Calaveras County Grand Jury May 17, 2001 The Honorable John E. Martin Calaveras County Superior Court

That County Ordinance 2226 be reviewed and updated in coordination with the Calaveras County Fire Chiefs Association and the OES Director. Response Requested: Board of Supervisors.

That the updated ordinance provide for inspections of all existing, as well as new, onsite water facilities. Responses Requested: Board of Supervisors and Building Department. 9 3. That water supply facility locations and details be established and made available to all county fire agencies. Response Requested: Building Department.

That the method of lease-purchase be reviewed by the County Board of Supervisors with primary weight placed on the original purpose of improving emergency water supply within the county, not necessarily early pay-off of debt. Response Requested: Board of Supervisors.

That the needs of the Foothill Fire District be reevaluated by the Calaveras Fire Chiefs Association, the OES Director, and the County Administrator as it relates to a new water tender with respect to the rest of the county. Responses Requested: Board of Supervisors and CFCA.

That accurate maps of districts and areas of protection be developed and made available to all concerned organizations and citizens as requested. Response Requested: Board of Supervisors.

That the existing internet map be updated. Response Requested: Board of Supervisors.

That an internet address be established and published for each fire district. Responses Requested: All fire districts.

That all Chiefs attend Calaveras County Fire Chiefs Association meetings on a regular basis or send an alternate. Responses Requested: All fire districts.

That every fire district develop a strategic operations plan and have it on file for presentation to interested organizations, and that these plans be reviewed and updated regularly. Responses Requested: All fire districts.

That fire prevention booklets based on the Ebbetts Pass Fire District (EPFD) booklets be developed and made available to all citizens within Calaveras County. Responses Requested: Board of Supervisors, all fire districts and all school districts.

That the EPFD coloring book (Jasper(cid:1)s) be made available to all first or second graders within the county. Responses Requested: Board of Supervisors, all fire districts and all school districts.

That the Local Agency Formation Committee (LAFCO) consider consolidation of the Angels Camp and Altaville-Melones Fire Districts. Responses Requested: City of Angels Camp, LAFCO, Altaville-Melones Fire Distrct.

