STAFF REPORT - CITY COUNCIL/SUCCESSOR AGENCY/PUBLIC FINANCE AUTHORITY

1. Adopt a resolution (following a hearing providing the owner of the property an opportunity to speak), finding that public necessity requires the acquisition by eminent domain of the streetlighting facilities owned by Pacific Gas and Electric (“PG&E”) located within City boundaries on PG&E’s rate schedule as LS1-A, LS1-C, LS1-E, and LS1-F; and authorizing the City Attorney to proceed with an eminent domain proceeding to acquire real property; and
2. Confirm by Vote on the Resolution of Necessity that the City of Coalinga, to the best of its knowledge, has found and determined to have satisfied the three elements required for a claim in eminent domain, as outlined by California Code of Civil Procedure (“CCP”) section 1245.230, et seq.

Historically, streetlight systems in California have been owned predominantly by investor-owned utilities (“IOU”). In past decades, many municipalities have purchased their streetlighting facilities from their respective IOUs. Today, California municipalities typically own some or all the streetlight facilities; some do not own at all. In California and nationally, municipalities have benefited from owning their own streetlight facilities. Coalinga currently owns some, but not all of the streetlight system within City limits.

The City currently owns approximately 85 streetlights within the public right-of-way. Currently, the difference in ownership prevents the standardization of fixture types and comprehensive upgrade to Smart City technologies, and requires higher electricity rates and maintenance costs for the PG&E-owned fixtures.

Acquisition of the streetlighting system will also further the City’s goal of repairing and upgrading aging streetlight fixtures, thus helping it achieve state-mandated greenhouse gas reduction targets. By obtaining control over the streetlights’ design, repairs and upgrades , the City hopes to reduce its carbon footprint by conserving natural resources.

The City has also experienced a lack of timely maintenance after notifying PG&E. For example, for several months, some going back to December of 2021, PG&E received notice of the following which as of September 21, 2022 remain unrepaired:

• On Elm Ave. and Van Ness St. (South West Comer): Two Decorative lights have been out since at least December 9, 2021.
• On Elm Ave. between 3rd and 4th St. (West side of road): Decorative light flickers on and off since at least December 9, 2021.
• On Elm Ave. and 3rd St. (South West Comer): Streetlight has been out since at least December 9, 2021.
• On Elm Ave. between 3rd and 4th St. (West side of road): Two Decorative lights have been not working since at least December 9, 2021.
• On Elm Ave. and 4th Street (Southwest comer): Streetlight pole struck by vehicle and is leaning over and remains unrepaired. (PG&E claims this is not their pole) on March 23, 2021.

Appraised Value:

To establish the value of the property, (with Tanko Streetlighting, Inc.’s (“Tanko”) assistance) the City hired an independent appraiser to determine the fair market value of the City’s streetlight system. The appraisal obtained by Tanko on behalf of the City, was performed by Cushman and Wakefield on 12/14/2021, and assigned a value of $93,850 for the 663 streetlights currently owned by PG&E.

Negotiation Efforts:

The City attempted in good faith to work with PG&E to purchase the streetlights but was unable to reach an agreement on the sale. The City sent PG&E a letter communicating its interest to purchase the streetlight system which was received by PG&E on September 13, 2021.  PG&E responded that it was not interested in selling. On March 1, 2022, by certified mail, the City extended a formal offer to the utility to acquire the property for the appraised value. On August 16, 2022, the City sent another formal offer to purchase the streetlight system to counsel for PG&E.  PG&E responded but declined to present a counteroffer, stating that the appraisal undervalued the system.

Hearing:

Staff recommends that a hearing should be conducted, and PG&E should be invited to appear and be heard. California Code of Procedure section 1245.235 states that the public hearing is intended solely to provide the opportunity for the property owner to speak to the Council, and not as an opportunity for public input.

If a Resolution of Necessity is adopted, the City would authorize filing in pursuit of California Code of Civil Procedure sections 1240.030 and 1245.210 et seq. Meanwhile, with Tanko’s assistance, Staff will continue to communicate and attempt to reach an agreement with PG&E in the hopes of negating the necessity to carry out further condemnation actions.

