How much will we pay?

In Golden State’s letter to customers dated April 16, they make the case that Claremont resident’s annual water bill will increase by 30  to 153 percent depending upon the value placed on the water company if Claremont is successful at acquiring it. I want to point out a few items that resulted from this letter.

First, the fact that they wrote this letter indicates to me that they very much believe they have a strong asset to protect. A stream of income that is guaranteed to be collected over an infinite period of time which is controlled by a fairly nebulous regulatory agency is clearly a valuable asset that they want to protect. This makes me believe that this is an asset the community may very well want.

Second, there is no doubt that water rates will go up in the short term if the city purchases the water company. Just about every individual that purchases a home makes the decision that their payment is going to go up when they convert from being a renter to an owner. They do this because they want to control their environment and by getting a long term mortgage they can fix their monthly payments. 

Every time a tree is planted, a street is built, or a freeway is constructed, a decision is made to expend money today for potential long term benefit. There is plenty of precedent for what Claremont is considering.

Third, Golden State’s argument may just be short term. What they don’t show us is that if water rates were to continue to increase at the rate of growth they have increased in the past, it is highly likely there will be a point in the future where rates will be lower if Claremont owns the water company versus continues to be a “renter.” This important analysis needs to be done, highly scrutinized and evaluating by our community. 

The acquisition of the water company is a long term decision. Long term decisions are difficult to make in a short term world. It is particularly difficult when you may not be the beneficiary of the decision because you may not live in Claremont at the time that this decision becomes financially beneficial (assuming that it does).

I have not decided where I stand on this issue. For me, it is primarily an economic decision. Will the residents of Claremont be better off over the long run if the city owns the water company? Or are we better off continuing to be subject to a public company whose sole objective is in maximizing its return to its shareholders?

They already own the water company so they have a distinct economic advantage in that they have already paid the acquisition costs. It is possible that this advantage, combined with potential operating efficiencies, may result in it not being to the residents’ advantage to take on this asset and liability.

I have already made the decision that I am willing to pay more today for this potential long term benefit to the community. I think many others would be willing to do the same.

The question is how much more would we pay and is it worth it?

Brad Umansky