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HomeMy WebLinkAbout1994-03-08 - AGENDA REPORTS - SALE SC WATER COMPANY (2)AGENDA REPORT UNFINISHED BUSINESS DATE: March 8, 1994 City Manat Item to be SUBJECT: Sale of the Santa Clarita Water Company DEPARTMENT: Management Services BACKGROUND Michael Murphy At the regular meeting of February 22, 1994, the City Council directed that a joint public meeting be scheduled between the City and Castaic Lake Water Agency (CLWA). The meeting is for the purpose of receiving public comment relative to the sale of the Santa Clarita Water Company. The meeting has been scheduled for Wednesday, March 23, 1994, beginning at 7:30 p.m. The location will be finalized shortly. Mayor Pederson and CLWA Board President, Mary Spring, will be meeting to define the operational logistics of the joint meeting. City staff has developed a "White Paper Discussion of the Sale of Santa Clarita Water Company." The paper outlines, from the City's perspective, some of the issues associated with the water retailer's sale. It is intended to serve as a preparatory document for the formal community discussions beginning on March 23, 1994. RECOMMENDATION 1. Set the joint meeting between the City Council and Castaic Lake Water Agency Board of Directors for Wednesday, March 23, 1994, at 7:30 p.m. 2. Receive "White Paper Discussion of the Sale of Santa Clarita Water Company." ATTACHMENT "White Paper Discussion of the Sale of Santa Clarita Water Company" MPMlclwamtg.agd 111 FR, UVE, A Item ' WHITE PAPER DDISCUSSION OF THE SALE OF SANTA CLARITA WATER COMPANY DECISIVE MOMENTS In the dynamic history of every community there occur critical junctures which forever shape the face of the community. These decisive moments are often part of a community vision but their timing is dictated by external factors coming together in the "right" sequence of events. The incorporation of the City of Santa Clarita was the culmination of over twenty years of desire for local governance by community residents. Although several earlier attempts at self - governance, in the form of earlier incorporation movements and new county formations were rejected, in 1987, the "right" combination of events led to the largest known municipal incorporation. Throughout its young life, the City of Santa Clarita has taken giant steps forward in developing high quality service delivery and commitment to balanced quality of life. Among the decisive moments faced by the citizens of Santa, Clarita have been the adoption of the General Plan, the future blueprint of our community, and the Santa Clara River Features Study, a futuristic vision for preservation of the last natural river in Southern California. The offer for sale of the Santa Clarita Water Company is another "it only comes once" moment to create a lasting imprint on the destiny of this community. The City would be remiss in its obligations to its current and future citizens if it did not cast a visionary eye toward this opportunity. WATER SERVICE: AN APPROPRIATE MUNICIPAL FUNCTION The history of California municipal governments is replete with stories of the close inter- relationships between water and those shaping the destiny of our nation's most populous and economically powerful state. A significant number of California cities own and operate the water services in their communities. Examples of these cities include Escondido, Fairfield, Santa Barbara and Sacramento, to name but a few. In Los Angeles County, many cities have a water retail operation. The cities of Glendale, El Monte, Pomona, Pasadena and Torrance most closely approximate Santa Clarita's population base. Santa Clarita is the largest city in Los Angeles County not directly providing retail water service. The City of Santa Clarita, though not currently a water service provider, has its own history of being a key player in local water policy. The recent earthquake called on the City to identify both sources and needs for water. The City Manager, as the Director of Emergency Services, was in daily contact with local and state water interests to ensure the safety and adequacy of our community's water supply. This charge was not simply limited to the incorporated area but, extended cooperatively throughout the entire valley. In 1991, at the height of California's drought, the City Council exercised its responsibility of enacting a comprehensive drought ordinance. This ordinance and the concurrent formation of a City -led drought committee ensured the responsible allocation of one of our region's most precious natural resources. Finally the City Council's action provided access to the state water bank creating a "water safety net" for the region. On the heels of the Council's action relative to the drought, local residents, through the Community Strategic Plan,identified a need to analyze the acquisition of the private water companies by the City. Action on this item was held in abeyance, recognizing that the private water companies were not available for acquisition. The existing service area of the Santa Clarita Water Company is almost wholly contained within the City's boundaries. The Santa Clarita Water Company is presently available for sale. It is appropriate that the City take the leadership role in thoroughly evaluating the public policy issues associated with providing retail water service in Santa Clarita. WATER COMPANY FOR SALE: BACKGROLJNI) In January, 1993, Santa Clarita Water Company approached the City of Santa Clarita to determine the City's level of interest in purchasing the water company. Throughout 1993, the City endeavored to more closely identify and investigate issues associated with such a purchase. The City focused on such issues as service area, type and condition of facilities, financial