Spending Money Like Water? : Luxurious New Facility Angers Critics of Castaic Lake Agency; Officials Say They Are Prudent

Any day now, from a scenic perch overlooking the Santa Clarita Valley, an obscure water agency with a flair for the extravagant will switch on a new water treatment plant that will be at least $36 million over projected costs.

The tally for the Castaic Lake Water Agency’s sparkling Rio Vista plant has spiraled to $116 million--46% over original estimates--and the costs are still rising. Among Rio Vista’s amenities are a $6-million headquarters building, a $2-million conservation garden and a $100,000 decorative water globe and fountain.

To pay for them, Castaic, despite amassing a $58-million surplus, has delayed half a dozen other water projects in the region.

And when it opens, the plant will produce water that won’t be needed by any existing customer.

With its Spanish-style design and careful landscaping, Rio Vista provides an apt metaphor for the Castaic Lake Water Agency itself. To agency defenders, Rio Vista is a prudent effort to safeguard future supplies; to agency detractors, it is a typical extravagance by an agency that spends as it pleases, and with little public oversight.

“It’s a special district that’s out of control. It’s out of control of the public,” said Ed Dunn, a board member of the nearby Newhall County Water District, one of four retailers that buy water from Castaic.

Agency general manager Robert Sagehorn offers a different view: “By and large, we’ve served our area well. I would think the population is relatively satisfied with their water system. And I would think they’re relatively satisfied with their costs.”

The agency’s water rates are low, and have not been raised in the last decade. But ratepayers and those who pay property taxes supporting the district fear that the spending could spill over into higher water rates.

Residents, rather than developers, are paying most of the costs of the new plant through property taxes, contrary to agency promises. And the tiny agency has quietly become one of the richest of its kind in the state. The $58-million surplus is 10 times its annual operating budget.

Elsewhere in California, local governments are struggling with layoffs and even bankruptcy. But at the Castaic Lake Water Agency, with 25 full-time employees, public money still flows freely.

“There are probably some things that could have been done differently. But I think we can prove [that] what we did in each of those cases has a basis in economics,” said Sagehorn, insisting that the plant spending was necessary to accommodate the region’s future growth.

Stephen McLean, a former director and now a top Castaic official, said the agency has “made good choices. At the time we did what we thought was best. In retrospect, we made some mistakes, but that’s life in the big city.”

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Critics say the new plant, designed to process 30 million gallons a day, is just one reflection of a public agency operating without enough oversight. And they claim that Castaic has wasted millions in other spending and used public funds to go water hunting for housing developers.

“They’ve had a $30-plus-million overrun,” said Don Duckworth, a Santa Clarita city consultant. “Can you imagine what would happen to the county of Los Angeles if that happened?”

“I can’t think of a water treatment plant that’s had that kind of cost overrun,” said Steve Hall, executive director of the Assn. of California Water Agencies, which represents about 420 local water agencies. But he added of Castaic: “They’re members of ours. I’m not going to say anything bad about them.”

A water wholesaler similar to the Metropolitan Water District, the Castaic agency delivers State Water Project supplies from the California Aqueduct. Created by the state Legislature in 1962, the Castaic agency is governed by an 11-member board, seven elected and four appointed representatives of local water retailers. The agency provides one-quarter to one-half of the 15-billion gallons of treated water used by the 160,000 Santa Clarita Valley residents each year.

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The rest comes from ground water pumped by the region’s four water retailers, who deal directly with local customers. Since these customers get their bills from the retailers, and not Castaic, valley residents seem to know little of the agency, one of nearly 5,000 special districts in California.

“To me, they are a classic invisible government,” said Santa Clarita City Manager George Caravalho.

During the past two years, however, the agency has become more conspicuous, in part because of a spirited board election last fall that attracted 45% of the registered voters.

The agency also has become literally more visible by relocating itself, as part of the new plant project, from a small suite of offices in a commercial building to a publicly funded 580-acre facility in Bouquet Canyon.

Agency officials defended the elaborate design of the headquarters and grounds--including decorative tile roofs and a tiled parking area--saying they expected to give part of the land to the city for a major park, which would surround the plant.

Yet, more than five years after the agency acquired the property from the city of Los Angeles, none of the unused property has been passed along to Santa Clarita. Agency officials say the transfer will take place soon, but city officials say Castaic officials have repeatedly broken such promises in the past.

“I think the public got robbed in the deal,” said Santa Clarita Assistant City Manager Ken Pulskamp. “If you fly over the Santa Clarita Valley, it’s the most beautiful piece of property in the valley.”

The city and agency also are embroiled in a legal dispute that, like the park issue, had once appeared settled, only to flare up again. The city’s ambitious redevelopment project, designed to speed recovery from the Northridge quake, has been blocked by two lawsuits filed by the water agency, which fears a diversion of some of its property tax revenue to the city.

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Many residents seem to have taken little notice because the Castaic agency, flush with cash over the years, has been able to avoid increasing its water rate despite the cost overruns. And its water price is low, only about one-third that charged by MWD, for example.

Critics say the Castaic agency could have met its water demands far less expensively by doubling the capacity of its original plant near Castaic Lake to 50 million gallons a day. That was possible, but the agency opted for the reliability provided by a second plant. The $79.4-million project the agency estimated in 1990 has climbed to nearly $116 million as of July 1, with the total still rising.

Although agency officials in the boom years of the late 1980s predicted that growing water demand would quickly outstrip the capacity of the old plant, demand has never exceeded its capacity. And once Rio Vista opens, the agency plans to run both plants below capacity for some time.

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Agency officials said Rio Vista’s overruns have included paying $22.2 million for the site, $6.4 million more than planned; adding the $6 million headquarters building not in the original plan, and piling up $9 million worth of change orders on the project’s $58 million in construction contracts. Most of the work was done by Advanco Constructors of Upland, which bid $52.9 million for the plant and pipelines, and was paid $8.6 million more with the change orders. Records show that much of the extra cost was because of changes ordered by Castaic.

“There were circumstances beyond anybody’s control,” said Jack Russell, Advanco vice president.

Sagehorn defended his agency’s decisions, saying the project’s original estimates were not meant to be precise. He said the two-story administration building was “built for the future,” and that the garden and fountain, which will be open for tours by schoolchildren, were needed to promote water conservation.

“Everything we do is not driven on the basis of costs,” Sagehorn said. “It is driven on the basis of what is necessary to support the population estimates” and water quality standards.

Some $40 million in regional water projects the agency promised five years ago have been delayed because the new plant drained all the money. Those included the start of a planned reclaimed water system that was to distribute recycled water for landscaping uses ($12.7 million); upgrades to the old plant ($11 million); plans for developing emergency ground water supplies ($3.5 million) and other projects.

The agency says it needs its $58-million surplus as a reserve against existing debt and the possibility that the state may reduce its property tax revenue.

Two years ago, the district spent $304,000 in three months lobbying against such a proposal. Castaic prevailed, winning an exemption for itself and other similar districts from a plan to divert property taxes from local agencies to the state to help balance the budget. During that period, the agency also outspent every government agency in California in lobbying.

The agency now is saddled for the coming 25 years with annual payments on the new plant project that total about $8 million this year and will gradually rise to about $10.4 million annually by 2000 and thereafter.

Developers were supposed to pay most of the costs, but it has not worked out that way.

Despite an agency policy that says future users should pay for water capacity improvements, records show that developer fees have averaged only about $3 million over the past four years. And current users are paying for the rest of the debt through property taxes and water charges.

Sagehorn blamed the weak economy, which has dramatically cut development and developer fees in the region, and said that developers will pay their full share in the future.