Score: +37 (39/7/2)
Ventura County Grand Jury • 2006-2007

Triunfo Sanitation District

Published: April 30, 2007 12 pages
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Findings 44 findings

F01
Triunfo Sanitation District (TSD) is an independent special district, formed in 1963, that supplies potable water, reclaimed water, and sewer services to customers within a fifty square mile area in parts of Southeastern Ventura County adjacent to the Los Angeles County line.
F02
TSD has no employees.
F03
TSD has outsourced all management and labor positions to Ventura Regional Sanitation District (VRSD). This contract is for the equivalent of approximately 10 full-time positions. Governance
F04
California Health and Safety Code §§4730 and 4730.1 prescribe how a sanitation district’s board of directors is constituted. The TSD Board is composed of the Chairman of the Ventura County Board of Supervisors (BOS), the Mayor of Thousand Oaks, the Chairman of the VRSD Board (or designees from their respective boards), and two members elected at-large from the TSD service area.
F05
The two elected TSD Directors must reside within the District’s boundaries. The other three directors may reside elsewhere in Ventura County.
F06
The Ventura County Local Agency Formation Commission (LAFCO) recommended in 2004 that TSD should examine increasing the number of directly elected directors from two to three [Ref-02, §III.1].
F07
The TSD Board could be reconstituted to be entirely elected at-large from among residents of the TSD service area according to Health and Safety Code §4730.1(b) by following the procedures set forth in §4730.2.
F08
For many years prior to November 2004, the two “elected” TSD Directors were appointed by the BOS because neither of the elected at-large seats were contested. A non-incumbent ran for election and was defeated in 2004. A non-incumbent candidate ran successfully in 2006, unseating a longtime incumbent. Triunfo Sanitation District
F09
In March 2005, a motion was made to change TSD’s governance to a fully elected board. However, the motion died for lack of a second.
F10
In April 2007, the TSD Board again considered the District’s governance: • A motion to have a fully elected board was defeated by a vote of 3-2. • Subsequent motions to replace one or two non-elected directors with elected directors were similarly defeated or died for lack of a second. • TSD’s attorney stated that his preliminary analysis of California codes indicated that an action to increase the number of elected directors would require changing to a fully elected board. • The Board directed its attorney to research this issue more fully, including seeking a formal opinion from the California Attorney General, and then report back to the Board.
F11
TSD pays $218 per director per meeting or day of service with a maximum of six compensated days per month. The employee portion of Social Security taxes (FICA) is paid by TSD. Directors attend regional and national conferences at TSD expense.
F12
In fiscal years 2002-2003 and 2005-2006, several TSD Directors attended as many as four conferences in such locations as Palm Springs, Monterey, Napa, and Yosemite National Park as well in Orlando and Washington, DC, at TSD expense.
F13
A March 2005 memorandum from the VRSD General Manager to the TSD Board of Directors regarding TSD governance stated: Consolidation with Las Virgenes Municipal Water District (LVMWD). I believe this is the best approach environmentally, technically and managerially. The system is currently bifurcated and would continue to be with the above systems [referring to either maintaining the status quo or going to an all-elected board]. This idea was brought to LVMWD several years ago, but there was little interest at that time.
F14
California Water Code §71060 indicates that a municipal water district can have territory in more than one county. Conflicts of Interest
F15
Both VRSD and TSD use the same law firm for legal representation.
F16
The same accounting firm performed both VRSD and TSD annual audits. In March 2007, the TSD Board of Directors hired a firm for its future audits, a firm different from the one used by VRSD.
F17
The VRSD auditor conducted an exit audit when a former finance director left that district. The July 2004 auditor’s report to VRSD recommended that several actions taken by the former VRSD finance director — actions affecting TSD — be reevaluated to determine whether they were Triunfo Sanitation District 3 appropriate and beneficial. The auditor further recommended that each action should then be ratified or reversed by the VRSD Board.
F18
The July 2004 exit audit report to VRSD was not presented to the TSD Board until 2006. Two TSD Directors who were also VRSD Directors — as well as VRSD staff serving TSD — received the report when it was originally presented to VRSD, but they failed to bring relevant TSD items in the report to the attention of the other TSD Directors.
F19
After the July 2004 auditor’s report was presented to the VRSD Board, that Board took none of the recommended actions.
F20
An October 2000 report by consultant Arroyo Associates [Ref-03] noted that a specific Triunfo District Manager position was to be provided by VRSD. At that time the position was vacant, and how or when it would be filled was uncertain. Currently the VRSD General Manager also serves as TSD District Manager. (See Attachment 1 for a time-line corresponding to findings F-21 through F-26.)
F21
Prior to the current TSD-VRSD contract for labor and management services, the California Water Service Company (CalWater) was solicited to make a proposal to manage TSD’s water service. Data initially provided to CalWater by VRSD staff was summary information that was insufficient for preparing a meaningful proposal.
F22
The VRSD General Manager informed the VRSD Executive Committee about the CalWater proposal. In a letter to the Executive Committee, the General Manager stated, “Approval by the TSD Board for a private purveyor contract would cause significant reductions in the VRSD revenues and work force.” Two members of the Executive Committee who were informed of the CalWater proposal were also TSD Directors at that time.
F23
On a recommendation from VRSD staff (acting as TSD staff), the TSD Board approved a new contract with VRSD more than five months before Brown & Caldwell, an outside consultant, submitted its review of the CalWater proposal. (See F-25.)
F24
The vote of the TSD Board to ratify the contract with VRSD was 4-0-1, with two TSD Directors who were also VRSD Directors voting in favor.
