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Monday, Aug 8, 2022
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Water war

Water wars and land development have gone hand-in-hand in California for more than a century. Now, there’s yet another fight brewing in the Santa Clarita Valley. This time, the battle is over critical water needed for Newhall Ranch, a massive 20,000-home community that has been stalled by bankruptcy and the housing bust but is still moving forward. Last week, a California Public Utilities Commission administrative law judge complicated matters when he refused to dismiss a legal challenge to the ranch’s water supply. Environmentalists are claiming that developer Newhall Land Development LLC sold its interest in the company that will retail water to Newhall Ranch’s residents – not so much for the cash but in a sneaky legal maneuver to protect the water supply. The $74 million sale of privately owned Valencia Water Co. to public Castaic Lake Water Agency in December included language absolving Newhall Land from any legal claims that may be filed against Valencia Water, including wells that the environmentalists say may be contaminated. The contract also binds Castaic to “hold in trust” enough water to supply the development. But in a January filing with the regulatory agency, the Friends of the Santa Clara River and the Santa Clarita Organization for Planning the Environment (Scope) alleged that the sale was illegal because Valencia Water, as a privately held company, did not ask for permission from the state’s Public Utilities Commission to sell itself. Private water companies are regulated by the agency. The legal principle at issue is that the sale was an eminent domain action. With eminent domain, public agencies have the right to take property for the public good as long as fair compensation is paid. In this case, Castaic claimed it needed the water because it would put the resources into public hands for future use. The action was approved by a Los Angeles Superior Court judge, and Valencia Water maintained that since it was sold through an eminent domain proceeding, it did not need the PUC’s approval. But Administrative Law Judge Douglas Long ruled on Feb. 25 that Valencia needs the PUC’s permission. “It looks like the judge agrees with us that they need to file for permission to do this,” said Ron Bottorff, president of Friends of the Santa Clara River. “This is really a clear violation.” Ultimately, the environmental groups want the agency to force Castaic to create a second board of directors for Valencia and operate it independently – and make sure that Newhall Land can be held to pay for groundwater clean-up. Castaic Lake General Manager Dan Masnada said that his agency is studying the judge’s decision, but hopes it can move forward with the deal. “The attorneys are looking at it, but it’s a little premature right now,” Masnada said. “The current game plan is to continue to allow the utility to operate as a PUC-controlled entity. At some point in the future, though, we would merge retail operations.” Running battle Local environmentalists have been at odds with the Newhall Ranch development from the start. It was first proposed in 1994 by Newhall Land & Farming Co. when the company, the developer of Valencia, was private and locally owned. The original plan was to build 27,000 homes west of the Golden State (5) Freeway along Highway 138 and the Santa Clara River to the Ventura County line. Despite opposition, that plan was approved by the Santa Clarita City Council in 2003. Then, late that year, homebuilder Lennar Corp. and its spinoff LNR Properties acquired Newhall Land. The Calpers state employees’ pension fund later took a $970 million stake in the company before the recession, but the housing bust cost it nearly $1 billion after Newhall Land filed for Chapter 11 bankruptcy in 2008. Lennar later purchased back Calpers’ shares for a fraction of the price. Newhall Land, which emerged from bankruptcy in 2009, is now backed by Lennar and developer Emile Haddad through FivePoint Communities Management Inc., a joint venture. The latest version of the master-planned community is scaled back but still calls for more than 20,000 homes, a commercial district, a golf course and even a 15-acre lake. As recently as October, the development stalled again after a Los Angeles Superior Court judge ruled in favor of four local organizations, including Scope, that the environmental impact of the project had not been properly studied. Specifically cited was a plan to shift the direction of portions of the Santa Clara River. Those studies are now being redone. In fact, Scope has brought several water rights violation claims against the developer over the years. In 2007, Newhall won lengthy litigation over the transfer of water rights for the development from nearby West Creek. Now, the groups say, the company is trying to get around some of those natural resource concerns and ensure development of the project through the sale of Valencia Water. “Moving nearly $74 million into the pockets of the Newhall’s hedge fund owners while illegally committing future water supplies is not in the public’s interest,” said Scope President Lynne Plambeck, in a statement. “Especially in light of increasing water well closures in Valencia due to ground water pollution in this area.” Marlee Lauffer, Newhall’s spokeswoman, referred all questions involving the case to Castaic. Moving ahead Despite any questions about Newhall Ranch’s motivation for the sale, Castaic Lake should see its bottom line improve. With the acquisition, Castaic now owns 84 percent of the retail water market in the Santa Clarita Valley. “We did an appraisal, which included site assessments,” said Masnada, the Castaic Lake general manager. “We went into it with our eyes wide open. It’s a very well-run utility, and a good organization. We knew what we were getting into.” As the latest case makes its way through the PUC, Valencia Water is being overseen by a new board of directors, including some drawn from Castaic Lake’s board. But the day-to-day operations have not merged, and Masnada said they are likely to stay separate for now. Castaic and Valencia are expected to file a response to last week’s ruling with the PUC. The water agencies were given until March 11 to respond with any additional arguments. After that, the judge could hold a full a hearing on the sale, and the PUC could nullify the acquisition. A judge’s ruling or call for a hearing could take anywhere from a week to a month, said Christopher Chow, a spokesman for the PUC. But both sides are ready to dig in their heels, expecting the process to go longer. “There will be hearings, I imagine,” said Bottorff. “This is going to take some time.”

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