By Jim Johnson, Monterey Herald
POSTED: 09/14/18, 4:19 PM PDT
Monterey >> California American Water has released an appraisal indicating its Monterey district is worth an estimated $1.044 billion as of the end of June, essentially setting the company’s own perceived value of the local system subject to a public buyout effort.
On Friday, the local water provider issued a summary fair market valuation from independent expert MR Valuation Consulting that outlined the rationale for establishing a value for the local system’s assets, and which made it clear that the appraisal was being done “in anticipation of a potential condemnation action.”
Cal Am is facing a public buyout effort aimed at its Monterey district system backed by Public Water Now, which has initiated a fall ballot initiative known as Measure J that would require the Monterey Peninsula Water Management District to conduct a feasibility study of a potential acquisition attempt. If a potential buyout is found to be feasible, the water management district would be required to move ahead with the acquisition. Cal Am has indicated the system is not for sale so the attempt would likely involve eminent domain or condemnation, which would likely be settled in the courts.
Cal Am manager of external affairs Catherine Stedman said the company has never before released an appraisal of its Monterey district, only publicly stating the value was likely in the “hundreds of millions of dollars,” and said the current appraisal was an attempt to inform voters.
“We want voters to have concrete information on what it could cost if Measure J is successful,” Stedman said.
According to the report, the fair market value analysis assumed a willing seller and a willing buyer, both with no particular necessity to do so.
Under the analysis, Cal Am’s Monterey district assets were valued at about $430.1 million, “certain” water rights at $111.5 million, construction in progress at $119.7 million, regulatory assets at $170.7 million, and the remaining value not already included in the district’s assets of the Monterey Peninsula Water Supply Project including desalination plant at $212 million.
The district includes 45 hydraulic zones, 192 water facilities, 35 well sites, 75 pumping stations, 75 tank sites, six water treatment plants and one dam over a 425-square-mile area.
The analysis excluded a dozen area satellite water and wastewater systems owned and operated by Cal Am, as well as any severance damage analysis.
Cal Am attorney Joe Conner, who has experience with eminent domain cases involving privately owned utilities, said “condemning authorities” or those entities seeking to acquire a water system through eminent domain often underestimate the systems’ value. At the same time, Conner acknowledged private companies do sometimes settle for less than their system’s appraised value.
“There are occasionally business reasons for a company to take less,” he said. “Each case stands on its own.”
Conner said the full appraisal report will not be released, at least not yet, and Cal Am as his client would need to decide if and when that would occur.
Peninsula water district general manager Dave Stoldt, whose agency estimated Cal Am’s purchase price at about $200 million in 2011, said the eminent domain process overseen by the courts is so complex with so many variables that it’s difficult to assess what Cal Am’s system could end up costing.
“There are various ways to judge value,” Stoldt said. “It’s going to be a process.”