Small Castaic Agency Spends Big on Lobbying : Finances: The water utility paid more than every other government entity to plead its case in Sacramento.

By CYNTHIA H. CRAFT

Sept. 22, 1993 12 AM PT

TIMES STAFF WRITER

SACRAMENTO —

The small, upstart Castaic Lake Water Agency racked up $304,000 in lobbying costs during state budget talks this year, outspending every other government agency in California and breaking into the secretary of state’s Top 10 list of big spenders.

The sum came as a surprise to insiders who track the Capitol’s power brokers, raising eyebrows among critics who are disturbed by local governments paying more and more money for lobbying.

But Castaic Lake water officials, troubled by the second straight year of state budget cuts, said they took the determined position that it was well worth reaching deep into their pockets if they could manage to protect their funding.

Indeed, they credit their full-court-press campaign for helping them successfully elude Gov. Pete Wilson’s budget-balancing property tax revenue shift. In the end, the Castaic Lake Water Agency obtained an exemption from the governor’s plan to divert a portion of city, county and special district property taxes and give it to schools.

While many local bodies sent lobbyists scurrying to battle the tax shift this summer, none matched the costly effort launched by the agency that provides drinking water to the burgeoning Santa Clarita Valley, according to a report by Secretary of State March Fung Eu.

The Metropolitan Water District, which as the granddaddy of California’s water wholesalers covers a region of more than 15 million people, reported spending $76,702 in the period from April 1 to June 30. Like the MWD, the Castaic Lake agency buys state water project water and sells it at a profit--but within a much smaller area of 150,000 residents.

The Castaic water agency’s lobbying bill for the second quarter of 1993 also eclipsed that of the city of Los Angeles ($106,817), Los Angeles County ($211,138) and the massive Los Angeles Unified School District ($123,497).

And it was nearly as high as that of Phillip Morris U. S. A., which aggressively fought not only a cigarette tax but smoking ban proposals, and the California Manufacturers Assn., backers of a much-ballyhooed tax credit for purchase of manufacturing equipment, one of the largest victories of the legislative year.

Castaic water officials say that, by spending in six figures, they were able to hold onto at least $6.5 million in annual property tax revenue that the governor and the Legislature had threatened to cut.

“I think the amount spent was in proportion to the amount of funds at risk,” said agency General Manager Robert C. Sagehorn. “We needed to tell our story--that it was funding being put to a good and useful purpose and the state can’t just suddenly reach in and take it away.”

Longtime water board member E. G. (Jerry) Gladbach said, “It was a one-time expense. It was kind of like going for broke. We felt we had a lot at stake and it was worth it. We felt very comfortable with that.”

The sheer amount of cash involved, however, has led some to wonder whether the water agency hasn’t just upped the ante for other government agencies seeking to preserve their funding. Others note that the agency may have unwittingly provided support for the argument that special districts are disproportionately flush with funds.

“I’ve never seen a special district spend that kind of money on lobbying. That is a stunning amount of money,” said Kim Alexander, a policy analyst for California Common Cause. “It makes you wonder, where did their money go?”

Although different agencies sometimes use slightly different formulas for reporting lobbying expenses, the secretary of state’s quarterly report is considered the best yardstick for measuring the biggest spenders in the Capitol.

Alexander said the Castaic water agency illustrates a growing pattern of small governments spending thousands of dollars to make their voices heard in a never-ending tug-of-war over public funding.

“This water district is a shining example of that problem,” she said. “And this actually exacerbates the problem--that a small water district would set this example. It is really mind-boggling how much they spent.”

State Sen. Cathie Wright (R-Simi Valley) was among those targeted by representatives of the Castaic Lake Water Agency, said Catherine Morrison, the senator’s chief of staff. Wright has frequently authored legislation for the agency in the past, and the water agency’s lobbyists’ reports show an occasional gift of candy for her and other legislators.

“I can’t speak to the cost, but I do know that the more people you have watching your issue, the better off you are,” Morrison said. “Lobbyists can be more effective than an individual from the water agency itself because they know the players and where to make their case.”

It was Wright, in fact, who years ago helped the little water agency blossom from an obscure elected body to a more aggressive agency poised to keep pace with the unyielding suburban growth around it.

In 1986, Wright carried a bill broadening the agency’s powers, giving it the authority to buy surplus state water, levy connection fees and add representatives from two public and two private water companies to its seven-member elected board.

Since then, the agency marched forward with expansion plans that, over the years, have included an ill-fated attempt to buy up surplus water from Mono County farmers, the construction of the new Rio Vista Water Treatment Plant in Saugus and--recently--discussions about buying the private Santa Clarita Valley Water Co.

The Castaic Lake agency’s consulting firm, Reiter Lowry Consultants, orchestrated this summer’s campaign, hiring a lobbying group and a public relations firm to spread the word that stripping special districts of property tax revenue would be unfair.

One of the partners of the public relations firm--Stoorza, Ziegaus & Metzger--is Bobbie Metzger, a former press secretary to powerful Assembly Speaker Willie Brown (D-San Francisco). The lobbying firm, the Dolphin Group, is said to be well-connected in Republican party circles.

If the campaign was a bipartisan success, Sagehorn said that in his view, it also represented an important victory of local government over “the hocus-pocus subterfuge” practiced by the Legislature.

It also represented a departure from what the Castaic Lake Water Agency spent on lobbying in the past--less than $14,000 during last summer’s state budget brawl and less than $7,000 in a typical three-month period.

When asked what services his agency paid for, Sagehorn said, “It involved having to communicate effectively with 120 people in the state Legislature as to our local problem--that we could not raise fees to make up what the state took away.” Also included was a public relations blitz to educate the media and public about the consequences that special districts would suffer if the property tax shift went through, he said.

Had the water agency not obtained an exemption, Sagehorn said, it would have lost more than half of its $11.1-million normal annual capital expenditures budget. The money for lobbying came from the capital funds, he said, not the agency’s $5.2-million operating budget.

The Castaic Lake Water Agency was not the only water district in California to coax exemptions from the property tax shift out of the Legislature, said Connie Barker of the Assn. of California Water Agencies.

“We were fighting potential disasters daily” on behalf of member agencies during state budget negotiations, Barker said. None had to put up the kind of money that the Castaic Lake agency did.

Ed Dunn, a self-appointed citizen watchdog who regularly attends meetings of the water agency to monitor its spending and actions, said many local people believe that the water district is more concerned about serving the needs of developers than residents.

“This agency has been totally mismanaged for the public interest,” Dunn said. “We look at our cities, our counties and our state having such a rough time and having to cut back vital services. And we can’t get this agency to cut back.

“They are just squandering funds,” Dunn said. “And I don’t understand what the benefit is for these people to continue spending money as crazily as they do.”

Top 10 Lobbyist Employers 1993 second quarter expenditures *

California Medical Assn.: $517,987

Assn. of California Insurance Cos.: $351,013

Phillip Morris U.S.A.; $347,789

California Assn. of Hospital and Health Systems: $330,002

California Manufacturers Assn.: $325,298

Chevron Corp.: $307,287

Castaic Lake Water Agency: $304,845

Western States Petroleum Assn.: $304,082

California Cogeneration Council: $300,598

Pacific Telesis Group: $271,596

Spending by Government: AgenciesCastaic Lake Water Agency: $304,845