Los Osos residents pack forum on taking over Golden State water service

nwilson@thetribunenews.comMay 7, 2014 

More than 200 people packed an auditorium in Los Osos on Tuesday to learn how they might take down their private water purveyor and keep rising rates under control.

But the company targeted by grassroots organizers is disputing claims that a municipal water district would benefit residents.

A group called Los Osos Friends of Locally Owned Water (Los Osos FLOW) is organizing a community takeover, through eminent domain, of Golden State Water Co.’s local water service.

The meeting, held at the South Bay Community Center, aimed to educate the audience and garner political interest in a public acquisition of the company’s Los Osos water system. Golden State serves about 2,700 customers in the Los Osos area.

“This effort is not just for us,” said Naida Simpson, a Los Osos FLOW organizer. “This is for our kids and grandkids. How much will they pay in 20 or 30 years? How much will water rates keep going up if we don’t do anything about it?”

For about 6,000 gallons per month of water usage, Golden State now charges a bimonthly rate of $201. The neighboring Los Osos Community Services District, which serves 2,750 area customers, charges $124 bimonthly for the same water usage.

Golden State has increased rates by about 50 percent over the past two years, including temporary surcharges to cover operational costs. The rate hikes were approved by the California Public Utilities Commission.

The company cites $4.9 million costs in capital improvements, including piping installation and drilling expenses, as necessary expenditures to support the Los Osos and Edna Valley water systems. The communities are part of the same Golden State service area.

Golden State also says its rates are different because public agencies such as the Los Osos CSD receive revenues from property taxes and grants, which aren’t available to a private company.

Tuesday’s meeting included presentations from members of two communities that organized to publicly acquire water companies — Felton and Ojai. The process involved floating a bond and buying the company’s assets, typically through a court procedure.

Golden State has opposed groups that seek to buy out its community water systems and says it’s not for sale in Los Osos as well, indicating the group likely would face a court challenge.

A judge or jury decides the value of the company assets if a community votes in favor of a takeover through eminent domain.

In 2008, representatives from Felton bought out California-American Water, which was a private company not associated with Golden State. A Felton FLOW representative, Jim Graham, told the crowd that costs have gone down for customers since the buyout and the community has benefited.

However, Golden State cites a property tax of about $500 per year that customers must pay for 30 years to cover the acquisition in addition to other water costs.

Ojai FLOW estimates that customers will save a total of $3.4 million per year if they successfully buy out Golden State’s system in their community. In 2013 the Ojai customers voted 87 percent in favor of taking over Golden State there, and the Ojai FLOW group formulated a merger plan with the publicly operated Casitas Municipal Water District.

The Ojai organizers are currently battling Golden State in appeals court over the takeover after winning an initial ruling to establish a community facilities district and issue bonds of up to $60 million.

Golden State officials dispute the views of the grassroots FLOW groups, saying they are misstating costs and facts.

“Unfortunately for Ojai, Felton and Los Osos residents, the promises FLOW organizations make are political fodder that largely ignore the realities of operating and maintaining a water system,” said Patrick Scanlon, Golden State’s vice president of water operations.

“It’s no secret that affiliated FLOW organizations in Ojai and Felton are against investor-owned water providers, and they have shown they will not let the facts get in the way of their agendas.”

Scanlon said Felton FLOW grossly underestimated costs to buy the system and they have raised rates by 71 percent since the takeover.

“This information is all publicly available, and we encourage the public to do the research and not just take our word, or FLOW’s word, for it,” Scanlon said.

Scanlon also said that the $3.4 million in annual cost savings in Ojai ignores the needs of that system and doesn’t account for its fair market value, which likely will be decided in court.

“That will greatly change the size of the tax burden customers will be taking on if they vote for a takeover,” Scanlon said. “... What they have done in Ojai isn’t just any tax, it is the largest property tax increase in the city’s history.”

Ojai FLOW’s Richard Hajas said their work included winning the support to merge with the Casitas Municipal Water District, assessing cost feasibility and positive financial benefits to the community, organizing a special election and fighting Golden State in court.

“After trying to get the California Public Utilities Commission to try to do something about our rates, we decided they weren’t going to make any impact,” Hajas said. “We concluded that we had to get rid of Golden State.”

Los Osos FLOW organizers said 119 people signed on to an email list to stay updated with the group’s activities. The group is planning future meetings and selection of a steering committee.

“We already have some heavy hitters stepping up to the plate to volunteer with legal and accounting needs,” Simpson said. “We had about 15 people offer to help with services.”

The Felton and Ojai groups both warned the Los Osos community that the public acquisition process won’t be easy and likely will take years, but they say ratepayers will end up saving significant amounts of money.


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