Readers comments 4.26.13
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?
I was fortunate enough to run into Joe Wojcik once in a while over the years. My first encounter was refereeing AYSO on a very hot day, and afterwards, Joe said something like, “Well, I need to go get my run in,” while I was dripping sweat after having just done line judging.
I thought it was pretty crazy to go run in the middle of the day when it was over 100 degrees, but later I would see him out running from time to time and realized he had it all figured out.
The idea that Joe was looking out for folks at Boston is comforting, and last Sunday when I went for my run, it was nice to think of him watching out for runners here as well.
The cost of marathon bombing
It’s unlikely that Mass General Hospital will absorb the expense of treating the alleged Boston Marathon bomber and will submit a bill to the US government for the emergency surgical services and hospital care they provided. But what about all the innocent victims of the explosions? Why shouldn’t they all be accorded the same coverage as the alleged bomber? Will they have to look to their own insurance policies to pay for their treatment?
Americans inevitably open their pocketbooks to donate to the victims of horrific events such as the Boston Marathon explosions. What happens after those donations run out?
1) Couldn’t all the US health insurance companies form a pool that would completely cover what donations don’t? or
2) Couldn’t there be a federal fund to cover victims’ medical treatment, prostheses (immediate and through the remainder of the victims’ lives), recuperation, rehabilitation and mental health?
CGU Master Plan far reaching
The proposed new Master Plan for Claremont Graduate University once again raises the problem of trying to expand an educational institution in a residential area.
The incremental growth of the Claremont Colleges over many decades has encroached on housing stock in historic Claremont, and continues with this proposal. The process of “college creep” has been piecemeal, a few properties at a time, but it results in substantial alteration of the social, cultural and demographic character of our community.
The conversion of houses to offices, institutes or centers robs central Claremont of residents, reduces student demand for the local elementary school, and adds to the pressures of parking.
The CGU Master Plan proposes re-zoning the single family residence at 1006 North College Avenue to be an institutional program building. Built in 1905, and featured on page 129 of Judy Wright’s Claremont: A Pictorial History, this house exemplifies the vernacular variety of North College Avenue, one of our grand residential streets.
The proposed re-zoning continues the transformation from residential to institutional, which is already advanced further south on College Avenue. No change of zoning should be necessary if CGU intends to maintain the property as a residence.
There is limited time to study this Master Plan, and the city’s Initial Study in response to it, before the close of the period for public comment on May 16. Residents need to be watchful for future changes, including the privatizing or vacating of Twelfth Street, Eleventh Street (so-called “Drucker Way”), and Tenth Street between College and Dartmouth; the demolition of the Jagels Building, the Institute for Antiquity and Christianity, and Huntley Bookstore; and other problems relating to institutional growth, parking, trees, and the scale and density of the university in our midst.
In the interest of full disclosure, please note that I have taught at several of the Claremont Colleges, and have a high regard for the benefits they bring to Claremont. But their ambitions for institutional advancement should not take priority over the interests of the community.
Buy the water company
On April 11 the Inland Valley Daily Bulletin published an editorial titled “Claremont ought to buy out water firm,” after the Bulletin’s opinion editorial board met with the League of Women Voters to discuss the proposed acquisition. (The board had previously met with Golden State Water.)
Golden State Water has commissioned several much-publicized studies being used to persuade the public it would be foolhardy for Claremont to go ahead with acquisition.
On April 16, Vice President Denise Kruger sent a letter to residents quoting studies published in the COURIER and the Bulletin. The label side of the mailer reads “Your annual cost increase for the next 30 years” would be “$469.73 additional if city pays: $54 million,” and “$2,361.41 additional” at $204 million. There is no mention of very real cost savings under a nonprofit municipal system, no recognition of the net difference, and no acknowledgment of the Bulletin editorial.
In the Bulletin editorial board interview, the League compared the municipal water system in La Verne with the privately-owned system in Claremont. The board concluded “the logic put forth in the League of Women Voters analysis makes sense: Ignore all that back-and-forth, and simply compare the water rates in La Verne and Claremont.”
Here are some of the facts that led to that conclusion:
Claremont and La Verne are similar in water quality, water use per customer, age of the infrastructure, elevation and location, water sources (imported from the Delta and pumped from local wells), and population.
There are important differences:
La Verne owns its water system; Golden State Water (GSW) owns the Claremont system. La Verne sets its own rates; the PUC reviews Claremont rates proposed by GSW. La Verne rates are local; Claremont’s rates are regional. La Verne charges only for water used; GSW bills include a “service charge” and “adjustments.”
La Verne must use about two-thirds expensive imported water; Claremont about one-third to one-half. La Verne does not pay for water used by the city; Claremont does. The La Verne system is not taxed; GSW-owned facilities are. La Verne has access to state and federal grants not available to GSW. La Verne’s water income stays in the city; GSW (part of American States Water) is guaranteed a hefty profit. Executive salaries are high and not subject to local control.
