For Water Subcommittee Meeting, March 26, 2026
TO: Water Subcommittee Members
APPROVAL: Sachin Chawla, Director of Utilities
FROM: Toyasha Sebbag, Assistant to the City Manager
Title
Staff Request Water Subcommittee Provide Feedback on Fontana Union Water Company Shares. (ACTION)
body
RECOMMENDATION
Staff recommends that the Water Subcommittee provide feedback on Fontana Union Water Company Shares.
BACKGROUND
Fontana Union Water Company (FUWC) is a mutual water company located in Fontana, California, whose shareholders hold proportional ownership interests in the company and its associated water rights and infrastructure.
Unlike traditional corporate stock, shares in a mutual water company represent both voting rights and access to water supplies derived from the company’s groundwater and surface water sources.
Historical records show that the City of Rialto (City) acquired multiple FUWC share certificates between the late 1950s and mid-1960s, through purchases and transfers from private shareholders and corporate entities.
Examples documented in the share certificates include transfers from:
• Kaiser Land Company
• E.R. Sedlack Company
• private shareholders
Based on the compiled shareholder documentation, the City currently holds approximately 170.25 shares of FUWC stock (Attachment 1).
As a shareholder, the City is responsible for paying periodic assessments levied by FUWC to support the operation and maintenance of the water company’s facilities.
Assessment records indicate that the City has paid shareholder assessments from 1959 through 2026, totaling approximately $565,314.
ANALYSIS/DISCUSSION
The City/Rialto Utility Authority (RUA) periodically evaluates its water supply portfolio to ensure that resources are aligned with current and future municipal water supply needs.
Historical records indicate that the City acquired shares in the Fontana Union Water Company (FUWC) during the 1950s and 1960s, when shares were periodically available for purchase or auction. The City currently holds 170.25 FUWC shares.
While prior summaries suggested that the City had not taken wet water deliveries, available system information confirms that the City does have an existing physical intertie connection with Fontana at the Linden Avenue and Baseline Road location. This intertie, constructed in the late 1970s to early 1980s, remains in place and is operational, although it is typically kept closed (valves off) and used for emergency or supplemental supply purposes.
State water system records also identify an active emergency intertie connection between Rialto and Fontana-area systems, supporting the existence of this infrastructure.
The existence and use of this interconnection is independent of the City’s ownership of FUWC shares. The intertie is maintained under mutual aid and emergency supply agreements and would remain available to the City regardless of whether the City retains or sells its FUWC shares. Accordingly, the sale of FUWC shares would not impact the City’s ability to obtain supplemental or emergency water through this connection, nor is staff proposing to abandon or modify the existing intertie infrastructure.
Figure 1: Location Map
The City’s rights to surface water originating from Lytle Creek are governed by the 1897 McKinley Decree and preserved under the 1924 Lytle Creek Basin Judgment, which established priorities for surface flow and pumping rights within the basin. The 1924 Judgment specifically provides that existing water rights established by prior court decrees remain protected and are not impaired by subsequent agreements or arrangements.
When the City acquired FUWC shares in the 1950s and 1960s, Inland Empire communities relied primarily on local groundwater and surface water sources to meet water demand. Mutual water companies such as FUWC were commonly used by cities and landowners to secure access to local water supplies and participate in regional water operations.
Regional water supply conditions changed significantly when the San Bernardino Valley Municipal Water District began delivering imported water from the State Water Project (SWP) to the Inland Empire in 1972. The availability of imported water, combined with the development of municipal groundwater infrastructure, reduced the need for Rialto to rely on mutual water company shares for operational water deliveries.
As a result, while the City has continued to hold FUWC shares acquired during that earlier period, the shares have functioned as a legacy asset from a time when local agencies were securing water rights prior to the availability of imported SWP supplies.
Based on information provided by Fontana Water Company, another FUWC shareholder reportedly sold shares at approximately $2,500 per share. Applying this transaction indicator to the City’s holdings of 170.25 shares, the estimated value of the City’s FUWC shares would be approximately $425,625.
Fontana Water Company also noted that there may be future financial considerations associated with FUWC share ownership, including potential demobilization and legal costs related to legacy power facilities. These costs could result in increased ongoing obligations, potentially raising annual operating costs by two to three times current levels.
Staff evaluated the City’s current water supply portfolio and determined that selling the City’s FUWC shares would not adversely impact the City’s ability to meet current or projected water demands, as the City’s water supply reliability is supported by other groundwater, imported water, and adjudicated surface water rights.
Given that the City has not historically relied on FUWC for operational water deliveries and maintains sufficient groundwater, imported water, and adjudicated surface water rights to meet current and projected demands, the shares may represent an opportunity to monetize a legacy asset while maintaining the City’s overall water supply reliability.
Staff is requesting feedback from the Water Subcommittee regarding whether to proceed with advertising the sale of the City’s FUWC shares.
ENVIRONMENTAL IMPACT
The proposed action is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include: (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY
Approval of the proposed action also complies with the following City of Rialto Guiding Principles, General Plan Goals and Policies: “Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.”
LEGAL REVIEW
The City Attorney's Office has reviewed the staff report.
FINANCIAL IMPACTS
Operating Budget Impact
There is no impact on the Operating Budget.
Capital Improvement Budget Impact
There is no impact on the Capital Improvement Budget associated with the Water Subcommittee providing feedback on the potential advertisement and sale of the City’s FUWC shares.
If the City Council ultimately authorizes the sale of the shares, the transaction would generate one-time revenue to the Water Enterprise Fund. Based on information provided by Fontana Water Company indicating that another FUWC shareholder reportedly sold shares at approximately $2,500 per share, the City’s holdings of approximately 170.25 shares could have an estimated value of approximately $425,625, subject to market conditions and negotiation of the final sale price.
Any revenue generated from the sale would be deposited into the Water Enterprise Fund and could be used to support water system operations, capital improvements, or other water supply reliability initiatives, as determined by the City Council.
ATTACHMENTS
City of Rialto FUWC Share Data