California state Sen. Steven Bradford (D-Gardena) introduced legislation this week authorizing the Water Replenishment District of Southern California (WRD) to take control of the Central Basin Municipal Water District (Central Basin), a move that would dissolve Central Basin’s board of directors and put the distressed agency in receivership because the problems at the district cannot be resolved by the district board as currently constituted.
As stated in the proposed legislation, Central Basin’s board of directors has a history of “poor leadership, decision-making, and oversight” which continues in spite of recent legislation which made changes to the District’s governance.
As a local measure, the bill has remarkable support with nine coauthors including Assembly Speaker Anthony Rendon (D-Lakewood), Assembly Majority Leader Ian Calderon (D-Whittier), Assemblyman Ed Chau (D-Monterey Park), and Assemblywoman Cristina Garcia (D-Bell Gardens).
The California legislation calls out current board mismanagement for “rejecting” a demand from the Los Angeles District Attorney’s Office to cure illegal Board actions, failing “to legally appoint a general manager or general counsel,” a lawsuit filed against the agency by numerous customers for several illegal acts, not having sworn in a vacant board member, failing to impose a crucial annual charge and mishandling the District’s finances.
Numerous financial issues include operating the District “at a deficit” and failure “to enact cost-cutting measures” due to lower water sales. The District’s annual budget has also not been adopted for the 2020-21 fiscal year.
The District also has recently experienced dramatic declines of approximately 60-70% in cash reserves and water revenues while significantly increasing water rates over the last five years, some more than double. At the meantime, the District’s credit rating has dramatically tumbled from AA- to BBB+.
In compare to other water agencies in many key areas related to profitability, debt, credit ratings, cash reserves and pension levels, Central Basin has previously reported it consistently compares unfavorably.
As proposed, the receivership would be temporarily enacted for 18 months as another government agency would be tasked to study the District’s governance structure and recommend “alternatives for long-term governance of the services of selling water to public water systems in the service territory of the district.”
This study, to be completed by the Local Agency Formation Commission within six months passage of the proposed legislation, will “report the results of the municipal service review to the Legislature.”