Castaic Water Treatment Plant Draws Criticism


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--45% 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, the Castaic agency, 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 current customer.

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

Whichever view one believes, it’s clear the agency has become a major player in the burgeoning Santa Clarita Valley. Does it labor dutifully to serve a fast-growing population, or does it actually promote growth through projects such as the Rio Vista plant? Both views are common.

“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 the Castaic agency. “They can think of projects quicker than they can find the money. And they spare no expense.”

Understandably, 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.”

Indeed, its 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 the spending could eventually spill over into higher water rates.


In fact, current residents rather than developers already are paying most of the costs of the new plant through property taxes, contrary to agency promises. And the tiny agency itself 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 agency, with its 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 what we did in each of those cases has a basis in economics,” said Sagehorn, insisting the plant spending was necessary to accommodate the region’s future growth.

Stephen McLean, a former director and now a top Castaic agency official, said he believes it 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.”

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 the agency has wasted millions in other spending and used public funds to go water-hunting for housing developers.

“They’ve had a $30-million-plus overrun,” said Don Duckworth, a Santa Clarita city consultant. “Can you imagine what would happen to the county of Los Angeles if that happened? But here, there was hardly even any local newspaper article about it . . . or any confrontation of the issue.”


“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, it is governed by an 11-member board--four appointed representatives of local water retailers and seven publicly elected members. 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.

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, 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 due to a spirited board election last fall that attracted 45% of registered voters.

The agency also has literally become more visible by relocating, 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 that resembles a hillside resort.


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 the city. Agency officials say the transfer will take place soon, but city officials say the agency has 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. And we’re putting a water plant on it. It’s nuts.”

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.

Many residents, meanwhile, seem to have taken little notice because the Castaic agency, flush with cash over the years, so far 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 the Metropolitan Water District, for example.

Critics, however, say the 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 officials instead opted for the reliability provided by a second plant.


The red ink has been flowing ever since. The plant project, estimated in 1990 to cost $79.4 million, has since climbed to nearly $116 million as of July 1, with the total is 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 yet exceeded its capability. And once Rio Vista opens, the agency plans to run both plants at partial capacity for some time.

Water agency officials said Rio Vista’s overruns have included paying $22.2 million for the huge 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 due to changes ordered by Castaic.

“They were things that were outside the company’s control,” said Jack Russell, Advanco vice president. “There were circumstances beyond anybody’s control.” He declined further comment.

Sagehorn defended his agency’s decisions, saying the project’s original estimates were not meant to be precise. He said the sparsely occupied 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. “We never felt we should be constrained in what we were building” by the original estimates, he said.


During the same period, however, at least three other California water agencies--the Modesto Irrigation District, the Contra Costa Water District and the Calleguas Municipal Water District in Ventura County--each built similar but more austere plants for less than their original estimates.

After hearing about Castaic’s elaborate headquarters building with its subterranean parking, the costly garden and other features, Calleguas General Manager Don Kendall quipped, “I’m embarrassed to show you my place. It’s a basic-looking structure.”

Through it all, the agency’s spending has cost Santa Clarita residents dearly. About $40 million in regional water projects it 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 in the future.

Two years ago, the district spent $304,000 in just three months lobbying against such a proposal. The agency 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, it also outspent every other government agency in California in lobbying, according to state records.

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 hasn’t worked out that way so far.

Despite an agency policy that says future users should pay for water capacity improvements, records show developer fees have averaged only about $3 million over the past four years. 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, predicting that builders will pay their full share in the future. But he conceded, “There’s probably a current tilt in this that’s not where you’d want it to be.”

Agency officials argue they’re fortunate to have built up the huge surplus over the years, saying some of it may have to go to help pay off the debt for the new plant if the economy remains weak.

Caravalho, Santa Clarita’s city manager, couldn’t disagree more.

Caravalho sharply criticized the water agency’s spending practices at a time when “cities and counties were cutting back essential services. Don’t you think there’s something wrong with that?”

The Castaic agency, meanwhile, continues to think big. It recently commissioned a study predicting the Santa Clarita Valley’s population would triple to 500,000 residents by 2020. It has begun discussing increasing its facilities accordingly.


MONDAY: Agency officials linked to developer.


Rio Vista Costs

The cost for the Rio Vista Water Treatment Plant grew by $36 million--a 45% increase--since original projections in 1990:

Costs in millions


1990 1995 Land acquisition $15.8 $23.4 Plant construction $63.6 $92.2 Total $79.4 $115.6


Source: Castaic Lake Water Agency


Castaic Water Woes

The Castaic Lake Water Agency, the regional water supplier for the Santa Clarita Valley, soon will open its new 30 million gallon-per-day Rio Vista Water Treatment Plant. However, enthusiasm has been muted by the project’s vast cost overruns and what critics call an overly grandiose design.

Water Agency Revenue

The sources of governmental fund revenue for the Castaic Lake Water Agency, in millions of dollars:


Fiscal Property Water Developer year taxes sales fees* Other Total 1983-84 $4.3 $1.1 - $0.80 $6.2 1984-85 $4.4 $1.2 - $0.98 $6.6 1985-86 $7.4 $1.7 - $0.89 $10.0 1986-87 $7.3 $2.2 - $0.99 $10.4 1987-88 $8.6 $2.7 $3.5 $1.10 $16.0 1988-89 $9.7 $2.8 $5.0 $2.80 $20.2 1989-90 $10.3 $3.2 $4.6 $3.10 $21.2 1990-91 $11.6 $2.2 $1.8 $12.7 $28.2 1991-92 $13.1 $1.6 $6.9 $11.6 $33.2 1992-93 $9.8 $1.9 $1.2 $9.00 $22.0


* The amount developers pay the agency to connect to the water system.


Water Agency Sales

The amount of water provided by the Castaic Lake Water Agency has dropped since 1990 because of reductions in supplies of state water, which the agency provides, and increased groundwater pumping by area water retailers.


In Thousands of Acre-feet*

1986: 13.0

‘87: 14.6

‘88: 18.7

‘89: 18.9

‘90: 21.8

‘91: 14.9

‘92: 11.3

‘93: 13.0

‘94: 12.3

1995: 18.3

* One acre-foot represents an amount of water one foot deep distributed over one acre.

Source: Castaic Lake Water Agency


Profiles of Board Members

Listed below are members of the Castaic Lake Water Agency board, the dates when they became board members and their occupations. They are paid $100 per meeting.

E. G. (Jerry) Gladbach; 1985; manager of civil engineering, L.A. Department of Water and Power

Robert DiPrimio; 1987; managing director, Valencia Water Co.

William Manetta Jr.; 1987; president, Santa Clarita Water Co.

James Gates; 1989; chemist, Metropolitan Water District

Donald Froelich; 1991; manager, Glendale Water Department

William Cooper; 1993; assistant superintendent, Metropolitan Water District

Dean Efstathiou; 1993; assistant deputy director, L.A. County Department of Public Works

Richard Green; 1993; owner, Green Landscape Nursery

Donald Hayes; 1994; director, Newhall County Water District

Richard Balcerzak; 1995; retired executive, Metropolitan Water District

Randall Pfiester; 1995; research scientist, Litton Guidance and Control Systems

Source: Castaic Lake Water Agency