That the San Andreas Fire District consider the procurement of a ladder truck for the San Andreas Fire District because of the height of some of the buildings for which they have to provide firefighting services. Response Requested: San Andreas Fire District. Utility Districts There was one complaint carried over from the previous jury. This complaint held that through loans to the Utica Power Authority (UPA) and placing CCWD Directors on the UPA Board of Directors, that CCWD could take over UPA and fold it into the CCWD realm if UPA should default, thus depriving shareholders of their financial position. Throughout the early months of the present Grand Jury(cid:1)s term, it became apparent that there existed potential management and operating problems within the Calaveras County Water District. Discussions with county employees and their leadership, with local newspaper editors and managers, with members of the Grand Jury itself, and with the general population, led to the initial suggestion that the Grand Jury ought to take a close look at the workings of CCWD(cid:1)s personnel and procedures. These discussions, taken as a whole, constituted enough of a question to warrant an investigation as though formal written complaints had been received. These perceived problems generally manifested into the following areas: THAT CCWD HAD loaned money to other water districts and forgiven such loans at the expense of people who had entrusted CCWD with proper use of monies obtained through payment of water bills and fees. THAT CCWD PLANNED to raise water rates to pay for certain operating activities within its area of jurisdiction even though the present rates were already higher than either of the two adjacent similar counties, and that it had used the money for purposes such as loans to other water districts. THAT CCWD HAS used entrusted citizen money to pay off claimants in lawsuits, and for legal fees, in situations that probably could have been avoided. THAT COVERAGE OF responsibility for providing water throughout the County was not in keeping with the provisions of incorporation as established by agreements between Calaveras County and the State of California in 1945-1946. THAT CCWD WAS heading into negotiations with a developer at considerably lower fees than were afforded other developers of similar projects. THAT ONE OR more members of the CCWD Board of Directors was abusing the per diem and 11 mileage privileges uniquely afforded to the board. With the seriousness of these allegations, individually and collectively, the Grand Jury undertook an examination of elements of CCWD and its management. Investigation The Calaveras County Water District was formed in 1945-1946 by certification of the State of California after an overwhelming majority vote of the citizens of the county. Actually two votes were taken at the same time, one for incorporated parts of the county (only Angels Camp) and another for all the unincorporated areas. Thus, as of November 5, 1946, CCWD became an independent utility district and its Board of Directors was elected on that date with voting districts synonymous with supervisorial districts. CCWD would operate with funds levied directly from water users and also from property tax revenues collected by the county. The following specific findings were derived from four direct meetings with extensive questioning of the CCWD General Manager, one meeting with the Budget and Finance Manager, several meetings with County Counsel who performed legal searches of California law applicable to the questionable areas, two meetings with the District Attorney who performed similar operations, and Grand Jury attendance at CCWD Board of Directors meetings. Findings: Management of CCWD appears to be relatively efficient and capable in regard to day-to-day operations, utilization of personnel and physical assets, and overall strategic planning although it needs certain levels of improvement in the areas of long-range finance planning and public relations. Relative to the perceived problems as outlined above: That CCWD had forgiven loans to other water districts. This impression is the result of the County auditors using the term (cid:3)defeasance(cid:4) in their annual report which means to forgive a loan, or to cancel it. In effect, those defeased loans were replaced by other loans more advantageous to the owner of the loan. This is what happens when one refinances one(cid:1)s home, for example, to gain a better interest rate. The original loan was defeased. That CCWD planned to raise water rates to pay for certain operating expenses. This situation is true although the rate increase plan was submitted three years ago to be applied to operations as then understood. The present power crisis in the state hit CCWD the same as it has everyone else and that portion earmarked to pay for power inflated out of proportion to the rest of the increase. This money will be used for water and sewage operations. That CCWD used entrusted money to pay off claimants. The situation wherein the claimant sued the water district for damages due to changing hookup fees was unfortunate for everyone concerned although apparently one or more other county government organizations were 12 involved in causing the significant fee changes. A settlement of $1.2 million which includes legal fees, was negotiated out of court. The money came from general CCWD funds. This case was an example of poor financial management and lack of sufficient written guidelines which could be understood and utilized by all concerned. Two other similar payments were uncovered during this investigation involving $20,000 and $50,000 losses. That coverage of responsibility for providing water and sewage service was not in keeping with original incorporation. The original agreement of Calaveras County with the State of California specified that CCWD(cid:1)s area of responsibility would extend to the exact limits of the county, less the area of Angels Camp, which was a separate entity because of its incorporation status. To this day, there exists as many as ten or twelve small water districts within the county which means that CCWD has given up responsibility for those areas. That CCWD was heading into negotiations with a developer for lower hookup fees. Discussions with pertinent people within the county indicate that this is not an unusual situation in spite of the fact that such transactions appear to have potentially deleterious impact on county and water district budgets. If it had been decided by the water board that such a reduction was manageable and was to the benefit of the citizens of Calaveras County, then CCWD was well within their legal parameters to negotiate such a contract. The only requirement is that they apply those same reductions to all similar projects in the future. That one or more Directors are abusing per diem and mileage privileges. Expense sheets for approximately the past two years were pulled from CCWD files for all Directors who served during that time. It was found that questionable per diem and mileage charges were listed by some Directors and paid for by CCWD. In accordance with advice given by the Grand Jury legal advisor, the Grand Jury had several options. These included (1) legal action; (2) forced payback of the monies involved; and (3) fix the system so that such questionable charges do not occur in the future. Actions 1 and 2 might involve significant legal charges and therefore are less appealing. Action 3 is the course recommended by the Grand Jury. This was discussed in detail with the CCWD General Manager and he assured the Grand Jury that he would make proper changes to the CCWD Policy Manual that would preclude similar charges in the future. Regarding the written complaint pertaining to CCWD loaning money to the Utica Power Authority, it is true that such a loan was made to help keep UPA afloat and that in exchange for such a loan, CCWD was able to place two of its Directors on the UPA governing board. This does not seem out of the ordinary because if UPA were to default, it could cause considerable impact on power customers within the area. The point of the complainant is almost moot in that UPA is now selling power outside the system due to the state power situation, and is making considerable profit that was not expected several years ago. Findings: The atmosphere surrounding CCWD is one of extreme distrust. CCWD appears mostly at fault for creating this condition. Interviewees who spoke with the Grand Jury were so disillusioned that they wanted the Grand Jury to go to the State Attorney General(cid:1)s office for an investigation of CCWD operations. They (cid:3)saw(cid:4) $12 million of water users(cid:1) money given away 13 to other water districts. Right or wrong, this is how they perceived the situation. Also, they (cid:3)saw(cid:4) the results of a lawsuit in which their money was paid to satisfy a claim for a situation that might not have been required. Right or wrong, this was their perception. Likewise, they see $4 million plus being offered to a developer and at the same time they see rising water rates. That is also their perception, especially when they are confronted with skyrocketing costs of electricity, gasoline and home heating. There was little in the Grand Jury investigation that showed where management at CCWD understood these public concerns. The public, however, is also partly to blame. Had they been truly concerned about giving away $12 million, they would have come upon the term (cid:3)defeasance(cid:4) and a few simple questions to appropriate people would have explained to them that no money was ever given away but that older loans were replaced with newer loans, for whatever reasons. Similarly, they would have come upon like solutions to the other so-called (cid:3)give-aways(cid:4) that the local newspapers and public opinion were so quick to pick apart. Perception of CCWD operations by the public will be very difficult to change. This perception, in large part, is the result of news media reports, including editorials and letters to the editor. Public criticism will not stop until the public becomes apprised of the bases for performing some of the more costly transactions, in open meetings and in newspapers and flyers.