, the absolute deadline if Poseidon is going to be considered at the Jan. 9 special City Council meeting.

Any later and the vote on Poseidon will likely have to be delayed again, Mayor Dave Sullivan said.

“Clearly that would not allow enough time for adequate consideration on the part of the council,” he said.

The delay stems from last-minute wrangling over the deal between the city and Poseidon, mostly having to do tax revenue issues, company Vice President Billy Owens said.

Under the agreement, Poseidon is promising that the city will continue to collect property tax revenue even if the proposed desalination plant at Newland Avenue and Pacific Coast Highway is sold to a public utility agency. State law exempts utilities like Edison and Metropolitan Water District from paying property taxes. Owens said Poseidon would include a clause in the deal requiring any potential public operators of the plant to pay an annual fee in lieu of any property taxes.

Poseidon would also make a one-time payment of $1.9 million as well as $100,000 annually for the right to build a pipeline through city streets to deliver the water to a regional hookup in Costa Mesa. Owens said Poseidon also plans to give the city $2 million to be allocated through a grant program.

In past statements, Poseidon has also offered the city access to an emergency water supply in the result of a catastrophic event like an earthquake or tsunami. The Poseidon plant is said to be capable of creating nearly 50 million gallons of drinking water per day by converting seawater in a process known as reverse osmosis.

A portion of that water would be sold to the city at a rate 5% cheaper than what it pays the Municipal Water District of Orange County for imported water, Owens said.

Many anti-Poseidon activists said they are skeptical about the deal but haven’t had a chance to view the contract. Activist John Earl said he was frustrated that the city had still not released the contract, despite instructions from council to make it available before Thursday’s deadline, as soon as it was finished.

“Whoever is leading that at the city hasn’t acted in good faith according to the City Council’s vote,” he said.

While the intent of the vote was to have the documents released before Thursday’s deadline, Deputy City Administrator Paul Emery said the city wasn’t capable of following the directive.

“We’re still waiting for the signed agreement from Poseidon,” he said, adding that his attorneys were still haggling over some last-minute details.

The result is that Huntington Beach residents will not have extra time to review the complex agreement, despite instructions from the City Council to get the report out early.

Whatever the agreement says, it appears likely that Poseidon and the city are destined to work out some of the tax issues in court.

Poseidon is taking the position that it should have to pay only a small portion of the city’s utility tax, because city law exempts utilities from paying taxes for electricity used in the pumping of water. Poseidon argues that 95% of its operation would involve public water, so it should only have to pay about 5% of its likely $1-million utility tax.

“The city is taking the opposite view that all operations will be subject to the utility tax,” City Attorney Jennifer McGrath said. “We believe that 100% of electricity [consumption] will be used for the treatment of water.”

Owens downplayed the disagreement but said it ultimately could be decided in court.

“The law is whatever the law is, and there is no dispute until we object [to the tax the city imposes on Poseidon],” he said. “We’ll think we’ll work that out before we get there.”