Liberty decision: Thoughts and impressions (Carloni) (May 10, 2021)
It just took me three hours to review the entire Liberty decision, and wow — what a decision. A few points stand out but the decision is a pretty damning condemnation of the efforts of the Town. The judge relied on Liberty experts who were well-grounded in competent documentation and analysis and lambasted the Town’s experts. It almost seemed like the judge was telling the Town, “Nice try but don’t bullshit me again!” (sorry for the language)
Here are ten points that struck me as important.
- The court was not persuaded by the hyperbolic allegations of the Town as regards the condition of the water system, the transfer of revenue out of the area, the ratepayers paying foreign (Canadian) investor returns, or the feeble expert testimony of both Mr. Close (system expert) and Mr. Koorn (economic expert). I would venture to say that Mr. Koorn’s testimony was so criticized that he might have an issue ever testifying as an expert again. The Court said Koorn relied on faulty documentation, failed to do proper analysis, and just about called him a liar.
- The court was careful to analyze the case following the statutory law and not along the “feelings” train of thought. The law was cited as to who held and what was the burden of proof, explained that lofty goals aspirations of local control and a better community were nice but not the basis of a legal decision for if it were, every municipality would take every profitable company on those terms.
- The Court found the Liberty system efficient and operations well run. In many cases, the Court used the testimony of Town witnesses to support its position. It also used the Town EIR definitions and statements to show that the Town, admitting it did not have anyone who knew how to run the system, additionally could not rely on acquiring and retaining the Liberty employees as many would not want to harm their pensions or start over as probationary employees. The Court recognized the offsite services provided by Liberty and the economy of scale presented by those services. Then noted that the Town offered no evidence to show how the Town would cover those same services.
- The court also recognized the financial shortcomings of the town, its failure to adhere to the requirements of prop 218, its dismal drain of the general fund, and its attempt to brag about a balanced budget, by backfilling the budget with borrowed funds. The Court utilized the overhead draw on the other enterprise funds to show that there was a raid on the enterprise funds to backfill the general fund, in a manner that rendered Mr. Koorn’s analysis of the overhead charge that would be collected from the water system, simply unrealistic.
- The court spent much time comparing the financial analysis of the rates to be charged customers and found that, over time, the customer was better served by the private investor utility and not municipal ownership. The court cited the lack of oversight by a town council or city council which would focus on short-term political gains for electeds while ignoring the needs of the water system which would harm ratepayers and consumers. The main topic or need ignored would be capital improvements to the system. The failure to maintain the system, which is required of the investor-owned utility, would result in harm to the public.
- The Court found that the PUC rate-setting process offered greater protections to the ratepayers than a Prop 218 process. It also stated that the Town’s dissatisfaction with the PUC is not a legal cause to invoke eminent domain. The answer was for the Town to seek a legislative change to the PUC regs and laws.
- A major issue was the definition of the project, from the perspective that the Town would be tied to the project as defined in the Resolution of Necessity and the EIR as both were the same. The Town attempted to bring in a new matter during the trial as a result of last-minute inspections and analyses. The court found that the Town did not avail itself of the right of inspection before issuing a resolution of necessity, that the project was an acquisition of the system in an “as is,” “where is,” “with “all faults” type of analysis. Bringing in the testimony of inspections before trial and identifying areas that needed paint or looked shoddy carried no weight.
- The court found the provision of safe water with no violations was unsurpassed, the response to complaints was way below the standard of allowable complaints, and that this Class A water system could not be better run, as confirmed by the testimony of the Town Manager Robertson. The court discounted the testimony of the one customer who complained and testified at trial.
- The court spent significant time comparing the components of setting rates and the benefits to each party from the components of the rate. The court found that the Town would receive greater monetary benefits from its rates than Liberty receives now or in the future. So the consumer, while being a sold a bill of goods about lower rates and not paying extras for shareholder, actually are bearing a greater burden with the Town related extras built into the rates.
- I will end with this one … the court found that the greater public good and least private injury occurs when Liberty runs the system, not just for the Town itself but for the surrounding communities with other and smaller water systems. These systems would benefit from assistance and/or acquisition by Liberty. This would occur in the context of sound public policy (published through state agencies) that encourages large water systems to assist and/or acquire smaller systems for the health and well-being of the consumers connected to the smaller water system.
100% of Liberty’s arguments were upheld … 100% which is pretty spectacular. Next, read the quote of Mayor Curt Emick in the press release, he looks like an idiot and it is apparent that he did not read the decision. No one would say what he said. The decision undermined and destroyed every justification that Town asserted for eminent domain. The judge’s decision results in a dismissal of the entire eminent domain action. Of course, hang on to your wallets as BB&K will appeal and we will all pay for it.
That being said, good night and be sure to congratulate Liberty, its employees, and especially their legal team! It is nice to see justice is served.
Diana J. Carloni
Attorney at Law