Bid to Buy Troubled Utility to Be Studied

The agency that oversees takeovers and consolidations of special districts has authorized an $87,360 study of a private bid to acquire the Santa Margarita Water District.

The county’s Local Agency Formation Commission executed a contract with Muni Finance Services, a government finance firm based in Temecula, to analyze a proposal by the California-American Water Co. to buy the district in South Orange County for more than $300 million.

In May, the company announced that it wanted to purchase the troubled district--whose top two longtime managers were convicted on criminal conflict-of-interest charges last month--and assume all of its estimated $370 million in debt.

California-American, a Chula Vista subsidiary of New Jersey-based American Water Works Co., will pay for the study.

Sara F. Anderson, the commission’s executive officer, said the study will take four to six months and will be followed by a staff recommendation on the proposed purchase.

The state’s Public Utilities Commission, which regulates private utilities, will also conduct public hearings on the proposal.

The dissolution of the district was considered by the commission after 5% of the district’s 39,270 registered voters petitioned for the action in June.

In a staff report, LAFCO administrators said the application was “the first of its kind in the state of California, because it calls for privatization of a public agency.”