We got a response to our recent post on the city's possible water company purchase. The reader doesn't believe Claremont can buyout Golden State Water for $100 million without a big water rate increase. The reader's figures are taken directly from the League of Women Voters (LWV) water report. A couple notes: AF means acre-foot, state water is brought to our area from the Sacramento River delta via the California aqueduct, hence the higher rate.
We won't go into the reader's math here and simply present the information for you to review. We do think that the reader brings up some important points and that, based on some of the inquiries we've received, we think the city should have a public debate on the matter. They and the LWV held a sustainability forum on 4/14/2007, and this issue is certainly related and equally vital. Let's open it up to a community discussion rather than having it hashed out behind closed doors. All of the five current councilmembers ran on platforms that at least mentioned openness or inclusiveness. Let's see them put their money ($100 million worth) where their collective mouths are.
Here's the reader's note:
To: claremontbuzz@yahoo.com
Subject: Some Water-Calculations
Date: Sun, 15 Apr 2007 23:31:43 -0400
I read your article about the potential purchase of the water company with interest. I also scanned through the League of Women Voters' study about the costs of purchasing the water company. As someone living in Claremont, I am all for buying the water company and making it a public good, but the promises that it will not increase our water rates is more or less wishful thinking.
Here some thought about the numbers: I did some back of the envelope calculations with the numbers presented in the LWV report.
Proposed purchase price: $100 Mil.; bond interest rate: 5.3%; number of customers in Claremont: 10,800; Annual water use in the city: 13,000 AF (acre-feet); approx. 50% from wells - 50% from Three Valley (MWD); cost of produced well water: ~$140 /AF; from Three Valley: ~$500/AF; average [annual] water bill in Claremont: $840
- $100 Mil divided per customers: $9,260 debt per customer
- annual interest (5.3%): $490 per customer (does not include depreciation)
Water production costs:
6,500 AF x $140/AF = $ 910,000
6,500 AF x $500/AF = $3,250, 000
Total production costs: $4.16 Mil
- production cost: $385 per customer.
This means that only the interest for the $100 Mil and the water production costs is approx. $875 per customer, which already exceeds the average annual water bill. The $875 does not include costs for managing and maintaining the system, repairing of old infrastructure and capital expenditures for new one, just to mention some other costs involved in running a water systems, and I am sure I did not include everything.
Concluding from the simple calculation: I just do not see how Claremont can pay $100 Mil and still claim that we can afford this without raising dramatically the water rates. In this case I do hope I am wrong with my assumptions and would be pleased if somebody can prove me otherwise.
Sincerely,
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