viability, estimated value, future water quality standards and most of all, benefits to the citizens of Santa Clarita. The City later became aware that the Castaic Lake Water Agency (CLWA) was looking to acquire Santa Clarita Water Company. This effort appeared to die when CLWA successfully contracted for professional, high-powered lobbyist services in the Spring of 1993 for purposes of obtaining an exemption to property tax taken by the state as part of the state budget balancing process for 1993. An exemption was specifically created for water agencies which do not sell water at retail. In August, 1993, two months after adoption of the state budget, CLWA sought special legislation in the waning days of the legislative session to permit CLWA to sell water at retail. That effort was rejected by state legislators as was a subsequent legislative effort in February, 1994. The City of Santa Clarita opposed CLWA's efforts at special legislation, in part, because no dialogue ever occurred with the City or general public despite CLWA'.s knowledge of the City's potential interest in Santa Clarita Water Company. In mid-January, 1994, Santa Clarita Water Company terminated discussions with the City regarding a potential purchase. On February 23, 1994, the Newhall Signal reported a price range of between $80 million and $94 million. The City has consistently focused at less than the lower end of this range while CLWA has reportedly been focused at the higher range. The public policy ramifications on this community are critical; if for no other reason than the reported value differential and the interest of two Santa Clarita public agencies. The citizens of this community must be assured that their tax dollars are being prudently used by whichever public agency, if any, eventually acquires the water company. In recognition of community interest and concerns, the Santa Clarita City Council took the initiative on February 22, 1994, and invited the CLWA Board of Directors to join in hosting a community meeting to receive public comment as to the feelings of local residents regarding public operation of a local water retailer. The City Council expressed that it would not move forward without the public participation which has become the hallmark of City public policy formulation. ADVANTAGES OF CITY OWNERSIIIP OF SANTA CLARITA WATER COMPANY * Maintains existing checks and balances between wholesale and retail water interests in the Santa Clarita Valley. * Permits more effective emergency responsiveness as the City serves as the central point during any local emergency. * Enhanced cooperation between City and other community water retailers. * City Council, acting as the water retailer governing board, will provide regular, responsive access to local citizens for establishment of rates and regulations, in addition to responding to community complaints. * Provides economies of scale and eliminates duplication relative to water company management and financial procedures and operations. * A comprehensive ground water management plan can be developed as authorized, but never implemented, pursuant to 1986 state legislation amending CLWA's legislative act. * Fulfills municipal policies as outlined in Santa Clarita General Plan in the Public Services, Facilities, and Utilities Element, Land Use Element, Community Design Element and Economic Development and Community Revitalization Element. * Provides City with a seat on the CLWA Board of Directors, more fully integrating water knowledge and service in the community. * Ensures safe and reliable sources of water immediately responsive to the changing dynamics of Santa Clarita. * Self-sufficient revenue generator not requiring subsidies from other City programs. DISADVANTAGES OF CITY OWNERSHIP OF SANTA CLARITA WATER COMPANY * Potential future water quality standards that may require additional capital expenditure. * Loss of annual SCWC Franchise Fee to City General Fund $ 76,137 (1993) $ 79,474 (1994) * Possible opposition by development interests. * New municipal service requiring additional management oversight. FUTURE DIRECTION As the public deliberation element of the process begins, new benefits and concerns will present themselves. It is not the intention of the City to predetermine who the new operator of the Santa Clarita Water Company should be, but to thoughtfully incorporate information .from a broad range of resources to make an informed and financially appropriate decision in partnership with the citizens of Santa Clarita. A "once in a lifetime opportunity" calls for nothing less. wa( MS.mpm CASTAIC`, :, LAKE WATER AGENCY A Public Agency Established 1962 I� I 32700 N. Lake HughJR `3' P.O. Box 368 PART Ur DIRECTORS 1 GENERAL MANAGER Mary P. Spring '�'iCastaic, CA 91310 E. G. "Jerry" Gladbach (805) 257-6024 Fax (805) 257-6146 Joe P, Whiteside - �� ATTORNEY W. J, Manetta No Robert H. Clark Jim Gates ,ti r, SECRETARY Stephen J. McLean �^ Donald R. Froelich-, March: 8,"1994 Linda J. Fleming Dean D. Efstathiou - WIliam Cooper Richard Green , Robert J. DiPrimio Mayor George Pedersen City of Santa Clarita 23920 Valencia Blvd. Suite 300 City of Santa Clarita, CA 91355 Dear Mayor Pedersen and Council Members: Two reports were recently prepared for you by members of your staff regarding the potential purchase of the Santa Clarita Water Company by Castaic Lake Water Agency, We desire to work cooperatively with you as we both seek public input on the possible acquisition; however, our spirit of cooperation is being significantly dampened by grossly inaccurate statements in these reports. As a local public entity serving the residents of the Santa Clarita Valley, Castaic Lake Water Agency staff and board of directors consistently take great measures to ensure