Apple Valley: The Town That Can’t Afford to Quit

The Town of Apple Valley’s mission promises “a better way of life through local control of public safety, development, services and amenities.” This leaves unanswered what the town should leave to someone else.

That omission can become expensive for the residents, even in the absence of corruption or spectacular incompetence. In three decades in municipal government, I watched many cities start things. But amid the excitement of initiating a new program or “investment,” I never witnessed a council pause and ask two questions: Should we be doing this? And what will it cost to stop?

Such questions do eventually get asked, 10 or 15 years later, by a council trying to free the city of something it never fully understood it had signed up for.

A town of about 75,000 in California’s high desert, Apple Valley has run this progression more than once across a variety of utility and commercial activities.

The Cheapest Way Out Was to Buy It

On November 18, 2008, the town council agreed to buy the Apple Valley Country Club, which was headed for closure. That was the last day that saying no would have cost the residents nothing.

Escrow did not close for nearly three years, because the purchase of the golf course depended on disputed water rights, and settling that took until late 2010 and cost $750,000. By July 2011, the town had spent $3.2 million on the course.[1] The town proceeded with the purchase because not closing risked “legal action that would have potentially far exceeded the cost to close escrow.”[2] Three years in, the best argument for buying the golf course was that backing out would cost more.

The cash to close escrow came from the town’s own sewer fund — an account funded by sewer bills and managed on the ratepayers’ behalf. The town’s sewer enterprise purchased the golf course’s water rights for $2.9 million, and the golf fund used the money to complete the purchase. Sewer ratepayers had involuntarily financed the town’s golf-course purchase.

By 2021, a decade later, the golf course owed the General Fund $3.7 million for keeping it afloat. The town’s auditors flagged the growing debt, and town officials said they were developing a repayment plan. That plan turned out to be forgiveness. The following year, the General Fund erased the debt by giving $4.1 million to the golf course.

Three years later, the town’s budget projected the golf fund’s balance at $3.2 million below zero. The latest budget no longer discloses that balance or what the golf fund now owes the General Fund. Last year, the course was budgeted to spend $1.9 million on operations and take in $1.1 million from greens fees, pro shop sales, and rents. The council approved the budget without acknowledging the $800,000 gap.[3]

The 2026-27 golf course budget shows revenue and expense suddenly matching at $2.1 million each, with budgeted revenue jumping 85 percent from last year. Nothing the town has published explains how.[4]

The golf course is not a story about a golf course. It is just one instance of how Apple Valley makes decisions that come with a high exit cost.

Ignoring Better Judgment Because They Wanted to Do It Anyway

The water system is the one activity where somebody actually did ask one of the right questions on the way in.

In December 2011, a council-appointed Blue Ribbon Water Committee studied the potential acquisition of the local private water system, Apple Valley Ranchos Water Company, and recommended against it. Because the water company was not a willing seller, the town could acquire the system only by condemning it — taking it by eminent domain, at a price set by the court. The report warned: “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, when the Town’s annual [general fund] budget for 2011-2012 is only $25 million.”[5]

Four years later, the council ignored the Committee’s recommendation and sued to take over the water system. It borrowed $6 million to pay its attorneys. In September 2021, it issued a $10 million, 20-year bond to refinance that debt and finance additional legal expenses. Repayment will cost the General Fund just over $12.7 million through 2041.[6]

Two months after the bond issuance, the trial court dismissed Apple Valley’s case. Later, the court ordered the town to pay the water system’s owner, Liberty Utilities, $13.2 million for its legal expenses. The town appealed and won in January 2025. Liberty appealed that decision, and on August 24, 2026, the state Supreme Court set the appellate ruling aside and sent the case back to the Court of Appeal, where it sits now.[7]

Ten years, a 67-day trial and two appellate courts later, Apple Valley does not own the water system and does not know whether it will owe $13.2 million. Its own Blue Ribbon Committee had warned about the prospect of $5 million or more in legal costs; the town put its water litigation costs at $8.5 million before the award and the appeals. However it ends, the bond repayment continues to 2041.

