BackgroundClaremont residents and officials have voiced

concerns over the water rate increases imposed by the Golden State Water Company (GSWC).

On average, GSWC has obtained water rate increases of 11% each year since 2006.

As a result, the Claremont City Council has directed staff to pursue the analysis required for potential acquisition of the water system and allocated no more than $250,000 from the general fund reserves.

BackgroundUnderstanding the Regulatory EnvironmentPrivately held, public utilities are regulated by the California Public Utilities Commission.Public utilities are government protected monopolies that are sheltered from competition and in turn their rates and services are subject to regulation.The goal of regulation is to provide the kind of protections and efficiencies that competition normally provides to the public in regular markets. However, economist say there are certain types of services that tend to become “natural monopolies”.

These involve services that become consistently less expensive as more of a particular type of service is provided.

The alternative to regulation of a private monopoly is to have a public agency provide the service, which in turn is legally and politically accountable to the public.

BackgroundGovernment Acquisition

If the City determines that acquisition is feasible and financing is attainable, an offer to purchase the water system can be made to GSWC.

If an offer is not accepted by GSWC, the City’s only option is to acquire the water system through eminent domain proceedings.

Property Acquisition Process Overview150+days

Retain utility consultant for feasibility studyObtain utility plant description/inventory of

what is to be acquiredRetain utility appraiser for appraising propertyRetain municipal financing consultantSend a Notice of Decision to Appraise to

property owner

Property Acquisition Process Overview120+days

Send letter to owner from appraiserPrepare appraisal of property to be acquiredAttorney review of appraisal for legal

sufficiencyMake offer to property owner

180+daysConduct good faith negotiationsProceed with CEQA review

Property Acquisition Process Overview90+days

If negotiations are unsuccessful, send out Notices of Hearing on Proposed Resolution At least 15 days prior to hearing date

Resolution Hearing (open session); CEQA to be complete no later than hearing

File eminent domain action with court, if findings were made public

Serve record owner with summons, complaint

Property Acquisition Process OverviewSeveral Years

Jury trialVerdict/JudgmentAppeal

The media reported that the City of Felton’s acquisition efforts took more than six years. Processes involved working closely with the County government to form a community facilities district and an election was held to approve general obligation bonds. Ultimately, the system was acquired by the San Lorenzo Water District.

Costs Related to Pursuing Acquisition The acquisition process is complex and success is related to how well the city is prepared. The following estimates for the professionals needed to pursue purchasing the system:

Feasibility consultant $25,000-$30,000Financial Advisor $40,000-$50,000Legal Advisor for initial steps $50,000-$75,000Appraiser for the system $35,000-$50,000CEQA consultant $75,000-$100,000Environmental Lawyer $25,000-$35,000Bond counsel $20,000-$25,000

*In 2004, when the City last embarked on the acquisition process the costs exceeded over $200,000.