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Lennar calls for water break

Castaic Lake Water Agency looks to control 90 percent of local water, developer stalls deal

Posted: March 27, 2009 1:31 a.m.
Updated: March 27, 2009 4:55 a.m.

A bankruptcy deal prompted a cease-fire in a water war over Valencia Water Company's 80,000 customers.

Castaic Lake Water Agency and Newhall County Water District are vying for Valencia Water Company's customer base, said Steve Cole, Newhall County Water District general manager. However, Valencia Water Company may stay with its owner Newhall Land and Farming if a bankruptcy restructuring plan goes through, he said.

"Buying Valencia Water Company would give us 90 percent of the service connections in the Santa Clarita Valley," said Dan Masnada, Castaic Lake Water Agency general manager.

"I don't like monopolies and that's what we're headed for," said Joan Dunn, a Newhall resident.

The Castaic Lake Water Agency is a water wholesaler, which sells state water to all SCV water retailers. The agency also operates local retailer Santa Clarita Water Division.

"We surround Valencia Water Company's service area on three sides and with our focus on groundwater and preservation we are the best agency to manage Valencia Water Company," said Marie Gutzeit, president of the Newhall County Water District board.

A Lennar/LNR joint venture, LandSource Communities Development LLC, took ownership of Newhall Land. By 2008 the company ran into trouble restructuring its debt and defaulted on loan payments. In June 2008, it filed for Chapter 11 bankruptcy protection.

The proposed bankruptcy restructuring led water companies to believe that Newhall Land and Farming would sell off Valencia Water Company, Cole said.

Newhall Land officials declined to comment on the restructuring, but said Valencia Water Company was never up for sale.

"From the beginning of the reorganization process, it was our intention to keep Newhall Land together including keeping Valencia Water Company," said Marlee Lauffer, Newhall Land and Farming spokeswoman.
Castaic Lake Water Agency launched an investigation into purchasing Valencia Water Company four months ago, Masnada said.

"We were considering buying Valencia Water Company because we thought it was in play," Masnada said. "But after the recent filing by Lennar we decided against it."

Castaic Lake Water Agency's sent two letters to Valencia Water Company on March 2, Masnada said.

"We mailed (Valencia Water Company) an offer to purchase and an eminent domain process," Masnada said.

Masnada described the eminent domain process as a "friendly condemnation."

Castaic Lake Water Agency planned a March 18 meeting to present the proposed acquisition to the public.

"But Lennar contacted us and called time out," Masnada said.

Valencia Water Company told Masnada the lien holder in the Lennar's bankruptcy filing said the water company was no longer on the auction block.

Castaic Lake Water Agency is poised to pounce on Valencia Water Company if it ever comes up for sale.

"If the reorganization plan doesn't come through and Valencia Water Company is in play, we would consider moving ahead," Masnada said.

The Castaic Lake Water Agency didn't stop the "friendly condemnation" process in case the reorganization plan fails, Masnada said.

Newhall County Water District started looking closely at buying Valencia Water Company in January, Gutzeit said.

Combining Newhall County Water District and Valencia Water Company would put the Water District in control of 50 percent of the SCV water connections, Cole said.

The Newhall County Water District never sent any letters to Valencia Water Company announcing their intentions, but continues to monitor the bankruptcy filing, Cole said.

Newhall County Water District officials scheduled meetings with state Assemblyman Cameron Smyth (R-Santa Clarita) and State Senator George Runner (R-Antelope Valley).

"We met with them to impress upon them the importance of having multiple water purveyors in the Santa Clarita Valley," Gutzeit said.

The Newhall County Water District also lobbied Smyth and Runner to not alter Castaic Lake Water's agency act.

A modification by state legislators in 1999 allowed Castaic Lake Water Agency to own and operate Santa Clarita Water Division, which made the company both a wholesaler and retailer in the same market, Masnada said. Another modification would be necessary for the Water Agency to operate Valencia Water Company, he said.

Newhall County Water District is also primed to pluck up Valencia Water Company if the company becomes available.

The Newhall County Water District will file its own condemnation against Valencia Water Company, if the restructuring plan falters, Cole said.

Newhall County Water District and Castaic Lake Water Agency share a common goal for buying Valencia Water Company if it comes up for sale.

"Our main goal is maintaining local control of the resource," Cole said.

"We just don't want to see an entity from outside the area or outside the state take ownership," Masnada said.


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