The Wrong Businesses Are Funding Town Services

The town runs sewer, trash and electricity services through separate enterprise funds, paid for by the customers who use them. Every year, the town’s General Fund bills those utilities for what it calls “administration” — nominally their share of the clerk, the town attorney, and the payroll office. In the 2025-26 budget, the last time the town published the administration charges for the three utilities, they totaled $2,484,900. The largest of those, $946,500, fell on Apple Valley Choice Energy, the town’s electricity-buying program, which already buys its accounting, invoice processing, rate setting, and regulatory work from a joint powers agency for about $980,000 a year. The town’s golf course was charged $191,747 as recently as fiscal 2022; the town has not explained why it no longer charges the golf course anything for administration.[8] From what I can tell, someone decided it was pointless to charge a program that had no ability to pay.

I have prepared such administrative cost allocations for other cities. The difference between a legitimate reimbursement and an unjustified transfer is whether the charge can be reasonably traced to the actual cost. None of the three “reimbursement” amounts changed between the last two budgets that disclose them, and the sewer share has not changed since at least 2022. That suggests that the calculations are not being updated with current information.

In the 2026-27 budget adopted this past June, the General Fund shows a $335,673 surplus. Without the $2,484,900 in transfers from utility funds, the surplus melts into a $2.15 million deficit.[9]

Two Lawsuits, and Nothing Changed

When I first came across these utility transfers I thought, “this is a Proposition 218 lawsuit waiting to happen.”

Then, I learned that residents had already sued – twice.

Proposition 218, which California voters added to the state constitution in 1996, limits what a government-run utility may charge its customers to the reasonable cost of providing the service. A charge used to fund a transfer to the General Fund must be supported by the reasonable cost of services the General Fund provides to the utility; to the extent the charge exceeds that cost, it can become a tax requiring voter approval.

In 2016, a resident sued the town for sewer transfers that appeared to violate Proposition 218. The town settled in February 2017, agreeing to return nearly $800,000 to the sewer fund and cutting the household monthly rate from $35.04 to $31.43.

Later that same year, the same resident brought a class action under Prop 218 and Prop 26, challenging the trash franchise fee passed on to garbage customers on the same theory: money collected for a specific service was in fact transferred to the General Fund, which makes the charge an illegal tax. Under the Town’s agreement, Burrtec Waste Industries collects the trash under a franchise agreement; the town charges its own trash enterprise for administration and retains an 18 percent franchise fee. That case settled in 2019 for $3.15 million.[10]

The town resolved both cases but changed neither its opaque reimbursement methodology nor its extraordinary 18 percent trash franchise fee. The California Supreme Court has held that a franchise fee exceeding the reasonable value of the franchise is a tax to that extent — and the town bears the burden of establishing reasonableness. For comparison, the town charges the electric, gas, and water companies two percent to run their wires and pipes under its streets.

Whether the administrative reimbursements or the trash franchise fee are unlawful is a question the town cannot answer about itself. Its budget publishes no allocation schedule, and its last audited financial statements, for fiscal 2022, arrived two years after that year closed. A town that cannot close its books cannot say with authority what its services cost and, thus, cannot demonstrate that its administrative charges do not exceed them. A cost-of-service study would cost a small fraction of either one of these settlements.

The town is left with an intractable problem. Its General Fund is kept afloat by $2.5 million a year billed to three utility funds without supporting documentation. Reduce those charges to what the services actually cost and the budget breaks. Terminate any of the three utility activities and the budget breaks. The only way to keep the General Fund whole is to stay in all three and keep the unsubstantiated internal billing in place.

If I were the town attorney, I would prepare for more lawsuits.

A Rejected $15 Million Offer to Walk Away

In July 2025, San Bernardino County offered to buy the town’s animal shelter. The terms: $10 million at closing and a $5 million credit against ten years of sheltering services. More than 800 residents signed a petition against the sale, worried their lost dogs would end up in Devore or Big Bear. In the face of this pressure, the council voted 5-0 to keep the shelter.[11]

Wanting to keep the shelter is understandable. The town contracted out its sheltering for years. But in 2004, when the nonprofit doing the work raised its rates, the town decided it could do the work more efficiently. It built its own shelter and then, in 2010, replaced shelter with a newer 36,000-square-foot shelter facility that local critics called the $8 million Taj Mahal. By 2025, the council was not deciding whether the town should be in the sheltering business. It was deciding whether to undo 20 years of bad decisions, each of which was priced when diving in, and none of which calculated the cost of getting out.

