Apple Valley looks to assume control of water district through eminent domain

By on March 18, 2019

Town officials say they should have some say over water rates. The matter is scheduled to go to court in September.

This fall, a San Bernardino County Superior Court judge will decide whether Apple Valley should be allowed to use eminent domain to acquire Apple Valley Ranchos Water System.

The trial, before Judge Donald R. Alvarez, is scheduled to begin Sept. 30 in San Bernardino and could last several weeks, according to Apple Valley officials.

At stake is Apple Valley’s claim that it has a legal right to take over the water district, which serves more than 23,000 connections in the High Desert community, or roughly 18,700 households.

Apple Valley residents have long expressed concerns about Apple Valley Ranchos, particularly the higher rates they were paying compared with customers of other water districts in the Victor Valley, said Mayor pro team Scott Nassif.

Those residents maintain that they should have some say regarding their water rates, according to Nassif, who responded to questions from IE Business Daily in several lengthy emails.

But Liberty Utilities of Hensley, Ark., owner of the water district, has vowed to fight that claim in court.

Because it’s privately owned, Liberty Utilities only needs the approval of the California Public Utilities Commission if it wants to raise rates, with no recourse available to residents. Were the water district publicly owned, any rate hike could be subject to a protest under the guidelines of Proposition 218, which California voters passed in 1996.

That initiative requires that any local tax increase be approved by at least two-thirds of the local electorate. Ten years after it was approved by voters, the state Supreme Court ruled that Proposition 218 applies to local water, refuse and sewer charges.

In June 2015, Apple Valley offered Liberty Utilities “a fair market price” for Apple Valley Ranchos, but Liberty Utilities rejected that offer, Nassif said.

The town then began condemnation proceedings and filed a complaint with the utilities commission, the first move in the legal battle between the two parties.

In November 2015, the town council voted to proceed with eminent domain proceedings against Liberty Utilities, a decision that was upheld by Judge Alvarez in February of last year. Eminent domain allows a government to seize private property for public use provided it pays a fair market value in exchange.

Siding with a publicly owned agency over a private company is against his instincts, but it’s the right thing to do in this case, according to Nassif.

“As an ardent capitalist, it might seem unusual for me to be supporting this effort,” Nassif said in an e-mail. “[But] it’s important to remember that Liberty Utilities is no ordinary company. It has a state-protected monopoly over water in the town, [and] water is not like other goods.”

Most California cities get their water from publicly owned and managed public utilities, not privately owned companies, Nassif said.

“Water is necessary to all life,” Nassif said. “That’s why public ownership of water is not unusual. Unlike [Apple Valley], Liberty Utilities doesn’t make decisions [before the public], isn’t required to provide records to the press or public and doesn’t produce a publicly audited budget every year.”

But Liberty Utilities has already fought and won a battle similar to the one it appears to be on the verge of fighting with Apple Valley.

In 2014, Claremont filed an eminent domain case against Golden State Water Co. in San Dimas, which serves parts of Claremont. A battle between the two parties ensued, and in December 2016 a Los Angeles County Superior Court judge ruled in favor Golden State Water.

In October 2017, Claremont reached a $4.8 million settlement with Golden State Water, having failed to gain any control over that agency.

Claremont has until 2029 to pay off that settlement, which includes some of the company’s legal fees. The bulk of those fees were waived so long as Claremont doesn’t sue Golden State Water again.

The costly legal battle – the city reportedly spent $6 million trying to get control of the water district – began after years of complaints by Claremont residents about perpetually escalating water rates.

One lesson from the Claremont-Golden State Water saga is that eminent domain – a device  government agencies are usually reluctant to use because it involves the seizure of private property – is not the way to resolve that kind of dispute, says one of the lawyers who represented Golden State Water.

“When the city of Claremont tried to seize its water system by eminent domain, the city lost in court and [had] nothing to show for it,” said George Soneff of Manatt, Phelps and Phillips LLC,  in a statement. “The people’s money needs to be spent on other crucial services, not paying lawyer’s fees.”

Mannat, Phelps and Phillips isn’t finished with eminent domain-water district case. When the Apple Valley-Liberty Utilities dispute goes to trial in six months – assuming it’s not settled beforehand – the firm will represent  Liberty Utilities.