By Jon Coupal
His column in the Inland Valley Dailey Bulletin
As most Californians are aware, the Howard Jarvis Taxpayers Association has been defending homeowners’ rights for more than 35 years. Attacks on property rights come in many forms — from excessive property taxes to overregulation and ballooning costs for sewer, water and refuse collection.
A particularly dangerous movement has taken hold in California that constitutes an immediate threat to homeowners in Claremont. The city government is planning to use eminent domain to seize the local water system currently owned and operated by a private company. The cost to taxpayers will be enormous, yet government refuses to provide residents with information that would allow for a thoughtful and independent review. If the takeover makes sense, why hide the facts?
There is nothing inherently wrong with public ownership of water service and, indeed, most Californians get their water from public providers. But the devil is in the details.
First, under the U.S. Constitution, if government takes private property, it must pay “just compensation.” Moreover, under California law, when government attempts to seize a private utility, there is the additional requirement of a showing of “need” — a seemingly insurmountable hurdle for the city of Claremont to justify replacing the current provider.
Government cannot simply say they want to go into the water business to be able to use eminent domain. In terms of the true cost, for Claremont, this could mean a sale price of at least $100 million and more than $200 million in total taxpayer costs. Are citizens prepared to repay hundreds of millions in principal and interest on debt that is guaranteed by their homes?
What is happening in Claremont strikes us as eerily similar to the bait-and-switch that proponents pulled on voters to pass California’s high-speed rail project. In exchange for passage of $9 billion in bonds, taxpayers were promised many benefits, very few of which turned out to be true. For example, what was promised to be about a $33 billion project is now estimated to cost anywhere from $67 billion to well north of $100 billion.
What about Claremont’s promises about the cost of seizing the assets of a private water company? The fact is that the true costs will be much higher than the city claims. There is little public information that can be independently evaluated which explains exactly how the city plans to buy the system, provide ongoing quality drinking water service and maintain 18 wells, 11 reservoirs and 150 miles of local pipes and water mains. In short, they can’t.
When it comes to the potential costs to Claremont taxpayers, nothing is more troubling than the city’s costly legal fight against a Public Records Act request seeking disclosure of the city’s feasibility study so that residents can evaluate it. If this doesn’t make taxpayers nervous, it should!
We’ve seen these takeovers before in California and they are bad news. In fact, we cannot find a single instance where the eminent domain takeover of a major water system delivered the promised financial benefits. The most recent example is from Santa Cruz County in a community called Felton. The cost to acquire the system was 250 percent more than the government agency predicted. A 30-year property tax increase of approximately $500 per household was assessed.
Immediately, ratepayers were hit with three years of rate increases, each compounded on the prior rate: 12 percent in 2009, 8 percent in 2010 and 15 percent in 2011. Last year, the provider announced plans for five years of new consecutive increases: 13 percent this year, 13 percent in 2015 and 9 percent each year from 2016-2018. The Felton experience provides a valuable lesson about broken promises in situations such as the one here.
So let’s bring this back to Claremont. A study conducted by respected Claremont economist Dr. Rodney T. Smith reviewed the impact of purchasing the system on local water rates. His methodology was public and his conclusions are solid. He determined that residents would face a 72 percent rate increase if the cost of the system were $104 million and a 153 percent increase if the price is $204 million. Even at $54 million, rates would increase by 30 percent.
If Claremont homeowners actually desire massive increases in their water rates, so be it. But the city government should not be insulting citizens by keeping them in the dark while at the same time claiming to be transparent. We suspect that the more than 1,800 Claremont homeowners who are members of HJTA will find this secret plan a very bad deal and deserving of strong opposition.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.