The council turned down the county’s $15 million offer and ended its paid contract to house animals from county areas. The county moved its animals elsewhere, ending its roughly $1.1 million annual payment to the town. Apple Valley kept the shelter and responsibility for operating it. This year, the town has budgeted about $2 million to operate the shelter, against roughly $200,000 in fees in the last published revenue schedule. Contracting the same sheltering from the county would have cost about $615,000 — a saving of some $1.2 million a year.

They Couldn’t Say What They Had, But They Knew They Needed More Money

Confronted with its multiple financial debacles, the council voted on July 23, 2024, to put a sales tax increase on the ballot for the upcoming November 2024 election. The newest audited financial statements in existence that night, the ones for the year ended June 30, 2021, were three years old.

So the council had no current audited statements from which to tell residents what the town owned, what it owed, what its activities actually cost, or whether the transfers into the General Fund were made as the council approved them. But the council told residents with certainty that the town needed a new tax.

Everything that should have been on the table — the future of the golf course, the trash business, the electricity operation, and the sewer utility — would have required current financial information. What cannot be reported does not get considered. And the wait has turned out to be a long one. The financial statements for fiscal 2022 were eventually released, but more than three years after the end of fiscal 2023, we are still waiting for that year’s audited statements, and for every year since.[12]

Such is how financial ignorance becomes a means to maintain the precarious status quo.

The voters approved the new sales tax. Two years later, the additional $11 million in revenue has not solved anything.[13] The General Fund is still dependent upon the unjustified utility transfers; it still retains financial risks associated with the utilities and golf course operations.

Every Exit Has a Premium Price

Apple Valley has cornered itself. Sell the golf course and the town may have to book a loss. Hand the electricity customers back to Edison, which never stopped owning the wires, or unwind the town’s trash enterprise, and the General Fund loses the two largest of its three administration charges, about $1.7 million. End the town’s shelter operation and the council chamber fills up again with residents who don’t see the connection between subsidizing the shelter and the tax increases that will eventually be needed. The sewer utility has no obvious buyer, because the town has been the only provider long enough that nobody else is set up to be one. That is a cost of the original decision, not a reason to keep it.

The town contracts for electricity years in advance and resells it to residents, who can leave for Edison at their next meter reading. At the end of fiscal 2022, those contracts committed the town to pay $63,387,964 through 2036, whether or not it still had customers for the power. That year, the electricity fund lost $2.3 million and ended with enough cash to cover just three weeks of operating expenses. It paid the General Fund $1.2 million anyway.[14]

If customers leave, the town still must meet its power-purchase commitments. Anyone considering taking over the electricity business would have to weigh those obligations against revenue from customers who remain free to leave. The town has never published a calculation of what that business is worth.

Every right move now costs something: money, or the goodwill of people who became attached to a program the town should never have owned. That’s the argument that will be made for never making any move.

And it is still going on. On June 9, on the consent calendar — the block of routine items a council adopts in one vote — the town extended its waste disposal agreement with the county to 2035 in exchange for a lower rate per ton. What it gave up was the right to leave that agreement without having to prove cause. It had given up that same right once before, in 2022, for a cap on the same rate.[15]

This is what a mission problem looks like after nearly two decades of being treated as a budget problem.

Ask at the Door

The time to decide whether a town should do something is before it does it. That is the only moment the decision is free. On the night of any significant vote, there’s one question that belongs in the staff report right next to the cost estimate: does this activity require the town’s legislative and enforcement powers to protect residents, businesses, and their property? It’s not enough to say that a proposed activity is “good,” or “popular,” or “cheap,” or “will be well run.” Nearly any service or amenity can promise “a better way of life,” but that does not establish that the town should provide it.

When a town later finds itself shouldering an inappropriate activity, the solution has to be definitive — sell the asset, or transfer the operation, or settle the contracts and withdraw. Any proceeds from this exit must be returned to those ratepayers. A phase-out on a timeline is what the next council quietly extends.

