San Diego Water Co. v. City of San Diego

The plaintiff is a corporation engaged in the business of .supplying water to the city of San Diego and its inhabitants. In February, 1890, the common council of the city passed an ordinance fixing the water rates for the year beginning July 1, 1890. In May, 1890, the plaintiff brought this action against the city, the common council, the mayor, and the individual members of the council, to annul this ordinance and enjoin its enforcement. The complaint alleged in substance that the entire revenue which plaintiff could receive during the year in question, under the rates so fixed, would be insufficient to pay its operating expenses and fixed charges for that year,j( and would, therefore, ’afford no reward whatever to plaintiff for furnishing the water, and that the ordinance would deprive plaintiff of its property without process of law and without compensation. It was also alleged that, hy reason of certain fraudulent practices on the part of the council, the plaintiff was deprived of a fair opportunity to be heard before the council, and prevented from properly presenting its side of the ease. The action was tried after the expiration of the year in question, and a judgment was…

concurring. The findings of fact made by the trial court which are deemed necessary to a consideration of tbe questions presented before us are as follows: 1. On tbe twenty-fourth day of February, 1890, and at tbe time the ordinance mentioned in plaintiff’s complaint was enacted by the common council of said city, tbe water plant and system of the plaintiff was of the value of $750,000; 8. The necessary operating expenses of plaintiff in conducting its property from July, 1890, to July, 1891, and the sum actually expended, was $40,-000; 3. Plaintiff was and is indebted upon its outstanding bonds regularly issued in .the sum of $1,000,000, bearing interest at five per cent per annum, of which sum $750,000 was necessarily expended iu the construction of the plant, and the interest upon which is $50,000 per annum; 4. The total receipts received under said ordinance from July 1, 1890, to July 1, 1891, amounted to $65,788,95, and no more; 5. The annual depreciation of plaintiff’s plant is three and one-third per cent per annum; 6. The rates as fixed by tbe ordinance for the year commencing July 1, 1890, were not just or reasonable, and were grossly oppressive, unjust, and…

concurring. I agree generally in the views expressed by Mr. Justice Garoutte. I do not comprehend how in this case the exercise of the power to regulate charges or to fix compensation for furnishing water is a taking within the meaning of section 14, article I, of the constitution. The waterworks were all constructed subsequent to tbe adoption of the constitution of 1879. Tbe city owns no waterworks. It is provided in section 19, article XI, of tbe constitution that any individual or company shall bave the use of the streets, fox laying down pipes and conduits and making connections therewith, so far as necessary for introducing into and supplying the city and the inhabitants with fresh water, “upon the condition that the municipal government shall have the right to regulate the charges *585 thereof.” Tbe corporation, therefore, constructed its works and invested every dollar of its capital upon this express condition. The privilege of distributing water for pay is a franchise which might have been withheld altogether. It is really a privilege granted to a private individual to perform a public service for pay. It is granted to all upon this express reservation of the right to…

concurring. I concur in the reversal of the judgment and order of the superior court. In finding the value as well as the cost of the plant the court included many items which were not proper to be considered for that purpose, and which are mentioned in the opinion of Mr. Justice Van Fleet as improperly constituting a part of the cost of the plant. While the cost of the plant may be properly considered as an element of evidence in ascertaining its value, I am clearly of opinion that it sho-uld not form the basis of estimating the revenue which the water company is entitled to receive. The value of the plant may change from year to year as materially as may the cost of operating the works, and there is good reason fox holding that *587 tbe constitution requires the rates to be fixed each year, in order that they may be adjusted to this changing oí value. It is not necessary here to lay down a rule which shall be applicable to all conceivable conditions, since the conditions governing in one municipality, or attending the supply of water to its inhabitants, will hardly ever be the same elsewhere, and it is only proper in the present ease to consider the circumstances attending the…

dissenting. I think the judgment and order appealed from should be affirmed. In fixing water rates, it is the duty of the city council to provide for a just and reasonable compensation to the water company. Anything short of that is simple confiscation, and is not only a violation of constitutional rights but is an extremely short-sighted policy. Bates ought to be adjusted to the value of the service rendered, and this means that the water companies should be allowed to collect annually a gross income sufficient to pay current expenses, maintain the necessary plant in a state of efficiency, and declare a dividend to stockholders equal to at least the lowest current rates of interest, not on the par or market value of the stock, but on the actual value of the property necessarily used in providing and distributing the water to consumers.

To arrive at the actual value of the plant, water rights, real estate, etc., cost is an element to be considered, but is not conclusive. The plant may have cost too much, it may have been planned upon too liberal a scale, its construction may have been 'extravagantly managed, tire real estate and water rights may have cost less or more than their…