The study was conducted by Rodney Smith, Ph.D., president of Stratecon Inc. and water resources expert in economics, finance and public policy.
After an extensive analysis, Smith
concluded, "If the City
does manage to acquire the Marysville
water system by eminent domain, higher water rates for Marysville residents are a virtual certainty for many years to come.
If the goal of acquiring the system is to charge lower water rates, then the effort should be abandoned because that goal is not a feasible outcome through the condemnation process."
explained that Cal Water's
system is regulated by the California Public Utilities Commission
(CPUC), which sets standards to protect the public health and safety of water customers and approves all investments to ensure facilities are necessary to meet CPUC water service standards.
In the last five years, Cal Water
has spent $5.1 million to maintain and improve the Marysville water system.
Under a municipal takeover, the City
and its water customers would be responsible for these costs as well as the long-term bond obligations to purchase the system that could easily reach $50 million.
And unlike Cal Water, the City
does not have sufficient reserves or shareholder equity to cover inevitable capital expenditures; therefore, residents would have to bear those costs on a "payas- you-go" basis.
summed up the study's findings by stating, "Marysville's municipal finances will be strained by the indebtedness necessary to pay for the system."
Another major challenge for water system operators is balancing the uncertain economics of variable and fixed costs with fluctuating water demands.
To meet the legislated target of a 20 percent reduction in per capita urban water use statewide by 2020, Cal Water
established incentive and educational programs to encourage conservation.
As a result, water demand in Marysville has been declining since 2000, while fixed expenses, such as debt-service obligations and taxes, have remained static.
pointed out, not only will the City's
finances be strained, "The size of City
government will have to expand rapidly in an effort to meet the significant technical and managerial demands of operating the system, none of which the City possesses.
cautioned, "Ownership and operation of the Marysville water system will dwarf all other services the City
In conclusion, Smith
made it clear that, "From a consumer's perspective, the vision of lower water rates is a mirage.