No Apple Valley town council ever considered the costs of its unbounded mission. Instead, they took on a new activity, and then another and another, each in a form that made termination financially burdensome. The effect is the same. Apple Valley is now too expensive to turn around.

Note: This account is built from what the public record will support: adopted budgets, including the fiscal 2026-27 budget adopted June 9, 2026; audited financial statements through fiscal 2022, the most recent available; court filings; and contemporaneous reporting. The record is thin in places, and there may be facts it does not reflect. If some of it turns out to be wrong, that is not a footnote to the argument. A town of this size should be able to tell a resident what it owns, what each activity costs, and what it has promised to pay through 2036 and 2041. This one cannot, and no one commenting on it — including me — can reason from more than it is able to produce.

Mark Moses is a senior fellow with the California Policy Center. He has 30 years of experience in local government administration and finance. His book, The Municipal Financial Crisis – A Framework for Understanding and Fixing Government Budgeting, was published by Palgrave Macmillan and is available from major online booksellers.

https://munifinanceguy.com/ X/Twitter: @MuniFinanceGuy

Notes

1. Town of Apple Valley, “TOAV to close escrow on AVCC,” applevalley.org, July 7, 2011: purchase approved November 18, 2008; water rights dispute settled November 5, 2010, for $750,000; spending to date $3.2 million; water rights valued at $2.9 million. Escrow closed August 8, 2011. The council approved the water rights sale to the wastewater fund in late June 2011. A March 10, 2011 lease supplied those rights to Apple Valley Ranchos at no charge in exchange for reduced golf course irrigation rates (CPUC Resolution W-4882).
2. The same posting describes a 2-2 impasse with one member recused.
3. Fiscal 2021 audited statements, emphasis-of-matter paragraph: $3,722,173 in General Fund advances to golf and a repayment plan under development. Those statements are posted on the California Choice Energy Authority website. Fiscal 2022 statements: $4,094,734 transferred to golf “to fund certain expenditures and cover operating deficits,” with no remaining advance. The General Fund budget-and-actual schedule shows no transfers out in the final amended budget and $4,218,848 actually transferred. The 2024-25 adopted budget projects golf’s June 30, 2025 balance at $(3,207,936). The 2025-26 budget omits fund balances and budgets golf expenses at $1,908,321 against $1,107,210 in green fees, pro shop sales and rents.
4. Golf is budgeted at $2,046,265 in both revenue and expense for 2026-27. Resolution No. 2026-18 does not state what the revenue figure contains, and the General Fund appropriations it adopts include no transfer to golf.
5. Blue Ribbon Water Committee report, December 12, 2011; the quoted passage appears as a Finance Committee recommendation. The $25 million refers to the General Fund, not the all-funds budget.
6. Fiscal 2022 audited statements, printed page 49: the September 2021 $10 million lease revenue bond refinanced $6 million drawn on a line of credit. Remaining proceeds were authorized for ongoing water-acquisition costs, additional capital improvements and issuance costs; the note does not establish their ultimate use. The bond bears 2.52 percent interest and matures September 1, 2041, with $12,721,726 in total General Fund debt service. The town put water litigation costs at about $8.5 million as of late August 2021, before dismissal and appeals.
7. Complaint filed January 7, 2016; 67-day right-to-take trial; dismissal November 12, 2021; $13.2 million in litigation expenses awarded August 2, 2022. The Court of Appeal reversed in Town of Apple Valley v. Apple Valley Ranchos Water (2025) 108 Cal.App.5th 62, mod. 108 Cal.App.5th 666. The California Supreme Court (S289391) unanimously reversed the Court of Appeal on August 24, 2026 and remanded to that court.
8. Adopted 2025-26 budget, interfund “Administration” charges: sewer $748,400, solid waste $790,000, electricity $946,500, unchanged from the prior year. The General Fund credit is $2,484,000, a $900 discrepancy. Fiscal 2022 audited statements report sewer $748,400, solid waste $807,205, electricity $1,194,225 and golf $191,747; no golf charge appears in either of the last two budgets. California Choice Energy Authority’s 2024-25 budget charges Apple Valley $151,812 in administrative service fees plus about $830,000 in data management and professional services. Resolution No. 2026-18, adopted June 9, 2026, sets General Fund appropriations at $51,112,595 against $51,448,268 in revenue; none of its 24 department appropriations is the administration credit.
