- by William Weirick

The Franchise Agreement under which Golden State Water (GSW) currently operates apparently was a renewal of a previous franchise agreement which had an expiration date of 5/8/67 (OVN, 4/12/67) .
Various discussions and debates delayed the approval of a new franchise agreement until the very last day of the old agreement.
The replacement franchise agreement was adopted over the objections of the City Attorney (John F. Fay), one City Councilman (Monroe Hirach), and an accountant (Godfrey Jacobs) acting in the capacity of an auditor of the city's books. These three also did not want the change from a fixed term to an indeterminate term renewal, especially given the higher relative rates of GSW's antecedent company, Southern California Water Company (SCW). However, the majority of the Council and the City Manager of the time responded that there was no need for a fixed term given the buy-out provisions of the agreement while contending that the appropriate forum for rate issues was the state Public Service Commission (PSC), not the city council chambers.
All of this was going on while the Ventura River Municipal Water District (VRMWD) and SCW were having a bit of a water war over the right to supply water to customers along Maricopa Hwy. (OVN, 4/16/67). Both companies were racing to lay supply lines in this area in order to expand their customer base. Lake Casitas was at full capacity at the time following several very high rainfall years soon after the dam was completed. SCW, beyond having the city council majority and the city manager support, was trying to use recently passed provisions of the California Public Utilities Code to intimidate VRMWD into backing off from extending lines to customers wanting to connect to its system. VRMWD was not backing off in the face of this pressure, especially since many of the potential customers in this area wanted service from VRMWD.
The public notice for this renewal was posted 3/5/1967 (in the OVN) under the heading “Notice of Intention to Grant Franchise.” The First reading was in March. Final adoption was delayed in April pending further investigation of rates and examination of submitted gross receipts statements of the SCW to the City. Data compiled by accountant Godfrey Jacobs compared SCW's rates to four mutual water companies in the Ojai Valley, the three other water districts in the Ojai Valley, five city owned water works in Ventura County, four other privately owned water companies elsewhere in Ventura County, and sixteen other suppliers scattered around California.
Even back in 1967, rates charged by SCW were dramatically higher rates than comparable water systems, especially compared to the VRMWD, the name of the district supplying water from Casitas at the time (OVN, 5/10/67). According to this comprehensive study by Jacobs, SCW's rates at the time were 37.9 percent to 92.1 percent higher than comparable systems. In every comparison category, SCW’s rates were higher.
Councilman Hirach volunteered to further study the situation if the Council would delay this indeterminate franchise agreement approval while also stating that the VRMWD was capable and stood ready to supply the entire City of Ojai at lower rates. The second reading and passage of the franchise renewal agreement was opposed by Hirach and Jacobs because of these higher rates.
The majority of the City Council, reflecting the wishes of the City Manager, disagreed and approved the indeterminate renewal.
It was further reported at the time that the franchise agreement renewal was not exclusive and was not an impediment to the City or another entity buying out the system at some future date. The franchise agreement was characterized in the press as a right to run distribution lines under city streets. It also was reported that the franchise payments were per state law and state regulations at the time. Much of the language in this franchise agreement does in fact mirror language in the California Public Utilities Code.
The City's renewal of the franchise agreement did not stop the race between VRMWD and SCW to install pipes to serve the Maricopa Hwy. area, (OVN, 5/14/67, p.A-1) At one point, the VRMWD asked for a restraining order against the actions of the SCW in this regard.
The majority of the City Council repeatedly expressed their preference for SCW, including discussing of legal action in favor of SCW in the dispute over service areas (OVN 6/21/67). The majority of the City Council apparently backed SCW at the time, but did not see the franchise agreement as including the right to stop the efforts of VRMWD to serve city customers in the annexed areas around Maricopa Hwy. Contemplated legal action involved provisions of the state Public Utilities Code, not the Franchise Agreement.
The repeatedly cited reason for this backing of SCW can be seen (OVN, 3/29/67) where the City Manager (Jack Blalock) made a statement to the press that the “The city stood to gain financially if the disputed area were served by SCW”, citing the Franchise Agreement payment.
The VRMWD continued to lay lines for this service area after adoption of the new Franchise Agreement despite the opposition of the Ojai City Manager and the majority of the City Council. Clearly, this franchise agreement was NOT an exclusive right to service City of Ojai customers.
It was clear from reporting before and after the renewal of the Franchise Agreement that the desire to receive payments from SCW drove the City's position, even though VRMWD’s rates were much higher than SCW’s. Back in 1967, the majority of the city council (Voogd, Burr, Remund, Huckins) and the city managers over this period (Blalock and McKinney) apparently put revenue for the city above costs to the rate payers. It certainly seems that City of Ojai ratepayers have been paying relatively higher water rates because of this desire to obtain franchise fee revenue for more than forty years.
Part II. Comments
The franchise agreement itself mirrors the State Public Utility Code in most of its provisions, such as the franchise fee percentages, the assertion of the right of eminent domain for authorized legal entities to buy back the system, the need for the filing of statements regarding gross receipts, and the need for the Grantee to have a written acceptance on file with the Grantor.
It seems clear that the Franchise Agreement only covers the water distribution/treatment system. If does not cover the extraction sources. The extraction rights appear to be unadjuticated. It appears that a "municipal or public corporation duly authorized by law" has the right to acquire just the distribution system by eminent domain and choose its means of supplying water to the distribution system. This could be new wells or connection to another supply system.
Given this, why cannot the buyout value simply be the distribution/treatment system cost, excluding any consideration of extraction or water rights? The Golden State wells would not have much value without the right to distribute. Faced with this prospect, Golden State would have every incentive to be more reasonable on their buyout price. In other words, the cost of any needed new wells should be the upper limit on the value of Golden State’s alleged, unadjudicated, water rights.
Why cannot the Casitas District be duly authorized by the City of Ojai to be the “municipal or public corporation thereunto duly authorized by law” mentioned in Section 3 of the Franchise Agreement to purchase the distribution system by voluntary agreement or power of eminent domain. Would not the Casitas District receive quite a bit of legal cover and effective indemnification from the City by being designated the City's authorized entity for asserting its right of buyout?
For that matter, why cannot the City adopt a second franchise agreement with the Casitas District to convey this authorization? It does not appear that the existing Franchise Agreement is exclusive.