that all agency released information is accurate, fair, and reliable. Therefore, it is of great concern when we discover that another public agency generates reports containing errors that concern our agency. Your City Manager has initialed these reports, thereby indicating he has approved these submitted documents. From meetings we have held with him in the past, we know that he is aware that the statements, which 1 have listed and subsequently corrected below, are inaccurate. I believe it is critical that you are made aware of these inaccuracies so that as our City council members you will be able to formulate decisions and opinions based on fact. We do not need false statements creating problems between the City and the CLWA. As you know, it has been our goal to cooperate with the City; and we have made considerable efforts to do so. We wish to continue that process. The first report generated from the City of Santa Clarita was prepared by Ken Pulskamp and dated February 22,1994. The report states that the City was approached by SCWC in January of 1993 but no arrangement was ever reached for a purchase and that the CLWA has most recently been having discussions with SCWC. It infers that the City was first approached rather than the CLWA and that the CLWA "was looking to acquire" when, in fact, CLWA was being sought after and not seeking to purchase a water company. The City has been aware for quite some time that SCWC first approached CLWA in 1991. Once the City negotiations broke down, SCWC approached CLWA again and in Jaunary of 1994, the board of directors of CLWA directed earnest negotiations in an attempt to finally resolve the litigation. • The document also states that "the City was thrust into the water business during the earthquake to provide necessary drinking water..." and that "the entities involved in water issues will determine how the SCV looks in the future." Immediately following the earthquake, it was the CLWA who supplied City and County tanker trucks with treated water from the agency's Earl Schmidt Water Treatment Plant. Again, grossly misleading. Mayor Pedersen has made many remarks asking that all entities within the Santa Clarita Valley work together, yet the City is continuing to ignore key contributions made by many entities such as our agency. This does much to diminish our spirit of cooperation. • The litigation between SCWC and CLWA was referenced in this same document. There are pertinent elements to the lawsuit that are not listed here, and once again there is a grossly inaccurate sentence stating that "the beneficiary of this reallocation would be The Newhall Land and Farming Company." The truth is that Newhall County Water District and LA. County Waterworks District #36 would have benefited far more than the Newhall Land and Farming Company owned Valencia Water Company. In the City's most recent "White Paper" report dated March 8, 1994, additional inaccurate statements and misleading information are given. • This report also infers that the City has only recently become aware of possible purchase discussions between CLWA and SCWC when, in fact, the City Manager was aware of the discussions held in 1991. • The report hypothesizes that the agency's effort to acquire retail authority legislation died after CLWA achieved an exemption from confiscation of our property tax monies. It states that the exemption was created for water agencies who do not sell water at retail. First, CLWA was exempt under the multi -county status and could maintain the property tax if it also decided to operate at retail. There is absolutely no relationship between the two as the report is trying to imply. Second, CLWA had not written legislative language in August of 1993. The report states our "effort was rejected" when, in fact, there was nothing to be rejected. To the contrary, we were invited to return at the beginning of 1994 if we wanted to consider a possible purchase of the retail company, which we are currently doing. • Lastly, the "white paper" states, "The City Manager, as the Director of Emergency Services, was in daily contact with local and state water interests to ensure the safety and adequacy of our community's water supply." This is highly misleading and untrue. The water retailers and Castaic Lake Water Agency, the valley's water authorities, worked around the clock to ensure the safe and adequate delivery of water to homes and businesses in the SCV. We made reports to the City for their information. The City Manager was only concerned as to the level of damages and cost of repairs. Both reports make references to newspaper reports of purchase prices. This information was not generated by SCWC or CLWA nor have the two parties negotiated a purchase price. The "white paper" indicates that the Santa Clarita Water Company is for sale. The General Manager of the SCWC has made it very clear to us that the company is being offered to CLWA and is not for sale to any other entity. The City should justly be applauded for its response to the emergency created by the Northridge earthquake and for distributing bottled water to residents while the four water companies were making repairs. However, to ignore contributions made by entities within its boundaries and to assume credit for some services not provided by the City is extremely disheartening, especially in light of the inaccurate statements made within these two documents. It is our feeling that members of the City Council have been misled or not been provided sufficient information to understand that your staffs documentation regarding the potential purchase of the SCWC by the CLWA is in large part untrue, misleading, and a discredit to our relationship. Respectfully, Ma S rm Mary P 6 President CLWA Board of Directors