Subpoena spotlights Southern California water district's projects with Calderon ties

jwhite@sacbee.comJuly 1, 2013 

One of a flurry of subpoenas delivered after an FBI raid on the Capitol offices of Sen. Ron Calderon last month went to a Southern California water district, seeking documents related to "federal grants and/or funding to include Federal Stimulus dollars."

It makes clear that federal investigators want to know more about contracting at the Central Basin Municipal Water District, where Ron's brother, former Assemblyman Tom Calderon, made hundreds of thousands of dollars serving as a consultant for nearly a decade.

Left unsaid is why federal money is a subject of inquiry in what increasingly appears to be a wide-ranging probe of the Calderon family's activities.

But two federally funded projects involving the district have drawn scrutiny and allegations of impropriety even as water rates doubled in the last five years.

In one case, Central Basin moved to award a federally funded contract to a water company whose leadership included Tom Calderon. In the other, Ron Calderon had a hand in postponing an audit of Central Basin's federally funded pipeline project, which had drawn the ire of mayors and water managers in southern Los Angeles County.

Mark Geragos, Ron Calderon's lawyer, did not respond to an interview request, but has told The Bee in the past that investigators "have no case."

Tom Calderon, whose name also appears in the subpoena, says he had no role in obtaining money for the federal projects or in determining where the money was spent.

"I'm not a federal lobbyist," Calderon told The Bee. "I advised the general manager on strategy pertaining to Central Basin, and we met on a weekly basis, and that's what I did. We had a lobbyist in Sacramento and a lobbyist in D.C., and they carried on all the lobbying work, and my role was strictly strategy."

Joseph Legaspi, a spokesman for the district, said it is cooperating with the federal inquiry and has ended its contractual relationship with Tom Calderon.

Employees of nearby water districts and city water departments say the district's strategy has become increasingly assertive in recent years. It aggressively sought to get into groundwater storage, clashing with a rival water district and spending millions on an environmental review for a storage project whose usefulness critics question.

It also moved ahead with a disputed recycled water pipeline, partially paid for with federal stimulus dollars, that local municipalities banded together to oppose.

"Probably within the last four to five years, the district took a new look at all of the powers permitted by the Municipal Water District Act ... that a district could do and started proceeding forth with the possible exploration of expanding their authority," said James Glancy, director of water resources for the city of Lakewood.

The pipeline had been in the works even longer. But when President Barack Obama sought to jolt a sinking economy with the massive stimulus package he signed in February 2009, Central Basin acquired a source of funding.

In July 2009, the district announced it had secured a $5.5 million grant for its "Southeast Water Reliability Project."

Elected officials began voicing concerns about how the district would pay for an additional $17 million it said was needed for the project, a critique articulated in a letter that the mayors of seven cities signed. They challenged the idea that there were enough customers to justify building the pipeline.

"The majority of the water purveyors were not for the project," said Mark Grajeda, general manager for Pico Water District. "It's a very costly project, and you would do it with a number of purveyors who say, 'Yes, we will promote and use your project.' They just weren't there."

Rep. Grace Napolitano, D-Norwalk, helped oversee stimulus dollars flowing to water projects as chair of a U.S. House subcommittee on water and power. In early 2010, Napolitano convened meetings of local water officials and cities. She also had asked then state Sen. Curren Price, D-Los Angeles, to call for a state audit.

"Concerns were tax dollars were not being spent appropriately, and there were higher than necessary charges involved," Price said.

In a letter to then Assemblywoman Alyson Huber, who was chair of the Joint Legislative Audit Committee, Price wrote that "the District has failed to provide any documentation to support its revenue projections for the (pipeline) project. Indeed, the District has provided and then changed budget numbers without any data."

The letter also asked the audit committee to "assess the process the District uses to contract for litigation, lobbying, and public relations services to determine if the process is competitive."

The audit never happened. Price backed off in order to "give the Central Basin the opportunity to answer its critics," according to an August 2009 letter signed by Price and Sen. Ron Calderon, whose offices were raided by the FBI in early June.

