MONTEREY – Water officials on the Monterey Peninsula will take a first step Monday toward assessing the value of California American Water Co.’s delivery system so that a public agency can acquire the investor-owned utility , after the buyout was approved by voters in 2018.
The Monterey Peninsula Water Management District Board is being asked to approve spending more than $300,000 to hire three assessors to perform financial analyzes early next year. The consultants will include a general business appraiser, a real estate appraiser and a water rights appraiser, according to a district staff report.
The ratings are an important next step in the acquisition effort mandated by Measure J. It was written by the nonprofit Public Water Now, which was concerned about existing rates as well as potentially higher rates at pay for the desalination project proposed by Cal Am.
On Friday, District General Manager Dave Stoldt said the new assessments are needed because those conducted in 2019 have become outdated, in part due to long efforts with an intra-government council called the Local Agencies Training Commission, or LAFCO. The district went to LAFCO to approve the district’s “latent powers”, which is essentially an endorsement of the district’s financial means to operate the Cal Am system.
LAFCO, which is overwhelmingly made up of representatives from the Salinas Valley, torpedoed the approval in late 2021. In April, the Water District filed a lawsuit against LAFCO in Monterey County Superior Court alleging that decisions made by LAFCO in December 2021 and even earlier this year violated the statutes for impartial decision-making as a government agency.
While the courts fight this battle, the Water District is moving forward with its plans to acquire Cal Am and needs current valuations in order to make an offer to purchase the water system. Cal Am is unlikely to open its finances to the district, but there are several ways to conduct valuations even though most of the company’s operations are kept secret, Stoldt said. One way is to file documents with the Securities and Exchange Commission. Cal Am’s parent company is publicly traded American Water Co., and there are financial indications of Cal Am’s operations in certain filings.
There are also filings with regulators Cal Am has made, such as the California Public Utilities Commission, which must approve any rate hikes, as well as comparable sales from other utilities.
Cal Am is expected to decline the offer to purchase, in which case the district will return to court in a proceeding to force the sale through what is essentially eminent domain. But first, the district must make an offer.
“We will be denied, of course, and we will go ahead with sentencing,” Stoldt said.
Eminent domain law states that a government agency has the right to acquire property if its intended use serves a public benefit greater than its current purpose. Cal Am would be rewarded following an approved eminent domain. The public interest goes back to the impetus behind Measure J and its emphasis on what its authors described as exorbitant water rates charged by Cal Am.
Stoldt said there were several reasons for the public to benefit from a takeover, including better control and governance, more transparency on pricing and finances, and providing operations as good or better. .
Not surprisingly, Cal Am refutes any mention of public interest.
“The District’s time and energy should be devoted to finding solutions to our water supply problems rather than wasting millions pursuing wasteful eminent domain action that divides ratepayers and exposes them to serious harm. financial risks,” Josh Stratton, Cal Am’s chief external affairs officer, said on Friday.
If all goes according to plan, a board resolution supporting a “public necessity” could take place as early as early next year.