Eminent domain may be only option when a city pursues water acquisition

As Golden State Water Company maintains Claremont’s water system is not for sale, city officials remain equally dedicated to pursuing water acquisition, whatever the costs.

“Every option is on the table,” said Councilmember Sam Pedroza last month. “I don’t think the council would have gone this far if we hadn’t already considered [eminent domain] in our own heads.”

In a continuing series of articles featuring the city of Claremont’s ongoing negotiation with Golden State Water Company, the COURIER takes a look toward the path of eminent domain and what it means for Claremont consumers.

Eminent domain, a tool long used by government entities, is defined as the ability of the state to take over private property in exchange for “reasonable compensation,” according to the Fisher and Talwar Professional Law Corporation, which specializes in eminent domain. Reasonable compensation is determined “in terms of fair market value of the property.”

In many cases, eminent domain refers to the government taking over private property in order to build a highway or other public project upon the private owner’s refusal to sell. In Claremont’s case, however, it refers to the city pursuing ownership of the pipes and water that run through the city despite Golden State refusing to sell, says A.J. Hazarabedian of the California Eminent Domain Law Group.

The first couple of steps are already underway in Claremont. The city offers a price to the company and, upon their refusal, the groups meet in an attempt to reach a settlement. After an appraisal conducted by Claremont, the city offered $54 million for the water company in October based on what the city claimed it believes to be the system’s fair market value.

Details of the appraisal have not been released to the public and the city has made it clear that it won’t be releasing that information until after negotiations. Repeated attempts by the Claremont COURIER to receive this document have been denied.

Should a settlement on the offer not be reached—Golden State officials contend it won’t because they do not believe the amount represents reasonable compensation—Claremont will have to file a resolution of necessity, deeming the action necessary before heading to court, according to Mr. Hazarabedian. In order for a resolution to be adopted, a public hearing must be held.

Each case is unpredictable and could range from 6 months to 2 years and potentially cost millions, Mr. Hazarabedian says.

“Litigation is costly and every case is completely different. It depends on how hard people fight,” he said. “I have been involved in cases where people are relatively agreeable relatively quickly, and cases with people fighting tooth and nail all the way to the end. I would imagine the water company will probably want to.”

It was a hard-fought battle for the community of Felton, a small unincorporated area of Santa Cruz County with only about 4000 residents. Felton residents, with the help of the San Lorenzo Valley Water District, embarked on nearly 7-year fight to acquire its water system from California American Water (CAW) in the early 2000s.

Felton’s journey began after CAW requested a 73 percent rate increase on 2001. Santa Cruz County came to the aid of Felton residents but after spending nearly $127,000, the California Public Utilities Commission was only able to get the rate reduced to 44 percent.

“They are supposed to be there to help us, but what the people in Felton realized at that time was that the CPUC was stacked in favor of privatization,” said Felton resident Jim Graham. “Something needed to be done. It came down to acquisition.”

Mr. Graham and others from Felton FLOW (Friends of Locally Owned Water)—the town’s grassroots campaign fighting for the city’s water rights, not unlike Claremonters Against Outrageous Water Rates—took action, knocking on doors to help raise support for a $10 million bond to acquire the water system. During that time, Mr. Graham says the fight became dirty, claiming the CAW used poll-pushing and astroturfing to sway public opinion. Astroturfing refers to the use of “front groups” that purport to serve the public’s interests, while actually being operated by an unnamed sponsor.

A month before the vote on the bond measure in Felton, a group of 6 individuals calling themselves the Valley Information Alliance surfaced in opposition of the bond. The group sent out 6 separate mailers to Felton homes, and shut down efforts the day after the measure was passed, according to Mr. Graham. 

In the end, however, the bond measure was successful with more than 75 percent favor from residents in 2005. After a long court battle with an estimated $1 million in legal fees, the system was acquired in 2008 for $10.5 million.

In the aftermath of the acquisition, Felton residents have been left to pay an additional $500 to $600 per household in property taxes on average, an amount that won’t sunset for the next 30 years. However, when asked if the large fee is worth it, Mr. Graham responds enthusiastically. He says it’s by far the best decision the city made.

“Even though we may pay $600 more per year in property taxes, our rates have been cut in half,” he said. “For some it took a couple years to see the savings, but for some the money out of pocket savings were immediate.”

Mr. Graham, who had his own initial reservations about eminent domain, now spends his time helping educate other cities considering acquisition along with others from Felton FLOW.

“Eminent domain is not always good, but this is one of those cases where it is the right thing to do,” Mr. Graham said. “We are up against a monopoly and we can’t fight this fairly and this is where eminent domain is the only option.”

—Beth Hartnett





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