A different sort of audit was authorized last year and completed in January.

A group of elected city officials called the Southeast Water Coalition sought an audit of the Central Basin district. Then Assemblyman Ricardo Lara, the Bell Gardens Democrat now in the state Senate who had taken over as chair of the audit committee, cited constituent complaints about high water rates in calling for a broader assessment of water charges in southeastern Los Angeles County.

The audit focused on water rates, including how Central Basin incorporated infrastructure costs into its charges. Margarita Fernández, a spokeswoman for the state auditor, said the agency wasn't asked to look at any one Central Basin project or its contracting practices.

It found that the average price of water sold by Central Basin climbed from $44 an acre-foot in 2007-08 to $90 in 2011-12, in part because of "spending large amounts to develop alternative sources of water."

"These activities currently add to the cost of the imported water that consumers use," the report concludes.

Art Aguilar, then general manager of the Central Basin water district, defended the pipeline project as necessary infrastructure for thirsty consumers. He said it is too early to judge the price.

"I dare say, if you find a recycled water project that does pay for itself in a 10-year window, then you're lucky," Aguilar said.

But to Central Basin's critics, the pipeline embodies what they called the agency's tendency to pursue new projects and contracts regardless of the cost or demand.

"Everything Central Basin did, and the reason they got so much criticism from every water agency in their area, is they had one goal: Spend money," said Ron Beilke, a former Pico Rivera City Council member who said he was fired after a short stint at Central Basin.

The district also won a $2 million federal stimulus grant in 2010 for a project to better measure water use.

Sally Flowers, then the conservation manager for Central Basin, worked with a Lake Forest-based firm called HydroEarth to secure the Department of Energy funding, emails obtained by The Bee show.

What happened next is murky.

Instead of giving the contract to HydroEarth, Central Basin recommended giving the project to Solana Beach-based Water2Save. Tom Calderon serves on the board of directors for Water2Save, and until recently he was receiving about $11,000 a month from Central Basin for his consulting role.

Central Basin worked with the Energy Department to modify the proposal. Aguilar, the former Central Basin general manager, said the changes improved the project. He described HydroEarth's plan as "a little weak."

HydroEarth CEO Phil Regli sees things differently. In his telling, Central Basin intentionally tweaked the project so Water2Save would become eligible to win a contract. He said the water district also removed Flowers from the project, which Regli called another indication that Central Basin intended to steer the contract to Water2Save.

"They didn't have to change it," Regli said. "They changed it specifically" to help Water2Save.

Aguilar dismissed Regli's charge as "outrageous" and said he specifically told Calderon he could not be involved with the contract. He blamed Flowers, who did not respond to calls from The Bee, for mistakenly conveying the message that HydroEarth would get the contract.

"It was promised to them by the conservation person, and that person had no authority to do that," Aguilar said.

In his interview with The Bee, Tom Calderon strenuously denied having done anything to influence contracting decisions. He said his role at Central Basin, which ended earlier this year, was strictly advisory. In that capacity, he said, "I don't have any power over there."

"Enemies of Central Basin, I'm sure, have talked to people and are making allegations of what my role was, but my role is my role," Calderon said. "I didn't make any decisions over there. I didn't advise the board directly."

The agenda of a June 2009 district meeting renewing Calderon's contract says he was "instrumental" in helping the agency evolve into "a leader in the water industry."

It says that Calderon was "not utilized in actual lobbying efforts" but credits him with facilitating crucial meetings and maintaining contacts throughout the area. It calls him a "key person" in acquiring new water rights.

"Mr. Calderon meets weekly with the General Manager to discuss items important to the District and serves as a key advisor to the General Manager on local, state and federal government issues," the agenda says, and "many of the benefits of this consultant-District relationship are not tangible and therefore difficult to measure."

Call Jeremy B. White, Bee Capitol Bureau, (916) 326-5543. Follow him on Twitter @CapitolAlert.

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