The Central Basin Municipal Water District, which serves 2 million customers in Southeast Los Angeles County, is so messed up the California State Auditor thinks the state Legislature should replace the whole governing structure.

A report (pdf) from State Auditor Elaine Howle held the scandal-ridden district’s elected five-member board responsible for hiring six different general managers between 2010 and 2015, losing their insurance, failing to address the district’s long-term financial viability, setting up a secret $2.75-million trust fund and awarding no-bid contracts.

“When the district does not clearly identify and justify its reasons for avoiding it competitive bidding process, it leaves itself vulnerable to allegations of favoritism or conflicts of interest,” the audit said.

The revolving door for general managers began when Arthur J. Aguilar left in 2012 after seven years. He was fined $30,000 by the state Fair Political Practices Commission (FPPC) for not reporting 31 gifts worth $3,500 from a consulting firm that ended up with $6 million in district contracts.

The audit questioned some of the board’s perks for employees and its own members. One high-level employee, the business development manager, was given $22,000 to obtain a bachelors degree while he worked, although having one was a requirement of the job. The district paid him the money up front, and he didn’t finish his degree work until after he left. He was one of the district’s highest-paid employees, $113,000 a year, until being laid off in July 2013. The district eliminated the position.

It was one of four instances where the district failed to follow established procedures and, as a consequence, “its hiring policies resulted in legal disputes and caused it to incur unnecessary expenses in salary and benefits.”

In September 2012, the district hired an interim chief operating officer who lacked a bachelor’s degree, but had attended college with a focus on Latin American studies and general education. There was no formal recruitment or competitive hiring process.

In December 2012, the board violated district policies and usurped the authority of the general manager by hiring an assistant for him, in closed session, at $98,000 a year. There was no competitive process. The board made the appointment although it had failed to create the position first, as required by the administrative code.    

Board members receive full health care, although their jobs are part-time. Their automobile allowance is “generous” and there were more than a few instances of “unreasonable travel and meal expenses.”

The report does not name names, but the audit was spurred by the district’s connection to indicted former Senator Ronald Calderon (D-Montebello) and his family, which is now under investigation by the federal government.

Two months after a raid on Senator Calderon’s office in June 2013, the FBI served subpoenas on the water district seeking documents on agency officials and contracts connected to his brother Tom Calderon. Tom, a former assemblyman from 1998-2002, had been paid $750,000 in consulting fees by the district since 2004. Ron has authored legislation on behalf of the water district.

The auditor suggested that the Legislature revamp the district and have the board selected by the district’s customers, 48 entities that include utilities, rather than the public. The district responded: “Disenfranchising the residents in these communities from the decades-long system of directly electing the board of their respective municipal water districts would raise a number of legal issues, including those of constitutional proportion.”

–Ken Broder

To Learn More:

Audit Finds Widespread Mismanagement at Central Basin Water District in L.A. County (by Dan Weikel, Los Angeles Times)

State Audit Slams Central Basin Municipal Water District Board (by Mike Sprague, Whittier Daily News)

Troubled Central Basin Water District Settles Overbilling Lawsuit (by Ruben Vives, Los Angeles Times)

State Senator Calderon Stung by Leaked FBI Affidavit about Corruption (by Ken Broder, AllGov California)

Central Basin Municipal Water District (California State Auditor) (pdf)