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Claremont reaches $4.8 million settlement agreement with Golden State Water (October 10, 2017)

CLAREMONT » Claremont has reached a $4.8 million settlement with Golden State Water Co., putting to end its five year feud to take over the local but private water system.

Claremont will pay Golden State Water $2 million by Dec. 31, then $2.8 million in interest over the next 12 years.

In exchange, the water company has agreed to waive the remaining $5.8 million in legal fees it is owed if Claremont does not try and sue again in that time frame.

“This resolution is a new beginning for the community, and we look forward to building and maintaining a strong relationship, recognizing that collaboration is better than conflict for the people of Claremont,” according to a joint statement released by Claremont and Golden State Water Co.

Terms of the settlement were announced Tuesday night during the council meeting. The council unanimously voted to authorize City Manager Tony Ramos to sign the agreement.

In an unprecedented move, Claremont had tried to acquire the rights to run the local water pipes via eminent domain, or a government taking that includes compensation. The process is often used to buy land to build public projects, such as highways.

A Los Angeles Superior Court judge’s final decision in December 2016 sided with Golden State Water Co., a private concern out of San Dimas. The ruling left Claremont on the hook for the entire bill, including $7.6 million racked up by Golden State Water’s legal defense.

That figure, based on 4 percent interest accrued since March, would jump up to $7.8 million by December.

“I think the agreement is very fair. We simply have to admit we lost this case and that’s the way it is,” said resident Marilee Scaff.

For its part, the city has already spent $6 million since 2012 in its quest to take over local control by eminent domain.

In late January, the city announced it would proceed with an appeal. The council agreed to bring in attorney David Axelrad of Horvitz and Levy, one of California’s top appellate specialists. Judge Richard Fruin found it was is in the public’s best interest for the system to remain as a private investor-owned utility. Fruin also found serious flaws in Claremont’s legal case, saying the city failed to prove why it would need to acquire the billing system by eminent domain.

After reviewing the judge’s decision, Axelrad told elected officials the “best possible outcome of an appeal was a partial retrial of the case,” according to a news release from Claremont.

Resident Donna Lowe, who was part of Claremont Affordable Water Advocates — the small but vocal group against the takeover — learned about the settlement at Tuesday’s meeting. Lowe said she was concerned it would end up being a long, drawn-out legal battle.

“I was happy the city finally came to its senses and settled,” she said by phone Wednesday morning. “I’m pleased that Golden State went easy on us, because the council and city management were less than professional.”

Lowe said she felt local control would not solve residents’ concerns of increased water rates. Any resident, she said, concerned about water rates should take it up with California Public Utilities Commission.

“The arrogance our city council and city management cost us millions and millions of dollars,” she said.

Resident Jim Belna told the council this chapter in Claremont history can’t be closed with Tuesday’s news of a settlement.

“This is an issue of public integrity, $10 million was lost and it was lost not through good faith, close-call judgments. It was lost in a legal proceeding where the public was never told of the risks,” Jim Belna told the council.

Belna asked that the city council waive all attorney-client privilege so that the public record on the issue could be completely open and transparent. He also asked that the city form a committee to review the decision-making process.

“The public needs to know exactly what went wrong here,” he said.

Councilman Sam Pedroza disagreed with Belna’s assessment.

“We did everything that we could. A lot of lessons learned — a lot of expensive lessons — but today’s decision ends this chapter,” he said.

Councilman Corey Calaycay said elected officials were following the direction of residents. He cited the Nov. 4, 2014, election in which voters overwhelmingly backed a bond known as Measure W, allowing the city to borrow as much as $135 million to acquire the system.

If voters were opposed to the effort then the measure should have failed, he said. Calaycay also pointed to the general election this past March in which he and mayor Larry Schroeder were up for reelection, months after a judge had sided with Golden State Water.

“I’m proud of the members that I serve with,” he said. “We stood tall on this and unfortunately, we are where we are. I do not feel that we did anything wrong, we listened to our citizens and we did have an open process all the way through,” he said.

Freeman Allen, a resident and a member of Claremont Friends of Locally Owned Water — Claremont FLOW, lauded the council for their efforts to take over the system.

“I’m very proud of the council for having pursued this, and of course I’m terribly disappointed we didn’t prevail,” he said. “I’m hopeful our relations with Golden State Water will be positive from here on out.”

Up to this point, there had been no shortage of criticism from Claremont residents of the water system operator.

For decades, residents have asked the city to proceed with a takeover, but efforts didn’t move forward until several years ago when water rates continued to escalate.

Claremont filed its eminent domain case Dec. 8, 2014. In the 43-page complaint, Claremont details the information about the water system it would acquire from Golden State Water.

Ultimately, in the courtroom, Claremont seemed outmatched against Golden State’s legal defense team.

Echoing his colleagues, Schroeder didn’t back down from the city’s decision to proceed with the eminent domain case.

“I think we gave it everything we had and we made the best decisions we could with the information we had. That’s all you can do,” he said. “The fact of the matter is I feel it’s time we take the settlement.”

For Lowe, the question now remains how will the two sides work together going forward.

On Tuesday night, both sides stated they were “dedicated to providing quality customer service and expert operation of the Claremont water system.”

Timeline:

• Nov. 4, 2014: General election in which voters overwhelmingly backed a bond known as Measure W, allowing the city to borrow as much as $135 million to acquire the water system.
• Dec. 8, 2014: Claremont filed its eminent domain case. In the 43-page complaint, Claremont details the information about the water system it would acquire from Golden State Water.
• June 14, 2016: Opening statements of Claremont’s eminent domain case — the first of its kind in the state — of the water public utility property owned by Golden State.
• Dec. 9, 2016: Los Angeles Superior Court Judge Richard Fruin found it was is in the public’s best interest for the system to remain as a private investor-owned utility.
• Dec. 31, 2017: Claremont must pay Golden State Water $2 million as part of the terms of the settlement agreement.

Source: Liset Marquez, Daily Bulletin

Staff Writer David Allen contributed to this report.