WATER BOARD LOOKING AT DEBT; CUSTOMERS SEEK PUBLIC ELECTION.

Byline: Angela M. Lemire Staff Writer

The Castaic Lake Water Agency board will vote tonight on a plan to finance nearly $80 million in borrowed debt for its latest acquisition and continued upgrades of its facilities.

The agency seeks to restore reserve funds that it tapped in March to purchase additional entitlements to the California State Water project, and to finance eight major capital improvements projects, including an expansion at the Earl Schmidt Filtration Plant.

A degree of public outcry is expected against the board's vote because the $79.5 million would be borrowed for the public agency without customers' say. Anonymous residents have circulated fliers on the issue, urging neighbors to call for a public vote.

``I have heard about that, but I haven't seen them yet,'' Michael Kotch, a water board member who shares their concerns, along with member Ed Dunn. ``A concept such as this is going to be paid for by connection fees and, eventually, by individual homeowners. They should be allowed to vote on it.''

There have been some discussions that property taxes might be used to pay off a portion of the debt, but nothing has materialized yet, he said.

A simple majority of the board's 11 members is needed to approve the loan, permitted under a Proposition 13 clause that Kotch calls a loophole.

Robert C. Sagehorn, general manager of the agency, said the agency is within its rights to borrow the money for system improvements, through certificates of participation rather than revenue bonds, which require a referendum vote.

Kotch said putting the issue on a referendum will remain a possibility, regardless of what action the board takes tonight.

Voters may appeal it by petition and put the matter to referendum themselves, he said.

Of the $79.5 million the agency seeks to borrow, $48 million stems from the water agency's recent acquisition of additional entitlements to supplies from Wheeler Ridge, a Kern County wholesaler based in Bakersfield. The balance would go toward various water quality improvements to the district's water system, insurance and financing fees, officials said.

``It's necessary that we carry an adequate reserve,'' Sagehorn said of plans to replenish the account. ``Right now the building activity is robust . . . but we have to maintain a healthy reserve for times when things are less than robust.''

The reserve fund - from which money was drawn to front the Water Ridge purchase - is sustained with revenues collected annually from connection fees, said Sagehorn. As of last month, proposed developments in Castaic's service area would add nearly 38,000 residential units for future tie-ins into the water system.

Historically, connection fees have generated a steady revenue flow to the Castaic Water Agency's reserve fund. In 1998, they totaled $6.7 million and are projected to yield $11.5 million in 1999 with the recent 60 percent hike in connection charges, according to a draft of the financial proposal.

If some of those developments fail to materialize, the cost to repay the debt would not be passed on to homeowners, nor would it affect connection fees in the future, said Sagehorn, because the money would be borrowed to replenish a reserve fund.

With current and future development, the water agency's total demand in 2000 is projected to reach 62,177 acre-feet, supplied by a mix of groundwater, reclaimed and state water. By 2007, the wholesaler will need 94,251 acre-feet to supply water to the six retailers within its service area in Santa Clarita and unincorporated territories.

The Water Ridge deal, finalized in March, gives the Castaic Water Agency an additional 41,000 acre-feet per year over its current cap of 54,200 acre-feet. The additional water will become available to the Castaic water wholesaler by January, according to Sagehorn.

Since the 1960s, Castaic's water agency has been one of 29 participants in the California State Water Project, which supplies Southern California with water from central and Northern California over a 555-mile aqueduct. As a wholesale supplier, Castaic is entitled to limited shares.

However, as Santa Clarita Valley's population grew significantly in the past decade, the Water Agency met increased demands for water by acquiring other communities' entitlements. Castaic upped its entitlement from 41,500 acre-feet to 53,000 acre-feet by acquiring the Devil's Den Water Project in 1988.

The average homeowner is not expected to see his or her water rates increase as a result of the latest acquisition, said Sagehorn, because the debt-related finances will not be passed on to retailers, such as the Santa Clarita Water Company and Valencia Water Company.

However, Castaic's recent 60 percent hike in connection fees is expected to impact new home construction. With new fees that took effect July 1, the average cost to connect each new home will fall around $6,000, depending on its retail water district, said Sagehorn.

MEETING

The Castaic Lake Water Agency board will meet at 6:30 tonight at the Rio Vista Water Treatment Plant, 27234 Bouquet Canyon Road.