9. $2,484,900 is the last itemized figure, from 2025-26; the town has not published the 2026-27 charges. The 2025-26 budget added General Fund revenue account 490000, “Administration Overhead,” at $1,538,400 — the sewer and solid waste charges combined, against zero the prior year. Non-Departmental account 710240, “Administration,” continued to reduce General Fund appropriations by $(2,484,000).
10. Sewer action CIVDS1604968, filed March 28, 2016, settled February 2017; solid waste class action CIVDS1725027, filed December 20, 2017, settled in 2019. Neither produced a ruling on the legality of the charges, and the release did not extend to future rates. The town’s budget book gives electric, gas and water franchise fees as two percent of gross receipts and dates the trash fee increase from six to 18 percent to August 2014. Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 269 holds that a franchise fee exceeding any reasonable value of the franchise is a tax to that extent. Zolly v. City of Oakland (2022) 13 Cal.5th 780 held that Oakland had not established an exemption on demurrer and placed the burden of proving an exemption on local government. Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.5th 1 holds that “the budgetary transfer itself is not a tax.” A November 2015 sewer demand letter cites an allocation schedule at page 257 of the 2015-16 proposed budget, allocating $637,308 of general government cost to wastewater.
11. July 22, 2025 council agenda report and local coverage of the shelter vote describe the county offer and residents’ “$8 million Taj Mahal” description. The town used Victor Valley Animal Protective League until 2004; the Powhatan Road facility opened in May 2010. The proposed agreement required acceptance of Apple Valley animals, but not housing at the Apple Valley shelter. County Contract No. 23-590 paid $1,110,122 for 2023-24. The town gave nonrenewal notice in late 2024; the county extended the contract to December 31, 2025. The agenda report estimated ten-year sheltering costs at $11.15 million gross, about $6.15 million after the credit. The 2026-27 Animal Services appropriation is $2,000,579, gross of fees; the 2025-26 budget, the last to publish fees, puts them at about $202,000. The separate $1,280,557 Animal Control appropriation would not have been displaced by the county offer.
12. The most recent available audited statements are for fiscal 2022, with the auditors’ report dated August 12, 2024, after the July 23 ballot vote. Fiscal 2023–2025 statements remain unpublished. The 2022 statements carry qualified opinions on Sewer and Solid Waste Management because unreconciled customer receivables prevented verification of balances. The fiscal 2024 Measure I audit reports a material weakness: June 2024 bank reconciliation and annual interest allocation were not completed until January 2026. The finding repeats fiscal 2023 and 2022 findings; management anticipated corrective action during fiscal 2026-27.
13. Town Council Agenda Report, June 9, 2026, on Resolution No. 2026-18. Measure P was approved in November 2024; 2025-26 was the first full year of collections. The adopted 2025-26 budget carries Measure P sales and use tax at $11,003,000.
14. Fiscal 2022 audited statements disclose $63,387,964 in take-or-pay power commitments at June 30, 2022, expiring at various dates through 2036. These are disclosed commitments, not recorded liabilities. Fiscal 2021 statements contain no comparable disclosure and report total multi-year contractual obligations of $5,230,633. The electricity fund lost $2,280,416 in 2022 and paid $1,194,225 in General Administration. Year-end cash was $1,686,011, including $192,000 restricted, against annual operating expenses of $24,908,917.
15. Amendment No. 9 to Waste Disposal Agreement No. 98-48, approved on the June 9, 2026 consent calendar, extends the term to June 30, 2035. Section 5.2 commits the town to remain “with no provision to terminate without cause” in exchange for a rate of 83 percent of the county’s posted gate rate, net of its recycling fee. Amendment No. 8, approved June 2022, exchanged the same commitment for an 85 percent rate cap through June 30, 2026. The June 9 agenda report describes Amendment No. 8 as a rate cap only. Amendment No. 9 takes effect only if all 15 participating cities and towns execute it.