City of Claremont Feasibility Study On Water System Acquisition

Financial Feasibility Study (Aug 12, 2014)

On August 4, 2014 the City signed an agreement with Golden State Water to release the financial feasibility study and amend ballot language in exchange for the stopping of a petition drive for a counter initiative and dropping of legal claims and lawsuits.

The financial feasibility study is a 110 page computer financial model of the Claremont Water System owned by Golden State Water. The financial feasibility study was prepared by a team of experts with over 30 years of experience in utility rates, financial analysis, and valuation. The study was designed to be an objective tool to evaluate, analyze, and compare rates between municipal ownership and private investor ownership at different purchase prices of the Claremont Water System. The study is based on data taken from Golden State Water Company's official filings for the Claremont Water System. The study was used to assist with the preparation of the City's November 6, 2013 Town Hall presentation.

For purposes of assessing rate impacts between municipal and investor ownership, the model assumes the same operating costs as in Golden State Water Company's California Public Utilities Commission filings for the Claremont Water System. This includes the same operation and maintenance expenses, customer accounting expenses, and administrative and general expenses. At the same time, unlike investor owned utilities, the model assumes municipal ownership has no operational costs for federal and state income taxes or profit.

For comparison purposes, the financial feasibility study further assumes debt service cost for municipal acquisition and the continuation of Golden State Water regional rates. An assessment of rate impacts for municipal bond financing at different purchase prices is shown in the model. The model supports the finding that municipal ownership at a $80 million purchase price would not result in an increase in rates over Golden State's rates.

The model also calculates what rates would be based on Golden State Water's operational costs for the Claremont Water System alone. It shows GSW regional rates are higher by 10 percent or more than rates would be for the Claremont Water System alone. 

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