This article is from Cal-Tax Digest, published
by the California Taxpayers' Association.
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Progress toward reform of California's most controversial special district is showing how public scrutiny can lead to legislative action. The road to reform also shows that the current system of lax state oversight of special districts is seriously flawed.

Since 1998, the Water Replenishment District of Southern California (WRD) has been an epicenter of controversy - the target of legal challenges by some of the 43 cities it is supposed to serve, the subject of a scathing report by the Bureau of State Audits, and the cause of a recent investigation by the Little Hoover Commission that has detailed the cost to taxpayers of California's hidden governments. (See article on page x.)

There are more than 2,200 of these "independent special districts" in California. Governed by their own elected bodies, they're collecting taxes and fees, spending and holding in reserve tens of billions of taxpayer dollars, and operating largely under the radar of public officials or the electorate. The Little Hoover Commission says that special district reserves topped $19 billion statewide in 1997 (the most current year for data).

According to the Commission, the good news is that, despite their anonymity, many special districts are doing a good job - reliably and responsibly overseeing important public services such as parks, hospitals, water system, waste disposal, and libraries.

The bad news as the Commission sees it - and we concur - lies with the districts that have succumbed to the potential for inefficiency and abuse that is built into a system of specialized governments with too few controls and too little public oversight.

The 24 health care districts (out of 74) that no longer operate hospitals are an example of what can go wrong. The WRD, which the State Auditor says has overcharged water users for nearly a decade, amassed unconscionable reserves, and grew top heavy with highly paid administrators and consultants, is another.

But, there has been progress toward reform at the WRD, even if it isn't enough, and even if it has been made under pressure from consumers, local elected officials, the State Auditor and the Little Hoover Commission. In recent months:

• The WRD board placed its general manager on administrative leave (with pay) and has negotiated his resignation (at a cost of $240,000 plus legal fees). The board also terminated the district's assistant general manager.
• In May, the WRD Board approved a water replenishment assessment fee for fiscal year 2000-01 of $112 per acre-foot, down from a 1997 high of $161 per acre-foot. Many municipal water experts maintain this fee should be no more than $100.
• The district has said that it will reduce its unspent reserves from a current $50 million. The State Auditor deemed anything over $10 million as excessive.
• The board has voted to reduce its expenditures for outside lobbyists and public relations consultants from a recent high of $100,000 per month to $52,500 per month. As of this writing, the district still employs at least six lobbying and PR firms.
• The WRD may even support some of the reform proposals now pending in the state Legislature to give statutory weight to fiscal controls and limits on reserves recommended by the State Auditor and Little Hoover Commission. Legislation currently in the hopper includes bills by Assembly Members Sally M. Havice (D-Cerritos) and Thomas M. Calderon (D-Montebello), and State Senators Martha Escutia (D-Whittier), Betty Karnette (D-Long Beach), Richard Mountjoy (R-Arcadia) and Richard Polanco (D-Los Angeles).

Marc Titel

Robert Wagner

Marc Titel and Robert Wagner are members of the Lakewood City Council. Mr. Titel is an educator; Mr. Wagner is a retired aerospace engineer. Both have been active in municipal water policy issues. They authored "California's Hidden Governments: A Case Study" for the November 1999 Cal-Tax Digest.

All of these are hopeful signs, signaling perhaps that the WRD Board is beginning to remember whom it serves. Cities are hopeful that the WRD has begun a process of reform, but they will continue to put pressure on the agency. At least 11 cities are prepared to petition for complete withdrawal from the district if legislative remedies and the district's own efforts fall short.

In the end, the WRD may actually have performed a public service by demonstrating the kind of trouble we can buy for ourselves when we allow California's special governments to operate in obscurity and without public participation.

The district's resistance to public oversight of its budgeting and contracting policies prompted both the Auditor General and Little Hoover Commission to get involved. It set the stage for legislation that should help bring the WRD under control, and may provoke even broader reforms to address what could be an even bigger problem for a state with too many specialized governments and too few tools to manage them.