by Joe Lyons , Mayor of Claremont,
The Claremont Courier, 9/19/14
The past Wednesday, I had the honor of representing the city at a Chamber of Commerce-sponsored informational seminar on Measure W.
On the panel with me were Freeman Allen of FLOW, Mark Sterba of CAWA, and Rodney Smith of Stratecon Inc., representing Golden State Water. Regrettably, neither Vice President Denise Krueger nor CEO Robert Sprowls were in attendance to represent Golden State Water.
My role on the panel was one of educator on Measure W, a water bond measure placed on the November 4 General Election ballot by the Claremont City Council. State law prohibits me from advocating for a position on the measure. In this role, I would like to clarify a few points about Measure W so that voters may make an informed decision on November 4.
First, and most importantly, Measure W would authorize the city to borrow up to $135 million to purchase the Claremont water system currently owned and operated by Golden State Water Company. A purchase price under $80 million would be supported by existing rate revenue and would not increase current rates.
If the purchase price exceeds $80 million, additional revenue bonds may be issued up to the purchase price. The impact to ratepayers would vary depending on the final purchase price and could result in increases up to a high of $28 per month for an average household using 27 ccf.
Although Golden State Water and opponents of city ownership have speculated on the value of the system, the city engaged a certified appraiser who valued the system at $55 million. The city has offered this amount to Golden State Water. The city continues to be open to negotiating a purchase price with Golden State Water but has analyzed other acquisition options, if Golden State Water continues to refuse to sell.
If financing is secured through the passage of Measure W, the Claremont City Council may hold a public hearing to gather input from the community on a possible eminent domain proceeding to acquire the water system. Through an eminent domain court proceeding, a court or jury would decide the final purchase price of the system based on apraisals and evidence presented by both the city and Golden State Water Company.
The city’s objective through this effort is to provide residents with a reliable, high-quality and affordable water supply. It is important to remember that municipally-owned water systems are prohibited by law from making a profit, and can only charge customers for the actual cost of delivering water service.
Municipally-owned systems are not subject to state and federal taxes, nor obligated to pay investors a rate of return or profit. In addition, a municipally-owned system is eligible for state and federal grants targeted at water conservation and efficiency programs.
If acquired, the city-owned water system would be maintained and improved to secure affordable water supplies now and into the future. In fact, the city’s financial feasibility study includes a capital infrastructure reserve of $3 million and an operating capital reserve of $1.5 million to fund infrastructure improvements. These reserves would continue to grow in future years and be available for infrastructure maintenance and improvement needs.
The city has made public its financial feasibility study, which was designed to analyze and compare rates between municipal ownership and private investor ownership at different purchase prices of the Claremont water system. The city’s team of financial and utility experts based their findings on Golden State Water’s own projections for revenue, usage and expenditures provided to the PUC during rate filings.
The city has been an active participant in the last five rate case proceedings and has been granted intervener status in the upcoming rate case. Through careful analysis and financial modeling, the city’s team factored in variables such as water use fluctuations, infrastructure repair and improvement costs and bond financing costs. The team is confident in the desirability of bonds to investors and the long-term viability of a municipally-run system.
Ultimately, decisions about water rates and infrastructure improvements would be made locally, with full public participation, instead of from the California Public Utilities Commission in San Francisco. If acquired, city officials would manage the water system on behalf of local residents. This move would bring Claremont in line with the over 75 percent of Californians who receive their water from public water agencies.
The city is currently working with the city of La Verne to draft an operational plan and is consulting with an expert in water rates to draft a rate structure— both items would be brought to the city council and available for public input.
For more information on Measure W, visit www.ci.claremont.ca.us and click the “Water” tab on the homepage.