A Look Back in History: Buying Out the Spring Valley Water Company

Interest in municipalizing San Francisco’s water service harkened back to the 1870s. But efforts to municipalize San Francisco water had begun in earnest in 1900-1901. Mayor James Phelan was in office. Subsequent to surveying up-country sources of water, the Mayor, the City Engineer, and the Board of Public Works came to agreement that the Hetch Hetchy Valley was advantageous over other options. Of key consideration was that it was a canyon with nearly-perpendicular granite walls rising above a flat meadow floor. 

After Phelan left office, other City officials kept the Hetch Hetchy option a secret. And, acting as a private citizen, Phelan applied for the rights to use Hetch Hetchy as a reservoir in April 1902. The City Engineer finally announced San Francisco’s intent in July 1902, and soon after, Phelan transferred his claim to the city. 

Partial Copy of Phelan Notice Posted July 29, 1901.

For ten years, different Interior Secretaries vacillated in denying, granting, and modifying grants to allow use of the Hetch Hetchy Valley as a reservoir. We all know of the opposition that came from John Muir and the Sierra Club. But also, and very nearly needless to say, the Spring Valley Water Company (SVWC) was none too keen on the idea either. 

It claimed that its watersheds and reservoirs were sufficient to supply the city’s needs for the foreseeable future. 

When, in 1913, President Hoover finally granted the allowance for Hetch Hetchy, funding for acquisition of Spring Valley had already been on the voter’s minds. A ballot initiative had been posted – and defeated – in 1910. And similar ballot measures continued to be posted well after the signing of the Raker Act. Measures were posted and defeated in 1910, 1915, 1921, and 1927. 

Proposed valuations in early and defeated ballot initiatives for acquisition of SVWC had been: 

  • January 14, 1910 – $35 million 
  • April 20, 1915 – $34.5 million 
  • 1921 – $38 million 
  • June 14, 1927 – $38 million 

Efforts to secure voter approval to buy the holdings of the SVWC were finally successful on April 10, 1928 and the purchase price had been set at $41 million. The 1928 effort, led by City Engineer M.M. O’Shaughnessy, Mayor James Rolph, former Mayor James Phelan, and Supervisor Frank Havenner, had produced a majority of 80 percent in favor. 

Presentation of Silver Plaque of President Wilson’s Letter regarding Raker Act. Taken at PUC Meeting. From left to right: Joseph Diviny, William McDonnell, Oliver Rousseau, Louis Petri. 1 of 3 negatives. 1 negative scanned.

Once the bond issue finally won voter approval, the next hurdle showed itself. San Francisco could not find purchasers for the bonds. (The same problem plagued the Hetch Hetchy bonds approved at the same time.) At last, in December 1929, the Bank of Italy (now Bank of America) under A.P. Giannini, elected to buy $4 million of the Hetch Hetchy bonds. He also led a syndicate that took the entire $41 million Spring Valley bond issue. 

The Board of Supervisors was finally able to create the San Francisco Water Department in early 1930. At inception, it was a division of the Board of Public Works. Its mission was to operate the system as a municipal corporation, to be self-financing, and to be responsible for liquidation of the bond issues involved in its creation. 

Copy of Woodrow Wilson’s letter regarding Raker Act, 1913 (copy). 1 of 2 copies.