Leon Worden

A secret deal for Santa Clarita Water?

By Leon Worden
Wednesday, September 16, 1998

ity Manager George Caravalho denied rumors Tuesday that the city of Santa Clarita is attempting to purchase Santa Clarita Water Co. One of the valley's four water retailers, Santa Clarita Water is privately owned by the Bill Bonelli family and serves most of Saugus and Canyon Country.

"It is not true that we have been attempting to negotiate (a deal) since the council has not made a decision to pursue the acquisition," Caravalho said.

Caravalho said the current City Council "has not made a decision in open or closed session." Asked if the former council, prior to the April election that replaced two council members, ever voted to pursue the acquisition, Caravalho said, "I cannot talk about that because it would have occurred in closed session."

The buzz about the city's possible acquisition of the water company has gotten louder in recent weeks. Local water officials aren't talking on the record, but they're talking. They're saying things like, "Leon, from what I'm seeing, this thing could be a done deal before it even gets to the public."

Water officials say the city is "extremely close" to dotting all the I's and crossing all the T's — which would be particularly curious if it's happening without the current council's approval. "It's gone far enough that offers have already been made, which is really surprising," one official said.

"I've heard it is proceeding rapidly enough that it could go to the council (for a vote) in October," said another. "It's amazing that they've been able to keep it this big a secret for so long."

If it's true, water officials ask, shouldn't the public have a chance to voice its opinion on whether the city should get into the water business BEFORE it's a done deal?

Sources close to the issue say the city has discussed a $55 million purchase price while Bill Manetta, general manager of Santa Clarita Water, was holding out for something closer to $70 million — although "that was six weeks ago," a source said. "I understand they're farther along than that."

The company was on the table in 1993 when its shareholders and the city were talking about a possible sale. Other interested parties caught wind of it and negotiations fell through. To keep that from happening this time, water officials say the city got Manetta to commit to an exclusivity agreement preventing him from negotiating with any other party.

Manetta was unavailable for comment Tuesday.

The issue is actually bigger than the potential purchase itself. The consensus in the water community is that one way or another, the system of distributing water in this valley is going to change.

Last year's examination of the local water system by the members of the public who participated in the CLWA's Water Issues Committee was the first phase of what will eventually become a comprehensive water management plan. By making a play for a company that represents 40 percent of the retail water market, City Hall would be positioning itself to take over the other water retailers and control all the water in the valley — not just inside the city, since the companies' service areas cross city boundary lines.

"Other cities with retail water systems run the entire water system," a water official said. "One would have to look at (the city's acquisition of Santa Clarita Water) as a precursor to buying all the retailers in the valley. You don't buy Santa Clarita Water in a vacuum."

Would people outside the city, in places like Stevenson Ranch and Castaic, really want their water supply to be managed by bureaucrats and subjected to the political whims of City Hall politicians they can't even vote for?

If the sale goes through, the city would inherit all the headaches of running the company. It would have to deal with the costly cleanup of MTBE and wells contaminated with perchlorates from Porta Bella, aging pipes, and increasingly strict health standards — all the reasons somebody like the Bonellis would want to sell a water company.

It would also hit water customers in both the pocketbook and the faucet if, like in other cities that have taken over water companies, water revenues were diverted into city things that aren't related to providing water.

"Historically, if a water company becomes a part of a city, the money gets siphoned off and put into the general fund and the water system starts to fail. It's subject to short-term political gains. But if it's kept private, (the owners) can set rates to support the infrastructure and put the money back into the system."

The potential takeover comes at a time when cities across the nation are doing the opposite. Hawthorne recently sold its water company to a private operator because it didn't want the financial and health code headaches anymore. Philadelphia and Houston have done the same. Atlanta opened bids last week to privatize its water company.

"It's purely a dollar and cents thing," one source said. "(By privatizing) cities don't have the general health liability. Meeting the health department standards (is) getting more and more complex and costly all the time."

I was discussing "trust" with someone at City Hall recently. Watch closely over the next couple of months.

    Leon Worden is The Signal's special sections editor.

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