A thank you to the tractor driver
My husband and I have been proud home owners in Seal Beach for over 30 years. Recently, my doctor advised me to walk on the wet sand for 30 minutes a day. Last week when I went to the north side of the pier to walk, I was shocked at the amount of litter along the water’s edge. I was really embarrassed because a friend from Surfside had enrolled her kids in our M&M Surf School and it was their first day of lessons. I did my best to pick up as much trash as I could, especially the large items and sharp objects (a kitchen knife, 2 used hypodermic needles, and lots of rusty aerosol cans). I stopped the beach cleaning tractor to inquire about the extreme amount of trash that day. Vince (the tractor driver), explained that because of the high/low tides lately we were getting all the debris that had been trapped in the rocks along the river bed. I asked him if the beach maintenance people ever walked along the surf line with gloves and trash bags and picked up trash. He said, “well, it’s just me.” Vince was very patient with me even though I was clearly upset and a little accusatory in my tone. He remained calm and professional and assured me that he was going to do his best to get the beach cleaned up so the kids would be safe in the water and on the beach.
Today I walked on the beach again and I was shocked and surprised at how wonderful our beach looked! There was no more trash! Now I feel proud of our town and our beach again, and I’m especially proud of Vince! I wanted you to know what a great job Vince is doing.
Maggie Curtis
Proud Citizen of Seal Beach
City does not need a new oil consultant
Seal Beach City Council recently deadlocked on a vote to approve a third contract with Municipal Petroleum Analysts (MPA). Thank you Mayor Varipapa and Councilmember Sustarsic for voting “no” and avoiding another bad experience with MPA. Our city needs a qualified oil consultant to conduct an audit of all local oil operations to determine if there are any companies that are delinquent on paying oil taxes and fees. I am a local resident with more than 35 years of oil industry experience and would like to offer my perspective on the selection of an oil consultant.
In my view, we would not need to hire an oil consultant today if MPA had completed what they were paid to do under two prior contracts in 2013 and 2014. Yes, MPA identified and collected $204,000 in unpaid oil taxes from BreitBurn Energy Partners, which operates wells locally. But MPA failed to issue an audit report, covering all oil operations (not just Breitburn’s), which was a contract deliverable. This is a big deal. With an audit report in hand (or even a reasonable draft that MPA claims was produced, but no one seems to be able to locate), City staff would have had everything they needed to implement an effective tax/fee collection system that could be administered in-house and without consultants. This is what other neighboring cities with oil operations have been doing for decades.
Why did MPA fail us? First and foremost, MPA principal Greg Kirste had never done an oil tax audit prior to his contract with Seal Beach. Second, I believe Mr. Kirste was preoccupied with securing a lucrative contingency fee contract with Seal Beach. Consider this – Mr. Kirste submitted a 40% contingency proposal to the City in November 2014 while MPA’s second $24,000 fixed fee contract was still in progress! It sure seems like he found something, but was holding out for more money, even though he had a contractual obligation under his fixed fee contract to provide us with his findings.
City staff recently recommended hiring MPA/Kirste over two other bidders (Clarke & Greene, and Millennium) to once again tackle the unpaid oil tax issue. Inexplicably, the staff report to Council did not provide a comparative analysis of all three bidders. If one had been compiled, it would put MPA/Kirste dead last. To start with qualifications, Mr. Kirste submitted a half page “Work History” that doesn’t even qualify as a resume in my book. It doesn’t provide us with one prior project or former client. By contrast, Clark & Green submitted resumes that totaled seven pages, listing decades of relevant experience, providing dozens of relevant projects, and naming numerous clients.
A comparison of costs would show that MPA/Kirste is by far the most expensive choice. MPA/Kirste offered three compensation methods – fixed fee, hourly, and contingency. For the fixed fee and hourly methods, MPA/Kirste was substantially more expensive than the lowest bidder (Clarke & Greene). For the same services, Clarke & Greene would charge $45,000, versus $391,000 for MPA!
MPA/Kirste was the only bidder that submitted a contingency fee option. Kirste would like you to believe that MPA is giving the City a gift by offering a 15% contingency fee because it is “no cost” to the City, as if any other consultant would not be so generous. This is nonsense. Contingency fees are unheard of for oil production tax contracts because they can result in huge sums of money diverted to the consultant for relatively little work. For example, under MPA’s 15% contingency proposal, the City could pay MPA $2,000,000 in contingency fees for recovering the $13,000,000 in revenue that Mr. Kirste claims he has identified. This compares to only $45,000 in fixed fees, under the Clarke & Greene proposal, to recover the same $13,000,000.