La Verne water rates for the average customer were approximately $52 less per month than the average rate in Claremont last year, according to usage and rate data from GSW and La Verne.
But can the city afford to purchase the system? Will rates go up? We can afford the purchase, and very likely without raising rates above what they are now to fund the purchase. Let’s assume that after Claremont acquires the system, local water users could be paying the same rates as LaVerne but, instead of lowering rates, the city kept them the same as they are now and used the extra income to pay for the purchase of the system.
The city’s income from its 11,000 water customers would be about $7 million per year (52 x 11,000 x 12), and there would be other savings as there are in La Verne. With this much money, the city could purchase a 30-year water bond worth about $150 million. There would be no need to raise taxes or for water users to pay more than they are now. But will the system cost more than $150 million? That seems unlikely since the infrastructure was recently appraised at $54 million. (In 2004, a price of $50 million was negotiated for the system. With water rights, the total negotiated was about $88 million.)
GSW has shown they would like to deceive us. Water is a resource we can not do without. It should be under public control.
Sally Seven and Betsey Coffman
co-presidents League of Women
Voters of the Claremont Area
Lower the rates or lose us
[The following letter was sent to Golden State Water Company with a copy forwarded for publication. —KD]
Dear Golden State Water:
I received your letter in the COURIER dated April 16, 2013
The letter explained that we, the residents of the city, will have to pay much higher water rates when the city buys the water system, but it was, in fact, a message letting us know the offer for the system is too high.
Thank you for informing us, the residents of Claremont, that the city’s pre-eminent domain offer to buy the Claremont water system owned by Golden State is, in fact, 30 percent too high. We can now clearly see the price should be $36 million and not $54 million.
Eminent domain can occur with utilities when the government believes that the operator, left to his own devices, would behave in a way that is contrary to the community’s best interest.
You must think about why we, as a city, want to take control of the water system. Claremont has a great aquifer laying under its feet, which is fed by the runoff from the San Gabriel Mountains. It provides much, but not all, of our water for the price of pumping.
When the water system was owned by Southern California Water Company we enjoyed some of the least expensive rates in the area. Once Golden State bought the system, rates increased for the highest revenue enhancement available by the PUC. Obfuscation seems to rule the day now.
Claremont now has about the highest water rates in the state. I have endured a more than doubling of my rates over the last 5 years. Claremont is angry about the monopolistic profiteering Golden State Water has shown us.
Golden State Water, open your books and let us know why it is so much more expensive to run this water system than when your predecessor ran it. Lower our rates or risk losing the system.
False concepts about city-owned water
Golden State Water’s mailer sent out last week is likely to generate another barrage of disparaging letters, so I want to address some misconceptions that will surely resurface:
False concept: We need to buy the water system so that we can have lower water rates comparable to the surrounding communities. While rate comparisons may be evidence that our rates are too high, they provide absolutely no insight about the potential level of post-acquisition rates.
For example, if you were interested in buying a home in an established neighborhood, would you consider the level of the current owner’s mortgage payments? You shouldn’t. The size of your mortgage payments will depend on the price you pay for the house, not on the price the current owner paid it for many years ago. Water systems are similar in that regard.
False Concept: We need to buy the water system now because it would have been much cheaper years ago and will become even more expensive in the future. This is not an apples-to-apples comparison as Golden State invests millions of dollars in its water infrastructure every year. The key point is that at any time, the fair market value that we would have to pay to buy the water system will always be 2-to-3 times higher than Golden State’s investment on which our water rates are based. Much like the new purchaser of an older home, we’ll only be paying a higher price for the future use of those same water facilities.
False Concept: By buying the water system, we can avoid funding Golden State’s exorbitant profits in the future. Guess what? Future profits are reflected in the fair market value. By purchasing the water system, we pay those profits upfront, instead of over time. “Profit” has become a nasty word, but corporations are legal, not physical, entities. Much of Golden State’s profits go to small investors like you and me. And we indirectly benefit from profits that go to institutional investors such as insurance companies, which recover their costs either from profits on investments or through the premiums they charge.
False Concept: We can avoid paying many costs such as taxes with a government-owned water system. The income taxes, property taxes, franchise fees, paving costs, etc. now paid by Golden State fund benefits that the government provides us. If we didn’t pay these costs through water rates, we would have to pay for them through higher taxes or forgo those benefits. We can’t have our cake and eat it, too.
False concept: Purchasing the water system to gain local control will better protect our interests as opposed to relying on a public utilities commission located miles away in San Francisco. While this argument has some initial appeal, it is unrealistic. Water infrastructures require regular maintenance and investment to ensure continued, reliable performance.
Last week, my home was without water for 24 hours due to an inside plumbing problem, reminding me how dependent I am on water. With local control, lower water rates would have priority over water system reliability. That would eventually catch up with us, as many city-owned systems are finding out.
This week, a city near my workplace will be discussing a 75 percent rate increase because its water system “is in need of substantial improvements to ensure continued quality and reliability of service.”
Regulation of utility service by an objective state agency achieves a much better balance between water costs and water reliability.