Contra Costa Water Co. v. City of Oakland

• Citation: 165 F. 518
• Court: U.S. District Court — Northern District of California
• Decision Date: 29 June 1904
• Parties: CONTRA COSTA WATER CO. v. CITY OF OAKLAND et al.

165 F. 518

CONTRA COSTA WATER CO. v. CITY OF OAKLAND et al.

United States Circuit Court, N.D. California.

June 29, 1904

Francis J. Heney, Garret W. McEnerney, and John Garber, for complainant.

J. E McElroy, R. M. Fitzgerald, and Wm. R. Davis, for defendants.

GILBERT Circuit Judge.

This is an application for an injunction pendente lite made by the Contra Costa Water Company, a corporation of the state of California formed for the purpose of furnishing water to the city of Oakland and adjacent cities.

The bill alleges in substance that the complainant for many years past has been and is now supplying nearly all the fresh water consumed by the city of Oakland and its inhabitants. That, in order to carry out the purposes of its incorporation, the complainant has acquired reservoir sites, buildings, and reservoirs, obtained riparian and other rights and properties necessary to secure the ownership of water caught and impounded in its reservoirs, and has purchased water rights and large tracts of land for the purpose of obtaining an adequate supply of pure, fresh water and preserving the same as well as other properties necessary and essential in the conduct of its business, the value of all of said properties being in excess of $8,500,000. That said properties consist of the following: (1) Lake Chabot, having a storage capacity of 5,070,000,000 gallons, a yielding capacity of 8,000,000 gallons per day, and a large drainage area, of which the complainant owns 5,550 acres, said lake being constructed by means of an earthen dam 127 feet high above the bed of the original stream; (2) a system of artesian wells near Alvarado, located on a tract of 377.54 acres, having a yielding capacity under natural flow of 5,000,000 gallons per day; (3) Lake Temescal, having a storage capacity of 250,000,000 gallons and a yielding capacity of 340,000 gallons per day, said reservoir being created by the construction of an earthen dam over 100 feet in height; (4) water rights on Sausal creek, enabling the complainant to utilize water to the extent of 400,000 gallons per day; (5) a system of tunnels in the Piedmont Hills, yielding 117,000 gallons of water per day. That, in connection with said sources of supply, the company owns and operates a distributing plant, consisting of 430 miles of pipe line 4,000 meters, all necessary stop gates, fixtures, devices etc., and has within the city of Oakland 16,000 services and 515 hydrants, also 11 storage and distributing reservoirs in addition to the lakes, having a joint storage capacity of 18,000,000 gallons, two mechanical filtrating and straining plants, one each at Lake Chabot and Temescal, four complete pumping plants with an average capacity of 18,000,000 gallons per day, large quantities of material, and supplies of all descriptions, a complete equipment of tools and appliances. That, in addition to these, the complainant owns various described tracts of real estate within the city of Oakland and elsewhere, as well as an established business and all requisite franchise for the conduct of its business of collecting and dispensing water, its said franchise being assessed at the present time at the value of $1,000,000. That during the year ending June 30, 1905, the operating expenses of the complainant actually and necessarily incurred in operating its works for the purpose of carrying water to the city of Oakland and its inhabitants will amount to the sum of at least $113,005.

