Peninsula's water district makes leap in Cal Am buyout, could make offer by mid-January

Growing impatient with the crop of political and legal obstacles in its way, the Monterey Peninsula Water Management District’s board of directors unanimously voted Aug. 15 to step on the accelerator in carrying out the voter-supported effort to buy out private water utility California American Water.

The $315,000 the board agreed to spend so an appraisal firm can calculate the price value of Cal Am’s local assets is the last step before the governmental agency decides whether to submit an offer for the system. 

The degree of precision in estimating the value of the system will depend on whether Cal Am voluntarily lets the appraisal firm onto their property, a decision Cal Am has not yet made according to its spokesperson Josh Stratton. Absent a site visit to determine the true condition of the assets, the appraisal firm will need to rely on publicly available filings, accounts data and drive-bys. 

The water district expects to have a final appraisal by the end of December. If the appraisal comes back and the board of directors maintain a buyout is still in the public’s interest, they could make an offer as soon as mid-January of 2023, according to a schedule published by water district staff on Aug. 15.

If Cal Am rejects the offer as the board expects, the water district could file for a condemnation proceeding by mid-March.

The most recent appraisals from the water district put the value of Cal Am's local assets at just over $500 million; Cal Am estimated the local system to be worth around a billion dollars. 

During the board of directors’ Aug. 15 meeting, directors spoke about the responsibility they had to carry out this process because the voters supported 2018’s Measure J, which told the district to explore all options to buy out Cal Am. Yet, Cal Am’s spokesperson calls it a waste of money and a “power grab.”

“Our constituents are really frustrated that…all these obstacles have been placed in the way of measure J and we knew that would be the case, so now our job is to remove those obstacles and move Measure J forward,” Karen Paull, chair of the water district, said on Aug. 15. 

The district is deciding to move forward despite an active lawsuit against the Local Agency Formation Commission of Monterey County, or LAFCO, a government board which rejected the district’s petition to be granted the power to sell retail water. That power is legally critical for the district if it wants to take over Cal Am’s system and sell water to Peninsula customers.

However, the district and its staff and board members, in moving forward, have convinced themselves that they already have the legal power to sell retail water to customers, since it already sells recycled water to seven golf courses within Del Monte Forest for irrigation purposes. 

David Laredo, general counsel for the water district, says his team has developed a “very sound, well-thought out” argument for why the district is already a water retailer.

“We are not doing this without thought, research and a sound theory behind us,” Laredo said during the meeting.