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City of Claremont releases water system feasibility study

As part of its agreement with Golden State Water signed on August 4, the city has released the financial feasibility study and amended ballot language in exchange for the stopping of a petition drive for a counter-initiative and dropping of legal claims and lawsuits.

“We’ve begun a comprehensive and thoughtful review of city information and will comment in more detail when the review is completed,” Denise L. Kruger, Senior Vice President, Regulated Utilities Golden State Water Company, said in a statement.

The financial feasibility study is a 110-page financial model of the Claremont water system, which was prepared by a team of experts with over 30 years of experience in utility rates, financial analysis and valuation, according to a city press release. It was designed to be a tool to evaluate, analyze and compare rates between municipal ownership and private-investor ownership at different purchase prices of the Claremont water system and is based on data taken from Golden State’s official filings.

The study was used to assist with the preparation of the city’s November 6, 2013 town hall presentation at Taylor Hall. The city’s refusal to release the study has been a point of contention between the city and Golden State since December 2013, when the water company filed a Writ of Mandate in a bid to require the city to release the financial reports regarding the possible water system takeover.

For purposes of assessing rate impacts between municipal and investor ownership, the financial model assumes the same operating costs demonstrated in Golden State’s California Public Utilities Commission filings for the Claremont system, according to the city. This includes the same operation and maintenance expenses, customer accounting expenses, and administrative and general expenses. At the same time, unlike investor-owned utilities, the model assumes that municipal ownership has no operational costs for federal and state income taxes or profit.

An assessment of rate impacts for municipal bond financing at different purchase prices is also shown in the model. Claremont city staff contends that the model supports the finding that municipal ownership at an $80 million purchase price would not result in an increase in rates over Golden State’s rates.

Golden State firmly disagrees.

“What is undeniable is that the proposed takeover cost to residents keeps going up. First it was $54 million, then $55 million and now $135 million,” states Ms. Kruger. “There’s no cap on the debt, as the November ballot measure does not limit future borrowing when it is determined in an eminent domain proceeding that the value of the water system and water rights are significantly higher.”

Although the ongoing debate over the price of the Claremont water system has yet to conclude, the city and Golden State continue to move forward in good faith. Golden State held up its end of the bargain, requesting a dismissal on August 7 of all pending litigation against the city following the receipt of the feasibility report.

It should also be noted that a lawsuit filed by Devin Beggs on July 3 against Claremont City Clerk Shelley Desautels, as well as Registrar of Voters for the County of Los Angeles Dean Logan, has also been dropped. The petition for writ of mandate was seeking to delete an alleged false statement made in the city’s argument in favor for the $55 million water system bond measure. However, with the revision of the ballot measure, Mr. Beggs’ attorney Brian Hildreth says the previous complaint is now void.

“As a result of the recent settlement agreement between the city and Golden State Water Company, my client dismissed his lawsuit and hopes that no additional litigation is necessary to ensure ballot arguments that are fair and factually correct.”

With a clean slate on the waterfront, at least for now, the city continues to prepare for the November 4 election. To view arguments in favor of and arguments against the ballot measure, please check out the city website at www.ci.claremont.ca.us, under “Water” on the left-hand column of the page.

—Angela Bailey

news@claremont-courier.com

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