In early November of this year, Claremont resident voters backed a measure that gave the city the ability to borrow as much as $135 million dollars to acquire Golden State Water Co., a private water company servicing the City of Claremont. Claremont’s desire to take over the private water company has been at issue since early this year, however, residents have been lobbying for the acquisition for many years now.
More than 11,000 customers of Golden State Water Co. have allegedly been gouged by the company with increasing water rates and higher rates than neighboring communities. Although negotiations between the City and Golden State Water have been ongoing for some time now, no agreement has been reached. The cost for the acquisition has been the subject of significant dispute. Claremont has appraised the water system at $55 million while Golden State Water Co. released a report claiming the value is $222 million. As in any other eminent domain matter, if the parties can’t reach an agreement, the price of the acquisition will be determined by a jury.
The thought of Claremont using its power of eminent domain to acquire the company is not a farfetched idea and seems to be the most likely route for Claremont. Earlier this month, the city unanimously approved a resolution of necessity to begin eminent domain process and later filed the suit. The City had published two proposals to the issue of rising water cost with respect to Golden State Water Co. The first proposal was to acquire the water system within the city limits. And the second was to acquire the water system outside the city. Per the City, the acquisition of the Claremont system would result in the most benefit for the city residents.
So far the city has invested $1.5 million on consultants and legal fees for the acquisition and has estimated another $2 million in litigation fees to exercise eminent domain. But the most important question is how much will residents save? Claremont claims that if the system is purchased under $80 million it will be able to generate enough revenue to pay for the bond. However, many are skeptical about how much it will actually cost the city to acquire the water system.
In the past, similar acquisitions of water systems have yielded much higher purchasing prices than the original estimates. In a similar acquisition in San Lorenzo Valley Water District, the estimated the price at $5.3 million, it was ultimately acquired for $13.4 million, 250 percent more than the original valuation price. Similarly in Big Bear Lake, the District there estimated the price at $15.7 million, while the final acquisition price ended up being $35 million. Given this history and the parties’ disparate opinions at value, the fear that the actual acquisition price for the Golden State Water Co water system may rise way beyond the $55 million appraisal value is a legitimate concern.
Past acquisitions of private water systems purportedly do show that the city residents did save annually on their water costs. How much the residents of Claremont will save, if anything is uncertain. But it seems as if the community of Claremont has come together to voice their discontent with private utilities raising costs. And their devised plan of using eminent domain to remedy the problem will soon come into play.
By: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, the managing partner at California Eminent Domain Law Group, visit http://www.eminentdomainlaw.net/aboutAJH.php