Visalia City Council Requests Appraisal of CalWater

The Visalia City Council continues to be proactive in finding options for addressing water supplies and conservation. To ensure the community’s well-being in the future, on November 12 the Council requested that an appraisal of California Water Service move forward. Visalia is the only city in Tulare County that does not own its water delivery system. Cal Water, a for-profit, utility-owned investment company, provides that service.

“In requesting an appraisal, the City Council wants facts that we and the community can consider. No decision to make an offer has been made. The Council is committed to a very public and open discussion so that local citizens can consider the facts and voice their opinion,” assured Mayor Steve Nelsen. “But it needs to be just that, a local discussion about whether it makes sense to have more local control of this valuable resource. We don’t think that discussion should be left to Cal Water in San Jose, or state commissioners in San Francisco.”

City Council concerns lie in Cal Water’s continued high rate increase requests (current rate increase request is for an additional 29%), the lack of progress in meeting the state’s

mandate to reduce water consumption in Visalia by 32% (Cal Water reports that overall water reduction has been 26.1% to date), a lack of data available to assist citizens in reducing their water conservation, and little effort on Cal Water’s part toward groundwater replenishment or resource conservation, according to a City press release.

In addition, Cal Water is regulated by the California Public Utilities Commission (CPUC), which further erodes local control. Cal Water is guaranteed an almost eight percent return on any capital investment they make, are allowed to increase rates to maintain their income stream if they sell less water, and pay millions of dollars to their senior executive staff.

“Cal Water answers to shareholders. We answer to our citizens, and over the years many citizens have suggested that the City needs to take an even more aggressive approach to our water resources,” said Mayor Nelsen. “The Council is an active participant in the CPUC rate process, is considering asking for legislation to be introduced that would require utility-owned investment companies to share information with local agencies, and is requesting this appraisal as another option.”

Water decisions made locally are pivotal for economic vitality and the overall quality of life in Visalia.

“We are one of 21 California water districts owned by Cal Water that are operated out of San Jose,” confirmed Mayor Nelsen. “There are significant local differences in our water resources, and in operating costs and practices here in Visalia that are not being appropriately recognized from the Bay Area. The rates in Visalia are significantly higher than those of other cities in the area.”

But, the appraisal is not an offer to purchase. The City Council has not yet decided whether to make an offer.

Prior to determining whether to acquire the system through use of eminent domain, the Visalia City Council will open formal public discussion.

“Our system is not for sale,” said Cal Water spokesperson Shannon Dean.

On November 12, via an 8-K filing with the Securities and Exchange Commission, Cal Water was notified Visalia intends to conduct an appraisal of Cal Water’s water system properties.

Although the City may or may not make an offer to purchase the drinking water system after the appraisal is complete, this is typically the first step in a hostile takeover, according to Dean.

“Whether the City opts to spend taxpayer dollars on an appraisal or not, we will oppose any attempt to take the drinking water system. The people of Visalia deserve to continue receiving the quality, service, and value that we have provided since 1927, not the higher taxes and water rates that would almost certainly result from a hostile takeover,” she said.

According to Dean, there are a number of reasons the public should be concerned about the City’s course of action, even beyond higher taxes and higher water rates.

“We are in the middle of the worst drought in California history. Is this really the best use of the City’s time and resources? In other communities throughout the state, Cal Water is working closely and cooperatively with the cities we serve to ensure a reliable water supply now and into the future. That’s what should be happening here,” Dean said.

Cal Water serves about 132,200 people through 42,400 service connections in Visalia.

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