Authority:

The power of eminent domain is authorized by Article I, Section 19 and Article XI, Section 9 of the California Constitution; sections 37350, 37350.5, 39732 and 40401 et seq. of the California Government Code; section 1230.010 et seq., 1240.110, 1240.120, and 1245.230 of the CCP, and other applicable law. The City’s authority is established if all of three elements below are determined:

1. The public interest and necessity require the project;
2. The project is planned or located in the manner that will be most compatible with the greatest public good and the least private injury; and
3. The property sought to be acquired is necessary for the project.

The City has satisfied all three of these elements. Owning PG&E’s streetlights is in the public interest of saving taxpayer funds, public safety through timely repairs and maintenance, and providing energy-efficient lighting. Necessity requires the City to obtain ownership of the streetlights to accomplish this. Securing ownership of the streetlights is most compatible with the greatest public good and the least private injury, especially as the poles are located within the public right-of-way and this will not change. The ownership of streetlights is necessary to qualify for the municipally-owned energy rate from the tariff.

Conclusion:

Purchasing the streetlights from PG&E is necessary and in the best interests of the community.  Therefore, Staff recommends the approval of the Resolution of Necessity to pursue the condemnation of the streetlights owned by PG&E, located within the City’s limits by exercising the right of eminent domain. The elements required for condemnation have been met in accordance with California Code of Civil Procedure Section 1245.230(c) and Government Code Section 7267.2:

1. The public interest and necessity require the project interest described in the Resolution.
   • The City will benefit from owning and maintaining the streetlights. It will have the needed control to properly maintain and update the system; additionally, there are substantial annual savings, the capability to increase repair responsiveness, the ability to integrate Smart City technologies, and decreased administrative costs.
2. The project is planned or located in the manner that will be most compatible with the greatest public good and the least private injury.
   • Given that the City will be continuing to use the streetlights at their current locations, the project is planned or located in the manner that would be most compatible with the greatest public good and least private injury. By obtaining the ownership of the streetlights, there would be minimal (if any) impact to the streetlights, the poles or the wiring, resulting in the least private injury for the utility. Additionally, PG&E would still be providing the electrical service required for the streetlight system, which decreases the private injury.
3. The property sought to be acquired is necessary for the project.
   • To achieve its goals of control of the system, decreased costs , intentional and planned design, increased safety, and improved maintenance, the City must acquire the streetlighting facilities owned by PG&E.
4. The public utility facilities to be acquired are a more necessary public use than the present use to which said facilities are appropriated.
   • The City’s ownership would be of more necessary public use because of the benefits that will be passed onto its citizens through increased responsiveness of repairs, decreased administrative inefficiencies, recovery of energy costs, increased business revenue, Smart City technology integration, improved public safety and reduction in greenhouse gases.
5. Whether the offer required has been made to the owner or owner of record.
   • An offer was made on 3/1/21, in which the City presented a written full market value offer of its entire utility-owned inventory established by the appraisal. The offer was accompanied by a summary Statement of Valuation, the appraisal, and an informational brochure.
   • On August 16, 2022, the City sent another formal offer to purchase the streetlight system to counsel for PG&E.  PG&E responded but declined to present a counteroffer, stating that the appraisal undervalued the system.

It is always the City’s preference to acquire real property through negotiation; however, with PG&E, negotiations have not moved beyond the City’s offer. If the City adopts the Resolution of Necessity, it will then be able to file an action for condemnation, which is the next step to acquire the property. This action addresses only the acquisition of the real property and no related items of claims resulting from the acquisition. The adoption of the resolution requires a two-thirds vote of the member of the City Council.

It is always the City’s preference to acquire real property through negotiation; however, with PG&E, negotiations have not moved beyond the City’s offer.  If the City adopts the Resolution of Necessity, it will then be able to file an action for condemnation, which is the next step to acquire the property.  This action addresses only the acquisition of the real property and no related items of claims resulting from the acquisition. The adoption of the resolution requires a two-thirds vote of the member of the City Council.

Tanko performed a physical audit of all City of Coalinga and PG&E owned streetlights.  The completed audit found 748 streetlights located on PG&E poles within the City of Coalinga. The utility-owned streetlights have an annual operating cost to the City of approximately $91,092. These costs will continue to increase annually. Once the City obtains ownership of the streetlights, converts the lights to LED, maintenance and energy costs will decrease by approximately $57,091 annually. Additionally, lower energy usage and costs will result from the City having control over the design. Based on the Machinery & Equipment appraisal performed by Cushman and Wakefield, the fair market value of the streetlight system is $93,850. The City will deposit the fair market value with the Superior Court of Fresno when the petition for eminent domain is filed.