Town of Apple Valley plans to get bigger if victorious in water suit August 11, 2019

APPLE VALLEY — The town plans to add 40 to 45 members to its staff, but only if a judge decides in the coming months it has the right to acquire its largest water provider and end a three-year legal battle.

If Apple Valley prevails in its eminent domain action against Liberty Utilities, a town official said the acquisition would also result in lower water bills for customers.

However, a jury would still need to decide how much Liberty’s water system costs if San Bernardino Superior Court Judge Donald Alvarez decides in the town’s favor.

“That cost will be our biggest factor when we go to set rates,” said Doug Robertson, Apple Valley Town Manager.

Robertson presented the acquisition plan, which presumes a legal victory, at the July 23 council meeting.

A “right-to-take” trial is scheduled to occur on September 30. It’s another step in a process that started when the Apple Valley Town Council first voted to take over the utility in November 2015.

The town plans to retain Liberty’s water employees, exempting certain executives and contractors, who would transition into the public works department that has a staff about half of the proposed influx.

Hiring a public works director with someone who is preferably a water expert would also need to be done, Robertson said at the meeting.

A firm would have to be contracted to assist in setting rates, in compliance with Proposition 218.

“In future years at least, if not at the beginning, we believe that deficiencies realized upon acquisition and the elimination of profit for multiple layers of multinational corporations will result in rates which will be lower than they otherwise would’ve been,” Robertson said.

Liberty officials and other critics of the acquisition attempt don’t think the transition will go as smoothly as anticipated and could result in higher, not lower, rates for water customers.

Among the reasons council members cited for acquiring the utility was Liberty’s rates were higher than those in neighboring areas.

Officials cited public support with the passage of Measure F in June 2017. Almost 58% of residents voted to issue up to $150 million in water revenue bonds to finance the utility’s purchase.

At an October 2018 information meeting, Assistant Town Manager Thomas Rice compared Apple Valley’s rates as being $570 more per year than Hesperia, and roughly $500 more than residents in Victorville, the Daily Press reported.

Liberty documents sent to the paper indicated that rates for certain customers were decreasing.

Company spokesperson Miguel Gonzalez shared data indicating that since 2013, the average residential bill had been lowered from $85.72 to $74.14 in 2019, adjusting for inflation.

The Daily Press also reported that Liberty customers had received a 3% decrease in July 2018, following a 4% decrease the year before that company officials said was due to legislation signed by President Trump.

John Husing, an economist, told the paper in April 2017 that paying back a $150 million bond would likely be more expensive than expected with future rising interest rates, translating into higher bills for customers.

Then-Town Manager Frank Robinson disputed Husing’s findings and said ”(Husing’s) analysis appears to be based on data cherry-picked by his benefactor, Liberty Utilities.”

Husing’s report was funded by the California Water Association, a group of investor-owned utilities of which Liberty was a member.

An Apple Valley victory in the “right-to-take” trial is also not assured, Liberty’s attorney, David Moran, told the Daily Press in 2018.

“Even if the town’s attorneys do a good job, you’re looking at probably at best for them a 50-50 proposition as to whether or not they’re going to be able to take the water system. And so they’re going to spend millions of dollars to get to, basically, a coin flip,” Moran said.

According to town spokesman Orlando Acevedo, legal costs since the condemnation action against Liberty was filed in January 2016 have totaled $2,703,094.15.

Liberty, however, declined to provide the Daily Press with its legal costs. “Liberty’s legal costs are never tied to rate payers. Our investors cover the costs of eminent domain,” according to Gonzalez.

In a July 2018 Daily Press op-ed, Town Manager Doug Robertson also expressed some hesitation.

“Unfortunately, even though it was and is clearly the right decision to fight this fight for the good of our residents, we don’t know how the judge will decide this case,” he wrote.

In 2017, the City of Claremont agreed to abandon its acquisition attempt with Golden State Water Company in October.

The settlement required Claremont to pay Golden State $2 million by the end of the year and $2.8 million in interest over the next 12 years. The city was also strapped with legal fees of $6.1 million.

Claremont was represented by the same firm that represents Apple Valley, Best Best & Krieger, but town officials told the Daily Press the facts of the two municipalities’ cases differed.

In Claremont’s case, the city looked to La Verne to operate the utility. Apple Valley is planning to run its own water company.

“The case is also in a different court and involves a different judge than the Claremont case,” former town spokesperson, Gina Whiteside, told the Daily Press.

“A more appropriate comparison can be found in Missoula, Montana, where earlier this year a court issued a final order of condemnation against a water company owned by the exact same company as here in Apple Valley.”

Two members of a group, Citizens for Government Accountability, disputed the town’s comparisons with the Missoula case in an August 2018 Daily Press op-ed.

Source: Martin Estacio, Daily Press