F25
A detailed proposal based on more comprehensive data specific to TSD was presented by CalWater to TSD. Brown & Caldwell was retained to evaluate that proposal.
F26
Brown & Caldwell concluded that the CalWater proposal would be more costly than the VRSD contract. This conclusion was not reported to the TSD Board [Ref-01] until after the ratification of the contract with VRSD. Services
F27
TSD area sewage is processed by the Tapia Water Reclamation Facility (Tapia), which is jointly owned with the Las Virgenes Municipal Water District (LVMWD) through a joint-powers agreement. Potable water 4 Triunfo Sanitation District purchased from the Calleguas Municipal Water District is distributed by TSD. TSD’s infrastructure for providing both sewer and potable water services is maintained by VRSD as a contractor to TSD.
F28
TSD owns 29.4% of Tapia, which is located in Los Angeles County adjacent to Malibu Canyon. LVMWD manages operations of Tapia as its majority owner. In this role, operations of LVMWD to provide services within its jurisdiction are kept separate from the operation of Tapia.
F29
The 1994 ten-year services contract between VRSD and TSD included an option for an independent review of VRSD service performance every two years. The only performance report was completed and submitted to the TSD Board in October 2000 [Ref-03]. Financial Issues
F30
Acting as fiscal manager for TSD, VRSD placed TSD capital funds into a non-interest-bearing bank account in 2004. The balance in this account fluctuated, at one time reaching $3.1 million. Thirty months later VRSD management stated that the failure to place these funds in an interest- bearing account was an “oversight”.
F31
In August 2006, TSD was credited with a payment from VRSD of $99,736.36 to compensate for foregone interest earnings on its funds. The TSD Board was informed by VRSD staff that the payment was based on what an interest-bearing account would have earned. However, the actual payment was based on what might have been earned on TSD’s actively managed investment portfolio. (See F-34.)
F32
VRSD calculated the interest reimbursement and credited it to TSD without any input from or prior approval by the TSD Board.
F33
In September 2003, approximately $9.6 million of TSD’s $12 million investment portfolio was transferred from accounts in the California State Local Agency Investment Fund (LAIF) and the County of Ventura pooled investment fund (MCP) into an actively managed bond portfolio.
F34
In accord with TSD investment policy at that time, much of the bond portfolio was sold prior to maturity and reinvested in an attempt to improve investment returns. Substantial losses and transaction fees were incurred as a result of this policy.
F35
On three occasions in 2005, VRSD staff recommended that bonds in the TSD investment portfolio be held to maturity. The TSD Board took no action.
F36
Beginning in 2004, a TSD Director and members of the public expressed repeated concerns regarding ongoing losses in the professionally managed bond portfolio. However, the TSD Board took no action to revise the District’s investment program until 2006. Remaining bonds are now being held to maturity, with resulting proceeds being invested in the State and County pooled investment funds. Triunfo Sanitation District 5 Public Involvement
F37
According to the California Little Hoover Commission, special districts are often invisible to the public and policy-makers, compromising oversight and accountability. [Ref-04]
F38
Compared to City Council elections, the electoral process for special districts is less vigorous with fewer competitive races, fewer voters involved, and more seats filled by appointment. [Ref-04]
F39
A long-standing special district concern is that compensation paid to board members discourages them from giving up their seats in the name of efficiency. [Ref-04]
F40
TSD Board meetings are sparsely attended except when controversial issues are on the agenda. Meeting notices are posted on the District’s Website and at the Oak Park Library.
F41
Regular TSD Board meetings are held at 5:15 p.m. on the fourth Monday of each month. Most special districts hold meetings after working hours at a time that would be more convenient to residents. [Ref-02]
F42
An existing Oak Park water tank was to be replaced by TSD based on a finding of no significant impact (negative declaration). However, community opposition forced further study, which resulted in a requirement to prepare an environmental impact report (EIR).
F43
Two opposite positions regarding the originally proposed location of a new water tank are: • The site is in a remote location, at a high elevation, on ground that will support the filled structure, not visible from any residence, and is close to the water distribution system. • The site is next to a heavily used hiking trail leading to the Santa Monica Mountains National Recreation area, will be illuminated after dark, will spoil views, and will require a paved access road.
F44
Water and sewer services in the District are more expensive than in surrounding areas for a number of reasons including: • All of the water is high-quality water from the California Water Project, which is significantly more expensive than water pumped from local aquifers. • TSD must repay revenue bonds that were issued to purchase the Oak Park Water Service from a private water company. The water rate is TSD’s only source of revenue for this purpose, thus requiring a rate higher than otherwise required to purchase water and pay operating expenses. • Wastewater effluent from Tapia is not permitted to be discharged into the Malibu Creek Watershed without undergoing expensive tertiary processing. Triunfo Sanitation District Conclusions C-01. TSD rate-payers may be ill-served because three out of five directors are neither elected from nor required to reside in the TSD service area. The TSD Board has considered increasing the number of directly elected directors. While this has not been favored by a majority of the Board, the issue remains unresolved. (F-04 through F-10, F-13, F-18, F-24, F-29) C-02. TSD out-sources its labor and management staff from VRSD. A VRSD Director is also a TSD Director, which presents the appearance of a conflict of interest. (F-02, F-03, F-17 through F-20, F-22, F-23, F-24, F-32) C-03. Employment of the same law firm and the same accounting firm by both VRSD and TSD may give the appearance of a conflict of interest. (F-15,

Recommendations 7

Conclusions 1

Agency Responses 1

Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.