While state regulators supervise three companies that provide gas
and electricity for most of California, drinking water is delivered
through a vast network of agencies which collectively do billions of
dollars of business, setting rates and handing out contracts with
There are so many agencies, in fact, that the California Department
of Water Resource, which is responsible for managing and protecting
the state's water, concedes that it does not even know the exact
"We think the total number is about 3,000 but there is no definitive
resting place for those numbers," a department spokesman said.
Some state officials and water experts are calling for change,
arguing that the process of providing water should be as clear as
the product, especially in the middle of a drought. As one of the
nation's agricultural leaders and a trendsetter in environmental
regulation, California's actions could be felt beyond its borders.
Wes Strickland, an attorney who specializes in water law, says most
of these water agencies do a good job. Cities and towns like
controlling their own resources, and most of the agencies are
elected, assuring a level of accountability.
But, Strickland says, good and bad, most operate "under the radar",
with little public scrutiny. "These agencies are at the forefront of
the drought response," he added.
John Chiang, the California state controller, is pushing for
legislation that will increase fines for public water entities that
fail to file annual reports with his office, although no agency is
responsible for reading the reports once filed.
"The lack of transparency provides a breeding ground for unchecked
spending, corruption, and fiscal mismanagement," said Chiang, who in
October warned nine cities and 117 special districts, some of which
were public entities solely responsible for managing and supplying
water, that they were delinquent in filing financial records.
Just 138 utilities — those owned by investors — are regulated by an
outside body, the California Public Utilities Commission, Strickland
says. The rest are governed by small boards of locally-elected
The former general manager and other unidentified current and former
officials at one major water system, southern California's Central
Basin Municipal Water District, are accused in a recent
whistleblower lawsuit of using a secret $2.7 million fund for
groundwater storage as a "slush fund" that funneled cash to
political allies, board members and relatives.
The lawsuit was filed last month by district board member Leticia
Vasquez. Under the whistleblower statute she would stand to gain
financially if the lawsuit succeeds. The agency's own lawyers, in a
report issued at the end of March after a nine-month investigation,
said the water district violated California's open-meeting laws when
it created the fund out of the public eye.
The former general manager has not yet filed a legal response to the
allegations. Efforts to contact him were unsuccessful. The water
district said if the case proceeds, it intends to fully cooperate.
Records relating to the fund were among those subpoenaed by federal
officials last year as part of a wider and ongoing FBI investigation
into the financial activities of the water district, which sells
imported water to water districts in Los Angeles county.
Three subpoenas, seen by Reuters, requested financial records,
documents and personnel records from the water district.
The FBI and the water district declined to comment or confirm an
California's drought, which is on track to be the third-worst since
records began in the early 20th century, according to state
officials, threatens to have devastating effects in the state and
Farmers are considering idling a half-million acres of cropland, a
loss of production that could cause billions of dollars in economic
damage, and several small communities are at risk of running out of
The state also recorded its driest winter to date by March. The
state's snowpack, which provides water in the spring melt, is at a
From the water wars in the movie "Chinatown" to the quote attributed
to Mark Twain, "Whiskey is for drinking, water is for fighting,"
water in the West has a long history of strife.
As California was settled, small communities would establish their
own water wells. Economic and political power often stemmed from
water rights and no single entity has ever been put in charge of the
system, Strickland says.
Some of these agencies are scrambling to get new sources of water,
which could require wells, water imports and plants to treat tainted
[to top of second column]
THE COST OF WATER
Water is expensive. For instance, 885 "special districts", which
provide drinking water for 11 million Californians had operating
expenses of $7.3 billion for fiscal year ending 2012. Their
long-term bond debt amounted to $20 billion, according to the
The state is planning an $8 billion water
bond and Democratic assemblyman Anthony Rendon, a sponsor, wants to
put provisions for stricter oversight of how bond money is spent.
"Past water bonds have gone to so many different places for so many
things it is hard to keep track of the money. We don't really have a
place where we can find out that information," Rendon said. "There
is very little oversight over the management of one of our most
sacred and vital resources."
State data shows that salaries to water district employees vary
widely and that some small agencies are paying big-city wages.
The state controller's website, where the latest available records
date to 2011, shows the average salary to employees in 45 top-paying
water special districts listed by wage totals is over $70,000, and
over $100,000 in two districts.
The chief executive of the Dublin San Ramon Service District in
northern California, which serves 157,000 people, will receive wage
and benefits of nearly $338,000 for 2014, according to a water
That compares with $345,000 paid to the general manager of the
Department of Water and Power (DWP) in Los Angeles — America's
second largest city with a population of 3.8 million.
Sue Stephenson, a spokeswoman for the Dublin San Ramon district,
defended the high salaries, stating that the San Francisco Bay area
had a high cost of living. She also said managing a water district
is an extremely responsible job, as clean water has to be on tap for
users every minute of every day.
Most of the agencies are run by elected boards that have to file
basic revenue and spending documents, and wage and benefit totals,
to California's state controller. But they do not file full budgets
and their contracts are not subject to review or singled out in
"Nobody pays any attention to these districts. So nobody knows what
is going on," said Robert Stern, an open government advocate and an
author of California's Political Reform Act, a post-Watergate era
law designed to make government more financially transparent.
In the Seeley County Water District, which serves just under 400
homes in the desert near the border with Mexico, General Manager
David Dale resigned in March 2008.
The following month his company Dynamic Consulting Engineers
received no-bid contracts from the water district's board worth over
$200,000, followed by another contract worth over $200,000 in 2010,
to undertake engineering work, according to copies of the signed
contracts provided by the water district.
Dale said he was giving the board what it wanted by undertaking
engineering work, but current Board Director Patrick Harris, who
came into office calling for more reform, said the contracts show
the lack of accountability.
"I can't say it's illegal. But my impression is it's unethical.
There was absolutely no oversight," Harris said.
Dale said: "Districts are not required to go to competitive bidding
for professional services. The board selected me. And before they
selected me, I stepped down as general manager."
(Reporting by Tim Reid; editing by Peter Henderson)
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