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.
June 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.
When 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.
If 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?