Conflict-of-Interest Questions Surface at Water Board : Development: Officials with financial ties to Newhall Land and Farming helped shape projects benefiting the firm, records show.

A top water agency official and three board members have helped shape millions of dollars in projects benefiting developer Newhall Land and Farming Co. while holding financial interests in the firm, records show.

State conflict-of-interest law prohibits public officials, such as those of the Castaic Lake Water Agency, from making or participating in decisions when their personal financial interests are involved.

Newhall Land is the biggest landowner in the Santa Clarita Valley and has plans to develop thousands of acres there. The agency is the exclusive water wholesaler for the region, providing State Water Project supplies.

The actions in question, all taken over the last three years, involve grading a road through Newhall Land property, a project Castaic estimates is worth $3 million; planning a $4.2-million reclaimed water system that would exclusively serve Newhall Land developments, and removing a major waterline that ran in part under a commercial development site owned by Newhall Land at a cost of $576,610.

Robert Clark, the water agency’s attorney, called the participation and actions by all four men “in full accordance with the law.”

The officials, their financial interests and actions benefiting Newhall Land are:

* General Manager Robert Sagehorn, who has headed the agency since 1980 at a current salary of $113,300 and owns 300 limited partnership shares in the publicly traded Newhall Land with a market value of about $3,900.

As head of the agency, Sagehorn oversaw the development of all three projects.

* Stephen McLean, an agency board member through 1994 who was hired as operating engineer for the agency this spring and holds 200 Newhall Land limited partnership shares. At current market prices, the shares are worth about $2,600.

McLean voted for the road grading project on two occasions in 1992, saying no one told him not to. He has repeatedly abstained from later votes on follow-up questions on easements and property value issues involved in the project, saying he did so at Clark’s suggestion.

McLean voted for the plan to remove an agency pipeline from under Newhall Land property in 1993.

* Castaic board member Robert DiPrimio, who manages Valencia Water Co., a wholly owned subsidiary of Newhall Land.

DiPrimio voted to move the waterline under Newhall Land’s property.

He abstained from voting on the follow-up matters involving the grading deal, citing Clark’s advice.

* Board member Richard Green, who owes Newhall Land about $140,000, records show. Green said he bought his nursery business property from Newhall Land and is still repaying the debt.

Green voted to spend agency money to move its waterline out from under Newhall Land property.

In addition, Green and DiPrimio both attended a briefing last month in which Sagehorn proposed the water reclamation project. At the time, Sagehorn said he wanted board members to review the plan before the agency sought financing.

A spokesman for the Fair Political Practices Commission, which enforces state conflict-of-interest law, declined comment.

Supported by property taxes and water rates, the Castaic Lake Water Agency has been the target of growing criticism over its perceived pro-development policies, its $58-million surplus and its new, $116-million water treatment plant, which cost 45% over original estimates.

The four top Castaic officials disclosed their interests in Newhall Land in documents they filed that are required by the state Political Reform Act.

“To my knowledge, all agency directors and management acted in full accordance with the law,” said Clark, the agency attorney. “All interests have been disclosed. Nothing has been hidden,” he said, adding that he has given “conservative” advice to the agency on conflict issues.

Sagehorn oversaw all three of the projects impacting the developer and brought them to the agency’s board for consideration.

In an interview, Sagehorn acknowledged that he was involved in the agency projects affecting Newhall Land. Sagehorn said he could not recall abstaining from any issue related to the company, even though it is the largest private landholder in the water agency’s service area.

“I never had to abstain. I never act on anything. As a manager, I simply provide reports and the board takes actions,” Sagehorn said.

In interviews, board members DiPrimio and Green said they saw nothing wrong with participating in agency issues affecting the developer.

DiPrimio acknowledged promoting the agency’s reclaimed water proposal, which he said is important for the future of the Santa Clarita Valley and would also serve Newhall Land projects and impact his own water company. Asked about the conflict issue, he said, “I just don’t agree. I look at it as a responsibility I have to my customers.”

In the Santa Clarita Valley, “If you put your finger on the map 45 times, 42 of those hits are going to be on Newhall’s land,” said Green, who also acknowledged favoring the reclaimed water proposal. Newhall Land owns about 37,000 acres, or 30% of the property in the area served by the Castaic Lake Water Agency.

Marlee Lauffer, spokeswoman for Newhall Land, which founded and is developing the master-planned community of Valencia in the area, said she saw nothing unusual about the water agency officials’ ties to the company. “We have a lot of local stockholders,” she said.

According to agency records, the Castaic board voted in 1992 to approve plans and then award an $18.4-million contract to install two huge water pipelines and grade a hillside road through Newhall Land property.

The agency’s chief engineer, Lynn Takaichi, said the agency estimated the work’s value to Newhall Land at about $3 million. In a complex trade, the agency decided to route its pipelines along the future extension of Newhall Ranch Road, which the company would have to improve when it develops the area, and do partial road grading in the process. In exchange, the company gave the agency a pump station site and easements.

In the second project, Sagehorn recommended to the board last month a design for the agency’s first reclaimed water project, the sole initial beneficiary of which would be Newhall Land’s 1,007-acre North River project, where the company plans more than 5,400 housing units.

The board did not take a vote at its Aug. 9 meeting. Staff members said they wanted the board to see the new design before they proceeded to seek loans to fund the $4.2-million project. DiPrimio and Green both attended the presentation by Sagehorn.

Clark, the agency attorney, called the board discussion that day “wholly preliminary.” Under the plan, Newhall Land projects would receive a discount for using up to 235 million gallons per year of reclaimed water, and gain a secure water supply.

In the third project, records show the board on Sept. 8, 1993, on Sagehorn’s recommendation, awarded a $576,610 contract to relocate a 21-inch waterline that in part ran under a three-acre undeveloped Newhall Land parcel on Valencia Boulevard adjoining the south fork of the Santa Clara River.

Under agency policy, buildings cannot be developed on top of agency pipe easements because of access and safety reasons, Castaic’s Takaichi said. Shortly after the relocation was completed, Newhall Land began planning to develop an auto care center at the site and sold a portion of the land to a firm that applied to the city for a permit to build a carwash.

Lauffer said the agency line only ran along the edge of the parcel and its relocation “had absolutely no impact on our development potential of that property.” Lauffer said the firm had no specific plans to develop the property until after the pipeline was removed.

Before the pipeline project, Takaichi, the agency’s engineer, said Newhall Land officials “indicated to us there was no plans for development” of the site. Agency officials said their main motivation was to relocate another section of the pipeline nearby that had been battered in storms.