A year and a half ago, our editorial board endorsed in principle the city of Claremont’s intention to buy out the local assets of the company that sells water to the city’s residents.
Today, we endorse the next step in that process — Claremont’s Measure W on the Nov. 4 ballot.
The basis of this endorsement remains the same: that Claremont residents collectively pay about $8 million a year more for water than their neighbors in similarly sized La Verne, which runs its own water utility. That’s too much of a differential, fueled by Golden State Water Co.’s relentless, sometimes double-digit rate increases over the years.
And that differential should allow Claremont to have lower rates — or at the very least keep them lower than Golden State would have. The company has to provide shareholder dividends, big executive salaries and pay corporate taxes, none of which Claremont would have to do if it takes over the assets and contracts with La Verne or another public agency to run the water utility.
Our April 2013 editorial expressed the hope that the city and GSW could come to an agreement on the sale, and avoid “a costly, risky and unpleasant” eminent domain battle in court. But it doesn’t look as though that’s going to happen; if anything, relations between the city and the company have become even more adversarial in the campaign over W.
Measure W authorizes Claremont to issue up to $135 million in revenue bonds for the purchase of GSW’s assets in Claremont. Some of the opponents of W, particularly those who have been paid by Golden State, say W will result in a tax on residents, but that’s not true. Revenue bonds would be paid off by the cash flow from delivering water to residents and businesses in town; if the price of acquisition is right, the bonds would be paid with rates dropping or staying roughly the same.
Claremont commissioned an appraisal of GSW’s assets in town, which came in at $55 million. GSW bought an “engineering study” that determined it would cost nearly $223 million to replace every component of its water system — a bogus, meaningless amount conjured to scare Claremont voters. After all, a 2002 Ford Escort might be “worth” more than a 2014 Cadillac Escalade if you added up the prices to replace each part in the Ford piece by piece.
Company tactics like this — and telephone polls that pretend to be independent political surveys but wind up promoting GSW’s side of the argument — have outraged Claremont’s W supporters, quite understandably. But the real question for voters is not whether they’re angry at GSW. It’s whether they want to control their water future municipally or leave it entirely in the hands of an aggressively for-profit company with a monopoly on a life-sustaining substance. And whether they’re likely to pay less, about the same or more for water if the city takes control.
There’s no certainty, for example, that Claremont would be able to acquire the water assets at the appraised $55 million. GSW will have to commission an actual appraisal before eminent domain court proceedings begin, and you can bet it will be higher than $55 million. Assuming the city’s right to use eminent domain is not rejected in court, a jury will have to decide the value, and is likely to split the difference, roughly.
By the city’s analysis, it can lower water rates immediately if the takeover price is $55 million, or keep them about the same at $80 million. If the price is much higher, it would take quite a few years to break even.
One argument against W is that water use could drop off precipitously if, for example, the state mandates ripping out lawns or other strict conservation measures in the dry future. Then the city would have to raise rates to pay off the fixed-costs bonds. But that’s exactly what GSW already does with its WRAM — water rate adjustment mechanism — when residents conserve water today. So if Claremonters were to conserve wildly in the future, they’d be hit by bigger rate hikes under GSW than under city control.
Among all the points being made and figures bandied about by both sides, one thing is undeniable: Claremont residents pay a heckuva lot more for water than those in neighboring cities do — did we mention that already?
Those Claremonters who want to try to rectify that over the next few years — or decades — are going to want to vote for W. It doesn’t guarantee an eminent domain takeover, but it gives the City Council the wherewithal to pursue it. In Claremont, there’s little doubt that residents would keep a close eye on city government’s handling of the water system if it does acquire it.
Yes on Measure W is our recommendation for Claremont voters in the Nov. 4 election.