Claremont water system valued at $222 million in new report

CLAREMONT >> A new report commissioned by Golden State Water Company found its water system is worth $222 million in an eminent domain action, four times the appraised value by the city.

It is the first time, in a multi-year feud with Claremont, that Golden State has released a value on the local water system. When Claremont appraised the system for $55 million, Golden State officials rejected the offer, stating its system was not for sale.

While the report looks at what it would cost Claremont to replace nearly every single component of the system, it does not include the value of the water rights or real property. Golden State Water officials say once those assets are calculated, it will raise the fair market value.

The report finds that Measure W, Claremont’s $135 million bond on the November ballot, would not be sufficient to purchase the local water system. But if a jury were to rule on a value half of the $222 million, the city could continue with eminent domain.

“Clearly, the fair market value of the water system will far exceed the amount the city contends it will have to pay for a hostile takeover of the water system,” said eminent domain lawyer George Soneff in a statement.

Mayor Joe Lyons in a statement called Golden State’s report a “gross overestimation.” City officials say Golden State inflated the purchase price by tabulating the cost to replace every single component of the system.

“This is a skewed, draft study that is silent on the fair market value of the water system and wasn’t prepared by a certified appraisal expert,” said Lyons said in a statement. “It makes an apples-to-oranges comparison in evaluating how much it would potentially cost to acquire Golden State Water’s infrastructure – our residents deserve straight facts and careful analysis.”

But Julie Hooper, spokeswoman for Golden State Water, said supporters of eminent domain takeovers have historically undervalued the cost of water systems by large margins. For example, in Big Bear Lake, officials estimated the water system would cost $15.7 million and the final acquisition price was $35 million — more than double the original estimate, she said.

In addition, Lyons criticized Golden State’s process for the report saying the water company brought in an engineering firm. Claremont used a certified appraiser, a procedure, he said, the city is directed to do by state law.

Hooper said there is no state law about who conducts the analysis.

The draft report was prepared by Hatch Mott MacDonald, a consulting engineering firm, and included the 150 miles of pipe, 18 wells, 11 reservoirs, 11 booster stations and 11,065 customer meters that are part of the water system. According to the report, the $222 million figure is the depreciated value of the system. A new system would cost Claremont $266 million.

The analysis included everything from the water production and distribution assets, to equipment such as distribution mains, valves, hydrants, services, meters, wells, pumps, and tank. It also took into account the engineering design and the construction of the assets, said engineer Michael Altland with Hatch Mott MacDonald.

“During an eminent domain court proceeding, a Los Angeles County jury will decide the price that the City of Claremont must pay to take over Golden State Water’s water system, and they will be instructed to determine the highest price a willing buyer would pay for the assets,” added Soneff, a partner at the firm Manatt, Phelps and Phillips.