Weeks after a judge allowed a lawsuit questioning the City's control over Gage Canal Company to proceed, City Council unanimously approved a proxy authority arrangement that gives appointed staff voting control over the City's 61 percent ownership stake in the water company.
Council voted 7-0 on Dec. 2 to confirm shareholder proxy authority that delegates the City's voting power over Gage Canal and four other mutual water companies to Riverside Public Utilities (RPU) staff positions. The RPU Board had unanimously recommended the arrangement in February.
The City seats three official representatives on Gage Canal's 11-member board, a practice dating to 1965, and uses its 61 percent controlling stake to seat three to six additional members representing private minority shareholders. Gage Canal operates 19 of Riverside's groundwater wells and provides approximately 24 percent of the city's water.
"Giving control of the city's 60 percent share of Gage Canal to a staff member constitutes an unlawful delegation of municipal legislative power," Jason Hunter, who is suing Gage Canal over transparency issues, said during public comment.
Councilmember Clarissa Cervantes asked if council members could attend future Gage Canal meetings. RPU General Manager David Garcia confirmed they could attend as guests of the City with advance notice.
On Nov. 21, Riverside Superior Judge Daniel Ottolia ruled that Hunter's allegations were sufficient to keep his Brown Actlawsuit moving forward, according to Inland Empire Law Weekly. Hunter argues Gage Canal should be subject to open meeting laws because the City owns 61 percent of the company's shares and appoints members to its board.
The proxy authority Council approved Dec. 2 removes elected officials from the appointment process, assigning it instead to the RPU General Manager and Assistant General Manager.
Hunter warned Council that once given proxy authority, the general manager "could call a special shareholders meeting" and "change any bylaw he would want at Gage Canal."
"He has total control once you give him that proxy," Hunter said.
City staff reports indicate the general manager does consult with the City Manager's office on board appointments, though no formal Council approval is required.
Hunter also argued the delegation violates Article 11 of the California Constitution, which prohibits delegation of legislative authority.
"The council must, at a bare minimum tonight, direct the general manager as to whom he will vote for at the Gage Canal annual meeting," Hunter said. "You can't allow him to do it."
The approved proxy authority covers five mutual water companies in which Riverside holds shares: Gage Canal Company, Meeks and Daley Water Company, Trujillo Water Company, Riverside Highland Water Company and Jurupa Ditch Water Company. The City acquired most of these interests in 1959 when it purchased the Riverside Water Company.
Hunter sued Gage Canal in April, filing a Brown Act petition claiming the water company is effectively a public agency.
A hearing on Hunter's motion for a preliminary injunction requiring Gage Canal to comply with open meeting laws was scheduled for October but has been continued. The case remains pending in Riverside Superior Court.
CORRECTION: An earlier version of this story misidentified a question about attending future Gage Canal meetings as coming from councilmember Jim Perry. The story also incompletely described the City's Gage Canal Company board representation.