The MPA/Kirste contract is being promoted by Mr. Kirste and City staff as “no cost” and “free”. This is misleading. The contract requires the City to pay for third party legal costs to support Kirste’s cost recovery efforts. The contract also has a $200/hour retroactive penalty charge that could easily be applied by Kirste. And let’s not forget about paying Kirste 15% of all City tax revenue he recovers.
What I find most disturbing about all of this is that Mr. Kirste has been relentlessly promoting his contingency fee concept for the past four years to recover the same oil revenues that our City paid him to recover four years ago under two fixed fee contracts with MPA. MPA has a contractual obligation to reveal the details of Kirste’s “$13 million of additional oil revenue available to the City.” Instead, Kirste is withholding this information and using self-serving terms such as “independently identified”, “proprietary”, and “trade secrets” in an attempt to capture a huge contingency fee for himself. Why would anyone in our City let him get away with this? Fortunately, if there is a big pot of unpaid taxes out there, a qualified oil consultant can quickly find if for us at a fraction of the cost that Kirste is demanding.
MPA/Kirste is not the solution here. MPA/Kirste is part of the problem. Thankfully, Mayor Varipapa and Councilmember Sustarsic recognized this and recommended we change course and hire a qualified consultant (Clarke & Greene) under conventional terms ($45,000 fixed fee). But Councilmember Deaton tells us we don’t have $45,000. Really? Yes, we are facing a budget deficit with expenditures projected to be $400,000 more than revenues in the next fiscal year. But that doesn’t mean we are “broke.” The City still has money in the bank, in fact a lot it. The City’s unassigned (i.e., uncommitted) General Fund Reserves are currently over $4 million. Even with all of the anticipated budgetary stress and planned projects, this “kitty” is projected to still have $2.9 million at the end of June 2019. On top of this, the City has over $9 million in additional reserves set aside for cash flow requirements, credit worthiness, and changes in economic conditions. So I think we can afford the $45,000.
Councilmembers Deaton and Massa-Lavitt – please reconsider Mayor Varipapa’s motion to hire Clarke & Green (or any other qualified oil consultant) to do the work that MPA/Kirste failed to do.
Ray Zeoli
Seal Beach, CA
Clarifying my column about oil consultant issue
My letter in last week’s Sun contained a timeline of events regarding the City’s pursuit of unpaid oil revenue. My intent in submitting this was to provide background information so the public would be better informed. Given the importance of transparency and accuracy with this matter, I would like to clarify the following:
1) The timeline was originally compiled by resident Robert Goldberg. I received it from a secondary source, and was informed that Mr. Goldberg did not object to its distribution. However, Mr. Goldberg and I had no direct communications prior to my submission of it to the Sun.
2) I added my comments to two of the timeline dates. The first was regarding an email exchange between Kirste and staff on January 30, 2015 about a private oil development proposal in the Los Cerritos wetlands. Specifically, I added the comment “Kirste fails to specify if his proposal is for new production or for an existing debt.” After now personally reviewing these emails, I see that there was no “proposal” from Kirste regarding this matter. The second comment I added was to the timeline date April 9, 2017 regarding Mr. Kirste’s prior employment. I conducted the Google searches of “Pentair” and “Wicor,” not Mr. Goldberg. I have subsequently been provided with a copy of Kirste’s resume which was attached to the June 11, 2018 staff report to Council. With the extra detail that it provides, I now know that my failure to find Wicor on the internet was due to its buy-out by Wisconsin Energy. Regarding Pentair, there is a pool supply company by this name, but Kirste worked for an “industrial products” corporation with a similar name, Pentair Industrial.
Pentair PLC is a multinational diversified industrial company incorporated in Ireland with tax residency in the UK, with its main U.S. office located in Minniapolis, Minnesota. Pentair was founded in the US, where roughly half of the company’s revenue is derived as of 2015. Pentair was reorganized in 2014, shifting the corporate domicile from Switzerland to Ireland.
Until a major restructuring in 2004, the company was primarily an industrial tool manufacturer. Now, the company’s primary focus is water and fluid controls used in the energy, food, beverage and manufacturing industries as well as infastructure. Its fiscal year 2015 revenues were US $6.43 billion and it employs more than 30,000 people worldwide.
In 2004, Pentair bought Wicor Industries, the former water systems subsidiary of Wisconsin Energy for $850 million. Wicor makes water pumps, filters, and fluid equipment components under the Sta-Rite, SHURflo, and Hypro brands.
