CLAREMONT >> As the city begins its effort to acquire a water system from Golden State Water Company one question looms: at what cost?
For years, Claremont residents have lobbied to buy the water system but it wasn’t until this year that a majority of the City Council backed such a measure.
On Nov. 4, voters overwhelmingly backed a bond measure that allows the city to borrow up to $135 million to acquire the system, which serves more than 11,000 customers.
“We’ve to tried negotiate with them nicely and they were disingenuous over and over again. You get tired of that,” said Helaine Goldwater, with Claremont Friends of Locally Owned Water also known as FLOW.
But not all who try to take over their system find it is that easy, said Julie Hooper, a spokeswoman for the San Dimas-based Golden State Water Company.
“There is a long history of eminent domain proponents greatly underestimating the value of the water system,” Hooper said. “In California, history has shown that a takeover has never been successful at lowering water rates.”
Last month, the town of Mooresville, Ind., dropped a multiyear effort to acquire the water utility from Indiana American Water after a jury had decided the system was valued $20.3 million. It was more than double than what it had offered. The town valued the system at $6.5 million and at the trial the valuation of the system jumped to $9.5 million. Golden State Water Company is a subsidiary of American States Water Company.
Seeking eminent domain
In Claremont, city officials have made repeated attempts to negotiate a fair market price for the system but have been denied by Golden State Water, who have said the system is not for sale.
Just last month, Golden State Water released a report stating it would cost $222 million to replace its system in an eminent domain action, four times the appraised value by the city.
The replacement cost of the system will be taken into account by the jury, Hooper said.
“A Los Angeles County jury will decide the price that the city of Claremont must pay to take over Golden State’s water system, and they will be instructed to determine the highest price a willing buyer would pay for the assets,” she said.
Claremont appraised the system for $55 million and has said rates would go down if the city acquired the water system for $55 million.
If the $135 million is needed, then the average family would have to pay $28 a month. If the cost to purchase the system comes under $80 million, then the system will generate enough revenue to pay for the bonds.
Claremont FLOW, which has been instrumental in leading public outcry against a private water system, say the measure would help control rising water bills.
“We’re being gouged by Golden State. When you compared us to the communities around us, we are paying an extra fee,” Goldwater said.
On Tuesday, the city will hold a public hearing to consider whether the City Council should adopt a resolution of necessity. The legal procedure would pave the way for Claremont to acquire the system through eminent domain.
In the 75-page staff report, the city council has two resolutions that it can adopt: One of them calls for acquiring the system that is within city limits. The second includes portions of the water system that is outside of the city, including Montclair, Upland and Pomona.
“Acquisition of the Claremont system will provide the Claremont rate payers all of the benefits detailed in the preceding section including control of rising water rates, greater local control in decision making, greater transparency and accountability to the ratepayers,” the report states.
In order for the resolution to pass, it will need more than two-thirds vote from the five-member council.
Costly measure
As of October, Claremont has spent nearly $1.5 million on consultants and legal fees for the acquisition, including $53,300 on a public relations firm. It has set aside a total of $2.3 million for all the costs associated to the takeover effort.
“It is currently estimated that the city’s cost of such litigation could be up to $2 million over the course of the litigation,” said Bevin Handel, public information officer for Claremont in a statement.
Golden State typically doesn’t release how much it spends campaigning on takeover efforts. Other water companies such as American Water told investors it had successfully spent $5.6 million opposing acquisition efforts in larger cities such as Chattanooga, Tenn., and Peoria, Ill., according to a 2012 report from the Washington, D.C.-based organization Food and Water Watch.
But in Felton, where the water company was unsuccessful in stopping a bid for local control, it spent hundreds of thousands of dollars in the first two years of the multi-year battle, the report stated.
Felton’s battle is significant since both Golden State Water Company and Claremont use it to make to their case for and against local control.
The San Lorenzo Valley Water District valuation price was $5.3 million but was acquired for $13.4 million, 250 percent more than the government asserted, Hooper said.
“In Felton, residents are paying an extra $500-a-year property tax which has a duration of 30 years,” she said.
Hooper also points to an eminent domain case in Big Bear Lake, in which officials estimated it would cost $15.7 million, and the final acquisition price was $35 million.
But according to the Food and Watch report, the move in Felton does benefit local ratepayers.
“Compared to the company’s proposed rates for 2011, public ownership saved a typical Felton household about 30 percent or $518 on total annual water costs, including taxes,” the report states.
Officials in Claremont say they don’t have a figure that they will consider a “breaking point,” or when the endeavor may be more costly than they expect, Handel said.
“Ownership of the Claremont System by the City would increase local control over the system and rate-setting. Control over important water decisions that affect daily life and business activities in the community would be made by the ratepayers most directly impacted,” Claremont’s staff report states. “In other words, it gives the Claremont community a voice in its water future.”
This story has been corrected since its original publication, Golden State Water is based in San Dimas and is a parent company of American States Water. The town of Mooresville, Ind. was in legal battle with Indiana American Water.
