It’s Not About Water Rights.

Recent OCR articles by both Chris Haire and Terri Daxon have addressed Brea’s recent acquisition of Cal Domestic water rights. The question regarding who has the authority to spend Brea’s money and what the real issue is in acquiring water rights seems to have gotten overlooked in the swarm of facts and figures.

The acquisition of water rights and preferred stock, from Cal Domestic and the Metropolitan Water District, has long appeared to be complicated, if for no other reason than to dissuade the public from taking a closer look at the process. While both writers got the essentials correct, here’s an executive summary.

Water rights – distilled.

December 2011 – Council approves an $8.1 million purchase of rights for 665 acre feet of water. Pay once, get the water every year in perpetuity. Cost for water is locked in, cost to deliver can and does rise annually.

This purchase is made by transferring $5.6 million from Brea’s General and Risk Management Funds to the Water Fund. This is called a “loan” – at an interest rate of 2.17% for seven years. So far we’ve paid back about $1 million. I don’t know why it’s called a loan. The balance, $2.5 million, was already available in the Water Fund.

bill_gallardoJune 2013 – Jim Byerumm, Cal Domestic’s General Manager alerts Charlie View and Bill Gallardo of the availability of rights for an additional 225 acre feet.

Internal discussions ensue, excluding Council. Brea’s bid of $3.4 million, made without Council authorization, by Charlie View and Bill Gallardo is accepted by Cal Domestic.

Believing that there were still Water Funds available from the original transfer (loan) and approval given in 2011, View and Gallardo completed the transaction without giving Council so much as a courtesy heads-up.

After their oversight was discovered, the Cal Domestic invoice was ultimately paid using a $1.2 million credit from Cal Domestic’s terminated Capital Improvement Fund (accrued because we’d overpaid for almost 18 months) and $2.2 million from the Water Fund.

The error on the parts of View and Gallardo, in memory and judgement, involves $3.4 million, not $2.2 million as reported. Also, the fact that we paid Cal Domestic’s Capital Improvement Fund $70 thousand a month for a year and a half after they terminated the fund deserves some discussion, too. How many errors like this are going on? Why aren’t audits catching this sort of blunder?

The whole affair was discovered by Council member Simonoff, who set in motion the process that brought the matter into Council study session. Apparently Garcia and Murdock believe that being in the room is sufficient to allow them partial credit.

I disagree, but that’s another blog.

Now having retroactively covered their assets and having called in independent auditors to review both purchases to ensure there are no further problems, plus doubling the staff required to closely oversee transactions of this sort in the future, Gallardo suggests that Brea is pretty much out of the woods.

I wouldn’t be too sure about that.

No data trail, the real problem.

According to Bill Gallardo, none of this process is documented in any fashion prior to Cal Domestic submitting their invoice!

Not the notification of availability. Not the confirmation of interest. Not the details of negotiation, i.e. bids, counter bids, stipulations and contracts. Nothing. Not who was involved. Not how business was transacted. Nothing.

No other purchase or financial commitment made by the city, to the best of my knowledge, is conducted in such an unacceptable, loosey goosey manner. You know why? Because we’re in charge! We make the rules.

CA_SealWhen it comes to water rights apparently there are no rules. We can’t even demand a paper trail from Cal Domestic because we have no authority over them. Only the State of California does.

Instead of sending a representative to Washington to wade in on immigration issues, instead of sending an entourage half way around the world to watch a folkloric event and do a lot of sightseeing, maybe we should send someone to Sacramento to rattle Governor Brown’s cage on this.

falls_640tim_2aIf Brea is really a corporation, how about asking our “CEO” to start acting like he’s running a corporation.

After all, every glitch in this whole water rights matter circles right back to his office.

Where was he in this process? On vacation… again?

 

Koreagate – Case Closed.

da-letterAfter almost 16 weeks the other shoe finally dropped. OC Senior Deputy District Attorney Raymond Armstrong sent me a letter saying they were closing their inquiry into Koreagate and that no further action would be taken.

I am still unsure what was actually done beyond quickly reading through the 15 to 20 documents provided as evidence in the complaint. Comments in Mr. Armstrong’s letter left more questions unanswered than answered.

I called his office to solicit more information on their process and ended up talking for some time to his associate SDDA Jaime Coulter. At the end of our conversation I understood the complexities in this case that would lead them to the conclusion that there was no evidence of criminal wrongdoing.

Letting the results be known.

What follows is my email to Marty Simonoff and Roy Moore (the only Council members interested in getting to the truth) as well as to Armstrong and Coulter plus a couple of OCR staff writers whom I had promised to keep informed.

Marty & Roy…

My response from the OCDA is attached. I called and spoke with Mr. Armstrong’s associate, Jaime Coulter, and it is clear that their investigation fell short of what I had expected. It was, however, conducted in a manner consistent with the prosecutorial restraints under which I understand their office must operate.

Per Mr. Coulter, the OCDA’s determination that there is no evidence of any criminal wrongdoing and their dismissal of my complaint hinges on the necessity for them to be able to prove “criminal intent to defraud” (steal from the city) as part of a case for misappropriation of public funds.

Intent is one the most difficult matters to prove, except perhaps under the more liberal burden of proof required in civil court. It’s a shame that “stupid” isn’t against the law, but then we all might be in serious jeopardy.

While I am not happy with the outcome, I am satisfied… my lengthy conversation with Mr. Coulter helped me to have a deeper, more clear understanding of these legal processes.

Mr. Armstrong’s letter states, “This also appears to be an issue that the city council could adequately address.”

Unfortunately, those most likely to be effected by continued pursuit of this matter, those who would be required to reimburse the city, maintain a strangle hold with their three votes which allows them to impede any effort counter to their personal agendas.

The good news is that, through over three months of relentless pressure from me and others and the wisdom in Measure T, the city has implemented positive standards which will avert this sort of unethical behavior from happening again. Itineraries will be required, Council will formally approve foreign travel and, hopefully, a more robust and enforceable travel policy will be adopted soon.

It’s perfectly legal to be stupid.

I never suggested, from day one, that there was any malice in the hearts of those who made such an ignorant blunder. When the culprits were publicly taken to task by Lynn Daucher, Bev Perry, Glen Parker and others no one called them criminals. It was clear enough that the choices made by Schweitzer, Murdock and O’Donnell were more idiotic and ethically unwise than criminal chicanery.

Regardless of what convinced Schweitzer, Murdock and O’Donnell it would be okay to spend almost half of the city’s annual travel budget on a ten day excursion to Korea and Japan… no law was broken. No common sense was exercised either and almost 50 years of precedents were totally and conveniently ignored.

So, where do we go from here?

First, Council needs to finish the job of formalizing an enforceable travel policy. They reached agreement, by consensus, to require public approval by Council for all foreign travel and that a complete itinerary must be included in the travel request to verify the official nature and direct benefits of the trip.

This is a good start but is nowhere near a robust and enforceable travel policy. A more thorough policy needs to be drafted and approved, in resolution form, in a public session. Not the study session, which might as well be held behind closed doors for all the transparency it provides, but downstairs in front of the tv cameras.

Throughout this lengthy ordeal, virtually all who called, emailed or stopped me on the street to talk about this felt as I did that Schweitzer, Murdock and O’Donnell should reimburse the city. I still feel that way, and with one swing vote a Council majority would agree. I’m not holding my breath.

And finally, November 2014 will give us an opportunity to elect candidates who will truly have the people’s will as their guide and reject those politicians who have repeatedly thumbed their noses at the public, taken every stipend and free chicken dinner they could and spent more time trying to build their legacy than maintain our community.