As the senate bill promising to create one new all-encompassing water district for the Santa Clarita Valley makes its way through the state assembly, costs continue to accumulate in money paid to lawyers and consultants by local water interests spurring the merger on.
Since SCV’s water wholesaler the Castaic Lake Water Agency began working on a merger with the Newhall County Water District – one of SCV’s three major water retailers – consultants have been hired on both sides for their expertise.
In roughly the past two years, the CLWA has paid consultants $256,205 for their help in hammering out the details of such a merger, Valerie Pryor, the agency’s assistant general manager, told The Signal this week.
Comparatively, NCWD paid about half that amount – $125,000 – on merger consultants over the last two years, or about $5,200 per month, NCWD spokesman Steve Greyshock told The Signal Wednesday.
Paying a combined $381,000 for merger consultants, however, is not the only the cost for merging water interests.
A poll conducted by Probolsky Research and presented before the two agencies signed a settlement agreement in December, which revealed most people in the Santa Clarita Valley were in favor of the merger, cost almost $44,000 – a fee split between the wholesaler and retailer of $21,975 each.
Although, lawyer and consultant costs are ultimately passed onto to ratepayers in the Santa Clarita Valley, the merger costs, according to both CLWA and NCWD, end up being a better cheaper deal for SCV water ratepayers.
In December, the CLWA and NCWD signed a settlement agreement promising to draft legislation that would dissolve their respective agencies and create one all new encompassing district.
The Newhall County Water District had originally contested rates set by the CLWA for water retailers and the water wholesaler’s stock acquisition of Valencia Water Company, purchased from Newhall Land and Farming in 2012.
In the settlement agreement, the two agencies would dissolve all civil litigation between them and “seek legislation to create a single new successor entity.”
The cost of perpetuating two separate feuding water interests, constantly at loggerheads and litigating, ends up costing the ratepayer more money in the end, they said.
“The formation cost for the new water district is non-substantial when compared to the alternatives and ultimate savings,” Pryor told The Signal Tuesday.
“The costs of forming a new water district for the Santa Clarita Valley must be analyzed against its alternative: continued litigation between NCWD and CLWA,” she said.
“The two Boards chose a collaborative process to set aside differences and create a new water district for the benefit of the entire Santa Clarita Valley, rather than continuing with litigation.
“This decision in itself saved money,” she said.
“In the short-term, expenses to continue the legal dispute would have been significantly more than the costs associated with the formation process,” Pryor said.
“In the long-term, the entire Valley will be able to benefit from the potential $14 million in savings that will result from the new district.”
While water officials have touted this number as a potential savings, they have not provided a line item breakdown of exactly where and how the savings will be achieved.
From NCWD’s perspective, the same logic applies – it costs more to fight, than to unite.
“When viewed against the alternative of continuing litigation, the short-term costs of the formation process are far less than what legal fees would be,” Greyshock said.
“The bottom line: when compared to the alternative lawsuit approach, we spent less, saved more and created something better for Santa Clarita Valley residents,” he said.
Agency heads had a chance to scrutinize and break down those “short-term” expenses at a meeting held last week.
On Thursday, July 13, members of the Financial and Operations Committee met to review the money made and spent by the agency’s retail operation, the Santa Clarita Water Division.
One set of numbers examined was how much the water retailer spent on lawyers and consultants for the month of May.
It spent $4,232 on lawyers and $15,74.80 on consultants – referred to in the budget as “professional services -other.”
Was this a normal monthly expenditure, or one considered out of the norm?
The agency, on average pays out $14,650 for lawyers and $13,750 on average for consultants, said Pryor, who sits on the Financial and Operations Committee.
This works out to $175,000 for lawyers, and $165,000 for consultants in the space of a year.
In its budget, the agency lumps the two costs together for the purposes of review by the committee Thursday, as “Disbursements to Consultants” which works out to a yearly expense of about $340,000.
In May, the most recent month in which figures were available, fees for services have gone to a number of providers including financial consultants (Raftelis Financial Consultants Inc.), water utility specialists (Raftelis), water law experts (Best Best & Krieger), and legal firms (Fedak & Brown LLP and Nossaman LLP).
The water bill, SB-634, introduced by Senator Scott Wilk (R-Santa Clarita), last cleared the Assembly Committee on Water, Parks and Wildlife. It has now been referred back to the Appropriations Committee.
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