He came to Wicor from California-based SHURflo Pump Manufacturing Co., another Wicor subsidiary, where he was general manager of the metering and dispense systems division and manager of business development. It seems likely that these are the Pentair and Wicor in Kirste’s employment background.
My apologies to Mr. Kirstie. Pentair’s distant and diverse locations and its multiple subsidiaries and its mergers and acquisitions are reasons that I had difficulty finding data on it.
Alex Saenz
Seal Beach, CA
Increasing sales tax will harm businesses
Recently, the Seal Beach City Council voted to approve an increase in the Sales Tax Rate by 1% from 7.75% to 8.75%. This action will require voter approval in the November election. This type of Tax is particularly onerous because it directly depresses economic activity by making the cost of retail transactions more expensive.
Our merchants and restaurants have enough difficulty generating adequate revenue without increasing the costs to their customers. Nothing happens in a vacuum. If the Sales Tax Rate is increased, it will likely impact transactional sales volume negatively.
Demand for goods and services is not inelastic, rather it is elastic. This means that demand will decrease as prices increase. Practically, it means that the City is unlikely to collect their forecasted increase in Sales Taxes because volume will be less than they expected. This is really the last thing that our businesses need and is hardly likely to encourage shopping local, which the City Council also wants to emphasize.
The vast majority of cities in Orange County have a Sales Tax Rate of 7.75%, like we do currently. If we increase the rate to 8.75%, this will put Seal Beach into the dubious class of highest taxed cities, along with Fountain Valley, La Palma, Stanton and Westminster. Not exactly a sterling group. Has anyone been to the Westminster Mall and seen the vacancies among the stores?
As citizens of Seal Beach, we need to think seriously about the kind of local economy that we want. If we choose to be a City that has high taxes funding its government, we are likely to have a stagnant economy.
If you think of our economy as a pie, an increase in the Sales Tax Rate will shrink the pie from what it would otherwise be and depress growth going forward.
If instead we choose to be a City with lower taxes and increased local support for business development, our economy will grow and provide enough revenue to support our services.
Continuing the pie analogy, lower tax rates will actually encourage the growth of the total pie, leading to higher revenue for all participants, including the government.
The long term answer to our City’s financial health is business development and growth. We must be more proactive in using our local assets to generate increased revenue streams.
For example, the Toys R Us and Babies R Us stores in The Shops At Rossmoor center are closing. We can actually turn this to our advantage if we can recruit a restaurant like the Cheesecake Factory to occupy the space. Cheesecake Factory does a tremendous amount of business at Bella Terra in HB and at Fashion Island. Their addition would bring an excellent restaurant to Seal Beach, increase customer traffic for the entire Rossmoor center and provide a strong stream of tax revenue to the City.
There are other ideas like this that we can pursue to generate a thriving economy that balances growth with our small town culture.
But raising the Sales Tax Rate is likely to harm our local businesses.
Paul Wayne
Seal Beach, CA
No business in politics
Cities and counties have absolutley no business getting involved in political issues. They are there to provide the services necessary for the ongoing business of the city, and nothing else. The city and county councils should not be spending taxpayer funds, resources, and time, on political positions. I am fully in support of the organizations that are suing cities and counties for taking these positions, thereby causing these cities and counties to waste taxpayer funds on legal fees, which means they are derelict in their duties to ALL the citizens of that city or county.
Roger Hansen
Seal Beach
A question for lawyers
So here’s a question for the lawyers in town. Councilman Thomas Moore originally recused himself from deliberating on the selection of the oil tax recovery consultant because of a potential conflict of interest. Specifically, Crimson Pipeline, which operates pipelines in Seal Beach, is a a client of the software company that Moore works for.
This presumably was to avoid any “appearance” of possible conflict-of-interest by Moore’s involvement in the selection decision. This is because, in the near future, the retained consultant may look at Crimson along with other pipeline operators for possible unpaid taxes. At last Monday’s council meeting, the City Attorney OK’ed Moore’s involvement in the selection of the oil consultant as long as the approved contract excludes Crimson from scrutiny for unpaid taxes. Now that Moore is cleared to vote on the matter, the proposed contract with Municipal Petroleum Analysts will be given a second chance to be approved by the Council.
However, isn’t the exclusion of Crimson from the scope of this contract definitive evidence of special treatment due to Moore’s involvement? How can this not be a conflict of interest?
Robert Goldberg,
Seal Beach
