A California town that borrowed millions to seize a private water company by eminent domain now faces a court order to pay the company's owner $13.2 million in legal expenses after losing the case, according to an analysis published by the California Policy Center. The report examines how Apple Valley, a high desert community of roughly 75,000 residents, has repeatedly launched municipal ventures that proved financially ruinous to exit. Written by Mark Moses, a senior fellow with 30 years in local government finance, the analysis argues that the town's unbounded mission has trapped it in a cycle where backing out of any activity now costs more than continuing it.
The numbers tell a story of compounding commitments. Apple Valley borrowed $6 million to finance its lawsuit to condemn the local water system, then refinanced that debt in September 2021 with a $10 million, 20-year bond that will cost the General Fund $12.7 million in total repayments through 2041. The town put its water litigation expenses at $8.5 million before the court dismissed its case in November 2021 and ordered it to pay Liberty Utilities' $13.2 million legal bill. Ten years and a 67-day trial after filing suit, Apple Valley doesn't own the water system and doesn't know if it will owe the $13.2 million—the award was overturned on appeal in January 2025, but the state Supreme Court sent the case back to the appellate court in August 2026, where it remains. Meanwhile, the town's General Fund depends on $2.5 million in annual transfers from utility enterprises—sewer, trash, and electricity operations—without published documentation showing the charges reflect actual costs. The golf course the town purchased in 2011 for $3.2 million ran up a $3.7 million debt to the General Fund by 2021; the following year, the General Fund forgave $4.1 million. The 2024-25 budget projected the golf fund $3.2 million below zero. Last year, the course was budgeted to spend $1.9 million against $1.1 million in revenue, leaving an $800,000 gap the council approved without comment.
The report states that Apple Valley's electricity fund ended fiscal 2022 with enough cash to cover just three weeks of operating expenses after losing $2.3 million that year, yet still paid the General Fund $1.2 million. According to Moses, the town had committed to pay $63.4 million through 2036 for power purchases under take-or-pay contracts, whether or not customers remain—and those customers are free to switch back to Edison at their next meter reading. The author writes that a council-appointed Blue Ribbon Water Committee in December 2011 had warned against the water system takeover, saying "it would not be prudent for the Town in this economic environment to incur $5 million or more in legal and consulting fees for a hostile condemnation proceeding." Four years later, the council sued anyway.
The town's financial predicament stems from what the report describes as a failure to ask two essential questions before starting any program: should we be doing this, and what will it cost to stop? Moses traces how early decisions created exit costs that made continuation the only affordable path. When Apple Valley agreed in November 2008 to buy a failing country club, disputes over water rights delayed the sale for nearly three years and added $750,000 in settlement costs. By July 2011, the best argument for completing the purchase was that backing out would trigger lawsuits costing more than closing escrow. The town's sewer fund—built from ratepayer bills—provided $2.9 million to buy the course's water rights, involuntarily financing the acquisition. Two settlements in 2017 and 2019 returned nearly $4 million to sewer and trash customers after residents sued under Proposition 218, which limits utility charges to the reasonable cost of service, yet the town changed neither its methodology nor its 18 percent trash franchise fee. For comparison, the town charges electric, gas, and water companies just 2 percent to run infrastructure under its streets. Without the $2.5 million in utility transfers, the General Fund's $335,673 surplus in the 2026-27 budget would become a $2.15 million deficit.
The report concludes that Apple Valley has cornered itself: selling the golf course would book a loss, unwinding the electricity or trash enterprises would eliminate $1.7 million in General Fund transfers, and ending shelter operations would provoke residents who rejected a $15 million county buyout offer in July 2025 because they feared lost pets would end up in distant facilities. Moses recommends that towns ask one question before any major commitment: does this activity require legislative and enforcement powers to protect residents and property? When a town later discovers it's shouldering an inappropriate activity, he writes, the solution must be definitive—sell the asset, transfer the operation, or settle contracts and withdraw, with proceeds returned to ratepayers. Any phase-out timeline, he warns, is what the next council quietly extends. Apple Valley, the analysis finds, is now too expensive to turn around.