The question of Apple Valley’s water ownership has been kicked back to county court.
In 2016, Apple Valley attempted to seize control of a private water utility system, which was owned by Carlyle Infrastructures Partners and operated by Apple Valley Ranchos Water. The town filed an eminent domain action to acquire the water system.
The following day, Carlyle sold the system to Liberty Utilities.
Following a bench trial, San Bernardino Superior Judge Donald Alvarez ruled that the town did not have the right to take the water system. Apple Valley appealed.
In a Jan. 15 published ruling, the California Court of Appeal invalidated Alvarez’ ruling. The case is remanded back to San Bernardino Superior Court, to decide whether to allow the town to take the water system, remand the matter back to the town for additional proceedings, or to hold a new trial.
A private water company
Apple Valley Ranchos Water Co. was formed in 1945, according to a 2015 Apple Valley staff report. The company was acquired by Park Water Co. in 1987. In 2010, Park Water Co. was acquired by Western Water Holdings, which was owned by Carlyle Infrastructures, which was owned by the Carlyle Group, a multinational global asset management firm based in Washington, D.C., the report says.
The water system includes 23 groundwater wells, 11 storage tanks, 16 emergency generators, eight booster pump stations, 450 miles of pipeline and more than 22,000 active service connections, the report says. In 2015, the company provided service to over 62,000 consumers, compared to Apple Valley’s population of 76,000 at the 2020 census.
The Town of Apple Valley began exploring public ownership of the water system over concerns of water rates, lack of local control, and the lack of responsiveness, accountability and transparency, according to the staff report.
Prior to the eminent domain action, the town offered to buy the water system for $50.3 million, the fair market value of the system following an appraisal.
Apple Valley Ranchos rejected the offer, the staff report says.
The Court of Appeal found that Alvarez applied the wrong standard of review, and improperly based his decision on facts discovered after Apple Valley began its process of acquiring the company.
Standard of review
The Court of Appeal found that the 2023 case Pacific Gas & Electric Co. v. Superior Court, which Alvarez based his decision on, was wrong. PG&E failed to acknowledge the difference between eminent domain takings within an incorporated area, and outside an incorporated area.
“A public entity’s taking property within its borders is a quasi-legislative act that, when lawful, is a valid exercise of the entity’s legislative discretion. A public entity’s decision to take property outside of its borders, unless otherwise authorized, is not a valid exercise of its legislative power,” the Court of Appeal found.
Factual discovery
Alvarez also should not have excluded evidence created before Apple Valley passed its resolution of necessity (RON), which kicked off its eminent domain action, the Court of Appeal found.
Courts should not allow a party challenging an eminent domain action to defend itself based only on developments the city did not argue in the beginning, the ruling said.
“A RON would likewise be meaningless (and a complete waste of public resources) if it could be invalidated with exclusively post-RON evidence without any consideration of its findings, objectives and supporting evidence, as is the case here,” the ruling said.
Case information
Case No. CIVDS1600180
Appellate Case No. E078348
Edward Xanders and Timothy Coates of Greines, Martin, Stein & Richland, and Kendall MacVey, Christopher Pisano and Guillermo Frias of Best Best & Krieger, appeared for the Town of Apple Valley.
Edward Burg, Michael Berger, George Soneff, David Moran, Benjamin Shatz and Joanna McCallum of Manatt, Phelps & Phillips appeared for Apple Valley Ranchos Water.
Fourth District Court of Appeal, Division Two, Justice Carol Codrington wrote the opinion, joined by Justices Art McKinster and Richard Fields.
