A waterfront neighborhood that serves 25 cities and 1.6 million people in southeast Los Angeles County and is already battling customers and state legislation for its future has laid off nearly two-thirds of its employees to help stabilize the district's finances.
The budget cuts, originally merged by the county board and its newly hired general manager without the guidance of an accountant, decimated the organizational chart of the scandal-ridden Central Basin Municipal Water District, removing every department head, most of his engineers, and all of his water resources department at once.
The layoffs have made the district's customers concerned about its ability to provide services and have sparked retaliation charges from employees who were fired after filing complaints of harassment and illegal activity over the past year.
Public accusations, key decision stalemates, and bitter clashes between staff and elected officials became the norm as the district stalled during the coronavirus pandemic, according to interviews, videos, and public records from the Southern California News Group. The district's bond ratings have dropped to "junk" levels due to the riots, and a bill, SB 625, threatens to turn the district over to a recipient.
General Manager Alex Rojas, a former school principal, described the cuts earlier this month as the right size for an agency that had become too top-heavy and unsustainable. Dismissed employees say it is the latest attempt by the Central Basin elected board of directors to silence dissenters who refused to obey the board's instructions for nearly a year because they believed and a judge later upheld the board violated his own administrative code and state law in certain actions.
Rojas denies there was any retaliation, saying the cuts have unfortunately had to be massive due to a difficult financial situation. He said the district is putting its house back in order and wants to cement its relationships with its partners and state lawmakers.
"There was no targeting of specific people in reducing the armed forces," said Rojas. "It was more in response to a large projected deficit that needed to be addressed."
The Central Basin encompasses a 227 square miles service area that extends from East Los Angeles to Signal Hill and from Willowbrook to La Habra Heights. The district does not sell water directly to residents, but mostly acts as a passage for water that is bought by the Metropolitan Water District and then sold to local utility companies known as suppliers.
The district has an eight-member board of directors, five elected and three appointed by the legislature. The board was bogged down in a 4-4 split for nearly a year until the five elected officials joined forces this month to lay off the employees and hire Rojas and a new law firm.
Bond ratings downgraded
The Central Basin budget is around $ 12 million per year. In July, Moody & # 39; s Investors Services and S&P Global Ratings downgraded the district's ratings to what investors would call "junk" levels. Moody & # 39; s attributed the downgrades to "the district's significant governance challenges that pose a material risk to its business and finances," and warned that all of the district's bonds were under review. S&P has put the district on "CreditWatch" which means a possible downgrade in the future if there is no turnaround.
"Since the end of 2019, the district board has not been able to meet an adequate quorum to govern the district and to act on crucial matters for the management," said a report by Moody. "This included failure to appoint a general manager, general counsel, and information technology manager for several months, which created risks to supervisory control, water flow management, the accounting system, payroll system and the district's computer network."
Both said their reviews would depend on whether the board passed its budget this month.
Suppliers, who are supporting a scaled-down central basin, expressed concern about the cuts. This emerges from a letter from David Aleshire, an attorney who represents the district's clients in the lawsuit and accuses the board of violating its own administrative code and state law by voting without a true majority in support.
"In short, while some downsizing may have been appropriate, this full layoff of virtually all existing employees in the district is an illusion to reassure bondholders that when you actually don't have the staff to do so, you'll have adequate coverage perform normal operations, ”he wrote in the letter.
Aleshire also raised concerns about the lack of a plan for the district to function with small, less experienced staff. And he criticized changes that appeared to underestimate the cost previously expected by the district's former finance director to be much higher. Some of the laid-off employees, including the finance director, have agreed with Aleshire's assessment.
The cuts will have no impact on the operability of the district, according to Rojas.
He said the board's budget only reflected 70 percent of the cuts, as up to 30 percent will be used to bring back the staff needed and hire contractors to fill certain roles. So far, two laid-off employees – an engineer and a senior accountant – have returned, he said. The district budget also does not include potential revenue from a fixed meter fee that is contested by suppliers in court.
The chaos started in 2019
The district, whose elected board was proposed by the auditor for 2015 to disband, fell into disarray again from early 2019 when the eight-member board lost the first of its appointed members. Not long after, the board's legal counsel was removed from his position after challenging the contract of the district's former director general.
State law and the Central Basin administrative law required five yes votes, a majority of the board of directors, to get something passed. However, with only seven board members left and a stalemate in hiring a new chief executive officer, four of the elected officials took the view that the vacant board seat also reduced the number of votes required to qualify as a majority.
Although the suppliers selected a replacement more than six months ago, the Central Basin has taken no action to set the agent, according to court records. Last week, Rojas said he planned to take action against the delayed appointment as soon as possible.
Provided they formed a majority, the four members hired an interim general manager, Carlos Penila, and replaced the district attorney against warnings from staff and their previous legal counsel. The board members pushed forward even after the Los Angeles District Attorney's Office notified them their votes were invalid and the Metropolitan Water District refused to seat the Central Basin-appointed people for the same reason.
