Analysis Group Client Prevails in California's First Investor-Owned Water Utility Eminent Domain Case

February 17, 2017

In the first eminent domain case involving an investor-owned water utility tried in the state, a California Superior Court rejected a request by the City of Claremont to take, by eminent domain, the water system owned by Analysis Group's client Golden State Water Company. The City had brought suit against Golden State, arguing that customers would benefit from municipal ownership of the water system. The judge concluded that Golden State had demonstrated Claremont residents would be better served if the company continued to own and operate the system, and would be worse off if the City were to take ownership of the system.

An Analysis Group team led by Principal David Sosa and including Manager Tracy Danner supported affiliated experts Dr. Michael Hanemann and Mr. Stephen Peters in developing testimony and analysis on behalf of Golden State Water, and provided consulting support to Golden State's counsel, Manatt, Phelps & Phillips. Testifying at trial, Dr. Hanemann presented an economic feasibility model comparing the expected impact on ratepayers under City ownership relative to continued Golden State ownership. Mr. Peters' testimony pertained to the City's anticipated issuance of water revenue bonds to finance the acquisition, and included an overview of the conditions and mechanisms that market participants would use to monitor the City's performance against those obligations.

In his final order dismissing the City's eminent domain complaint, the judge wrote that he was "persuaded by the testimony and analysis given by Stephen Peters and Dr. Michael Hanemann that the [City's cost of acquiring the water system]… will require increased water rates." The judge also agreed with Dr. Hanemann, rejecting the City's argument that income and property tax savings would be a source of savings under City ownership.