Ojai Valley News Blog

By Daryl Kelley
A small East End water company founded in 1928 by five pioneer families is struggling to survive, the victim of higher wholesale water prices and a dispute among shareholders about whether the company should change the way it does business.

Climaxing a raucous meeting of Senior Canyon Mutual Water Company shareholders on Saturday, directors agreed to study whether a merger with the Ojai Valley’s largest water district could stabilize water cost and supply for the company’s nearly 250 shareholders.

The board appointed a committee to study a possible merger with the Casitas Municipal Water District as a peacekeeping move after angry Senior Canyon owners — especially large shareholders with agricultural interests — objected to a board proposal to levy a new assessment on every share to pay off the district’s $110,000 debt to Casitas.

Holders of Senior Canyon shares range from Twin Peaks Ranch, with 232, and The Thacher School, with 161, to residential owners of a single share. There are 1,125 total shares.

Shareholders, with votes weighted to reflect their shares, rejected the proposed levy. That left unanswered until an April meeting the question of how to pay off the debt and begged the question of whether private Senior Canyon should join with its large public neighbor, Casitas. 

Casitas officials said a merger with Senior Canyon could be possible, but only if it does not cost Casitas’ ratepayers any money. That would mean that Senior Canyon shareholders would have to upgrade their water system to public agency standards before Casitas could take it over, officials said.

Saturday’s standing-room-only meeting at San Antonio School highlighted the plight of small, independent water companies statewide, and showcased problems water companies around California are experiencing in times of drought-limited supplies and rising demand.

It also spotlighted the tensions at Senior Canyon between large farmer shareholders and residential users, who now underwrite part of the cost of water for agriculture.

In a December letter to shareholders, directors proposed that Senior Canyon change its fee structure so users pay for the actual water they use if it’s purchased from Casitas. But that proposal went nowhere on Saturday.

“I’m glad to see they’re going to evaluate their business situation,” said Steve Wickstrum, general manager at Casitas, who attended the meeting. “This is a difficult situation that a lot of water companies are having to address, and not only smaller ones.”

Indeed, Senior Canyon directors, in their letter to shareholders, blamed the private water company’s inability to pay its bills on Casitas’ escalating water rates. Casitas, whose huge reservoir supplements supplies of small Ojai Valley water agencies, has sharply hiked its wholesale rates over the last two years to balance its own budget.

And Senior Canyon directors said that the company’s need of Casitas water during dry periods — along with a dispute with a shareholder over fixing a broken water line —  created the current budget shortfall.

The directors’ letter to shareholders said Senior Canyon “is going broke.”

“The problem is that Senior Canyon uses more water than is presently available, necessitating increasingly onerous and prohibitively expensive purchases from (Casitas),” the letter said. “This is due primarily and logically to large Ag (agriculture) consumption combined with a (Casitas) decision not to support Ag interests.

“The board believes that our historical strategy of subsidizing Ag costs through Domestic-weighted rate structuring is no longer viable in terms of survivability.”

The board proposed solving that problem by having shareholders pay for water based on actual use when that water is purchased from Casitas, and also by having Senior Canyon’s largest water user and shareholder, Twin Peaks Ranch, transfer to the Casitas district.

If that occurred, and with the drilling of two new wells, including one on the Friend’s Ranch run by the Thacher family, the Senior Canyon system could become independent of Casitas except in the driest of times, directors said in their letter to shareholders.

But the letter prompted a rebuttal from several shareholders, including Helene Gordon, owner of Twin Peaks Ranch, and the ranch’s manager, Mike Miller.

“The business model for Senior Canyon no longer works,” they said. “This company is simply too small to support the required overhead.”

Merger with Casitas, the rebuttal letter said, would mean lower costs for water, no more assessments, less exposure to risk and more stability.

“The Senior Canyon board states that agriculture is no longer a viable aspect of our environment,” the rebuttal letter said. “We believe this statement is wrong. Agriculture is an integral part of life in Ojai’s East End … If the choice needs to be made between preserving agriculture in the East End and preserving the water company known as Senior Canyon, we choose to preserve agriculture.”

Board members began Saturday’s meeting by telling a crowd of shareholders that they still support East End agriculture.

Director Keith Nightingale, who said he wrote most of the letter to shareholders, said the board believes agriculture is “absolutely critical to our way of life,” but that Casitas’ new higher rates “no longer allow us the flexibility to support agriculture as we used to.”

Board members emphasized that Senior Canyon needed to develop two new wells beyond existing ones, while maintaining a working relationship with Casitas as a backup supply. But they also stressed that changes needed to be made so water rates reflected actual usage of Casitas-supplied water.

“In some cases, because of shares, you’re receiving water at a rate (less) than we have to pay for it,” said director Sam Eaton. “You should pay for the water you use.” 

Board Treasurer Bill Prather said Senior Canyon’s situation is not unusual in this time of drought and water shortages.

“The norm right now,” he said, “is everybody is in water wars, essentially. It’s a collision of events that’s pretty dreadful.” 

He said billing to pay off the debt should be based on use, not number of shares. He noted that he is business manager for The Thacher School, which is Senior Canyon’s second largest shareholder.

Twin Peaks’ Miller supported paying off the $110,000 debt with a low-interest loan offered by Casitas, citing a third straight low-yield avocado harvest. With nearly 21 percent of company shares, Twin Peaks would have had to pay nearly $23,000 of the debt if shareholders had approved the per -share payoff.

Some small shareholders pressed for approval of the new levy per share.

After a confusing vote, in which more shareholder votes were cast than were shareholders present, an audit of the votes found shareholders had rejected the new levy.

But there were bigger issues at hand. 

Shareholder Bill Loehr, a former board member who had signed the rebuttal letter, challenged Prather’s explanation of how Senior Canyon is charged for Casitas water. And Prather promised to come up with a figure for how much those who irrigate are charged for that wholesale water.

Other shareholders asked for documentation of precisely how the debt had been incurred. But Prather said documentation “is shaky.” In fact, data on one key summer month is missing entirely because the company’s auditor can’t find it, directors said.

Another shareholder complained that the confusion was “mind-numbing.”

And shareholder Bob Davis, a grower, complained that the board in its letter said he had offered to allow a new Senior Canyon well to be drilled on his property for free. He said he had not spoken with anyone on the board about a well in the past three years.

Davis questioned the board’s competence, as did a second shareholder.

Director Nightingale said the board wanted to appoint a committee to explore a merger with Casitas so Senior Canyon could put that issue to rest.

“We want hard data,” he said.

Among the frustrated shareholders was Lou Tomasetta, who owns 18 aces of avocados and oranges and 44 water company shares. He voted against the levy, favoring instead taking out a loan and paying it off with a surcharge on usage.

Others were simply left scratching their heads.

“I don’t know what to think,” said Stephanie Gibson, who holds one share. “I don’t have enough good information.”

Roger Essick, a grower who signed the rebuttal letter, added: “Hopefully we can work it all out in a constructive way. I think we will.”