Larry Kosmont comments in LABJ Article: City Bottles Water Deal

After a seven-year battle to fend off a forced sale of its Ojai water system, Golden State Water has finally agreed to sell the business to the nearby Casitas Municipal Water District for $34.5 million.

The deal, announced April 7 by Casitas and approved by the district’s board last week, could have reverberations for both Golden State – a subsidiary of San Dimas-based American States Water Co. – and other private water utilities embroiled in takeover battles with local communities. Golden State is fighting a court battle with the city of Claremont, seeking to avoid a forced sale of its system to that city.

“With this deal, the dominoes will start to drop on smaller private water companies being bought out by public agencies, particularly if the Claremont suit results in condemnation as a legitimate public-purpose taking,” said Larry Kosmont, an L.A. economic development consultant who has tracked water conveyance issues.

The Ojai sale announcement came nearly four years after 87 percent of that city’s voters, many of whom were upset by what they regarded as high bills from Golden State, approved Casitas’ plan to buy the local system. For the past two years, the two entities were in an eminent domain battle in which Casitas tried to force Golden State to sell its Ojai asset.

Golden State rejected a $23 million offer from Casitas early last year, but this deal was different.

“We are pleased with the terms of this settlement agreement, which we believe will enable us to achieve a comprehensive resolution of this eminent domain action,” Robert Sprowls, chief executive of American States, said in a statement late last week. “We look forward to working closely with Casitas to facilitate a seamless transfer of ownership of the Ojai water system.”

The agreement is premised upon securing bond funding. The transfer of the system could occur as early as June 15, according to Ron Merckling, Casitas public affairs manager.

“Casitas’ work has just begun,” Steve Wickstrum, the water district’s general manager, said in a statement on the district’s website. “We are beginning the transition of the Ojai water system to our management and operations. The integration of the Ojai system will begin with planning and identification of system improvements that will be paid for by bond proceeds. We look forward to providing excellent water service to the Ojai community.”

In the two trading days after the announcement, American States shares rose about 4 percent to $45; the stock closed April 13 at $44.79.