That during said year the complainant will be compelled to pay at least the sum of $128,887 taxes levied upon its property for that year. That, in addition to supplying said city of Oakland and its inhabitants, the complainant now supplies water to the towns of San Leandro and Emeryville and the inhabitants thereof, and to the inhabitants of a portion of the city of Berkeley, and also supplies water for certain purposes to the county of Alameda. That the total revenue which the complainant will derive from these sources will not exceed the sum of $401,800. That in order to derive a just income from the water supplied to the city of Oakland and its inhabitants to pay for necessary additions to its plant, its operating expenses and taxes upon its property, and to pay 7 per cent. upon the present value of its plant, it is entitled to have the rates for the water so furnished so fixed that the gross income therefrom will amount to $850,000. That in addition thereto the complainant is entitled to an annual sum for depreciation of its plant, amounting to at least $82,000. That in January, 1904, the complainant furnished the council of the city of Oakland, in compliance with are law, a detailed statement showing the name of each water rate payer, his or her place of residence, the amount paid for water by each, during the year preceding, also showing all revenues derived from all sources during the said year, and an itemized statement of its expenditures for supplying water during said time. That from said statement it appeared, and such is the fact, that the receipts and expenditures so made by complainant during said time were as follows: Receipts from water rates, $546,181; from other sources, $27,401-- making a total of $573,582. That on May 31, 1904, the council of the city of Oakland passed a resolution purporting to fix a maximum rate to be charged by the complainant for furnishing water to the city and its inhabitants for the fiscal year beginning July 1, 1904. That the said rates were fixed arbitrarily and without any consideration or regard to the right of the complainant to a reasonable compensation or to a reasonable income or any income upon its investments, and without consideration of the value of complainant's works or property or its operating expenses or its taxes, or the right of its stockholders to reasonable dividends upon the stock. That in the passage of such resolution the said council, through a majority of its members, declared that no consideration had been given to a large and important and material part of the property and plant of the complainant, used and necessary to be used for the purpose of supplying the city of Oakland and its inhabitants with fresh water, and no consideration whatever was given to the expense of operating the same or the taxes required to be paid thereon. That a fair return and rate of interest upon the present value of the complainant's property, which exceeds the sum of $8,500,000 for water to be supplied to the city of Oakland and its inhabitants for the fiscal year beginning July 1st, and a just and reasonable rate therefor is 7 per cent. of said sum of $8,500,000 over and above operating expenses and taxes, and over and above and in addition to at least 2 per cent. upon the value of that portion of said property which falls within the definition of perishable structures, to wit, $4,500,000. That according to the complainant's best information and belief the taxes which will be levied upon its property so used by it in supplying said city of Oakland and its inhabitants with water will exceed the sum of $128,086.96, which is the amount of state, city, and county taxes which were levied upon said property for the year 1903.

That the rates purporting to be fixed by said resolution are unjust, unreasonable and unconstitutional, oppressive and confiscatory. That if said resolution is enforced the complainant's gross income for the fiscal year beginning July 1, 1904, after deducting the operating expenses and taxes, will be wholly inadequate to pay a reasonable income or interest upon the actual present value of the property of the complainant in actual use in supplying water to said city and its inhabitants, or any greater income or interest thereon than about the rate of 2 1/2 per cent. per annum. That no allowance or value was ever made by said council for the franchise of complainant, although the same is assessed by said city of Oakland at the value of $1,000,000, and taxes are collected by said city from the complainant on that value. That said council has refused to value the established and going business of the complainant at any sum, although such value exceeds the sum of $1,000,000. That the fair and reasonable value of the service to be rendered by the complainant to the city of Oakland and its inhabitants in supplying them water during the year beginning July 1, 1904, is $595,000, exclusive of taxes, operating expenses, and a proper allowance for depreciation of the complainant's plant, resulting from its use. That the complainant is ready and able to supply to said city and its inhabitants at the present time 15,000,000 gallons per day of pure fresh water, but that the quantity of water which is necessary to meet the reasonable requirements of said city and its inhabitants at the present time does not exceed an average of 10,000,000 gallons per day.

The bill further alleges that on May 28, 1901, a judgment was rendered in the superior court for the county of Alameda state of California, in a suit brought by the complainant against the city of Oakland, the council thereof and its members, to set aside an ordinance passed by said council on March 26, 1900, establishing water rates for the year beginning July 1, 1900, which judgment was rendered in favor of the plaintiff therein and against all the defendants. That said court was occupied for a period of seven months in taking testimony upon the issues involved in said suit, and in the judgment it was found, adjudged, and decreed, among other things, that at the date of the commencement of that suit in May, 1900, the value of the property of the complainant, used and necessary to supply the city of Oakland and its inhabitants with water, was then of the value of $7,000,000. That in said judgment it was further...