In an unusual turn, employees resisted and refused to implement board decisions that only received four votes. With the district's administrative code expressly stating that employees only respond to one executive officer and the employees argued that one was not properly selected, the two sides got caught in a stalemate.
The judge intervenes
In July, Los Angeles District Supreme Court Justice James Chalfant overturned both board positions and reiterated the need for five votes under his own administrative law and the state's water law. Early last week, the board responded by changing its administrative code to require a "simple majority," a move that Chalfant chastised at a hearing on Thursday, August 27th.
Prior to the decision, former Central Basin finance director Andrew Hamilton refused to make payments to the improperly hired general manager and general counsel. He later refused to pay certain board members' daily rates for certain activities.
The board fired him in May for insubordination, but without the right votes, Hamilton would not accept the resignation. Someone who matches CEO Leticia Vasquez-Wilson's description has reported him to the Los Angeles County Sheriff's Department for theft for failing to return his equipment, according to a police report. Law enforcement could not determine whether a crime had been committed.
In another case, the Sheriff's Department had to intervene again when Hamilton allegedly locked the elected board members out of the district headquarters for lack of pay slips. Often times, interactions between the two sides became hostile.
Protesters with megaphones, allegedly encouraged by board members, have turned up at staff homes to accuse them of corruption. In a video posted on YouTube, a protester accompanying Vasquez-Wilson used a megaphone in the Central Basin lobby to call Hamilton to "stop being such a slut and come downstairs".
Directors during public meetings accused Hamilton of failing to produce financial records, of writing improper checks and of "disruptive and erratic behavior," according to a complaint filed by Hamilton.
"These directors have told imprecise lies about myself without any evidence," said Hamilton in an interview.
President makes statement
Vasquez-Wilson, who was reached by phone, did not respond to allegations that she was involved in harassing employees and did not talk about the upheaval in the district. She described the allegations as "personnel matters" that she could not discuss.
After asking a reporter to submit questions via email, she responded with a brief explanation.
“I believe the Central Basin Municipal Water District is on the right track to move the agency in a positive direction. The board of directors has teamed up to adopt a balanced budget and hire a seasoned and experienced executive director and law firm. Obviously there are some disgruntled employees who are dissatisfied with the board's decision to balance their budget and choose to use your newspaper to spread lies, ”she explained. "Even so, we need to advance the district's business and mission, which is to continue to provide clean, reliable, and most importantly, affordable water to our region."
Hamilton filed five complaints against district officials on Aug. 13. The next day, the district board officially removed his position and 13 others to cut costs. This emerges from a memo that Vasquez-Wilson sent to the staff.
"Because there is no one to hold them back or fence them in, they continue to be more aggressive and continue to feel encouraged to break the law," Hamilton said in an interview. The cuts removed the district's professional engineer and its only auditor, he said.
The appointed board member alleges harassment
Suppliers' attorney Aleshire said two appointed board members resigned over harassment last year. "I've been doing this for over 40 years and it's just bizarre," Aleshire said.
The only remaining appointed board member, John Oskui, Downey's deputy city administrator, claims there have been "coordinated and orchestrated" efforts to harass him and others for not being in line. Oskui was named by the district's customers, cities and private water companies shopping in the Central Basin following the reform passed by lawmakers in 2016.
Recently, Central Basin's legal counsel filed a complaint against Oskui with the prosecutor alleging that his appointment was a conflict of interest because Downey was one of Central Basin's clients. However, the right of suppliers to appoint him is determined by state law.
"They wrote letters and emails to my employer, my city administrator and my city council," Oskui said in an interview. "You came to our city council meetings accusing me of being a 'water terrorist', of being a business criminal and asking me to resign."
Bill would take down district
SB 625, the bill to dissolve the Central Basin Board of Directors and temporarily transfer control of the district to another agency, the Water Replenishment District in Southern California, was approved in June by Rep. Cristina Garcia and the assembly spokesman Anthony Rendon presented. Under the law, the WRD would run the district for up to 18 months while the Los Angeles District Local Agency Formation Commission was conducting a public process to determine how it should be administered.
In a statement, Rendon said the bill was about "restoring accountability and public trust" in the district.
Nine Central Basin employees jointly sent a letter in support of the bill that has stalled in the Senate. Most were released earlier this month.
The reforms started in 2016
In 2016, Garcia and Senator Ricardo Lara passed two separate central basin reform laws in response to the discovery of a hidden $ 2.7 million slush fund. Vasquez-Wilson filed a whistleblower lawsuit in 2014 calling the fund and received $ 750,000 from the court. Garcia's bill will reduce the board to seven members, four elected and three appointed, in 2022.
In an interview, Garcia expressed frustration that the Central Basin elected board of directors "appears to believe they are above the law" and refuses to cooperate with the appointed members. She said her original bill should give the board a chance to fix itself instead of resolving it as advised.
"The problem was there long before that, so the FBI was there several times, that's why the audits said we should just get rid of this," she said. "We tried to compromise and give them a chance and they failed."
Rojas, the district's new general manager, said he wanted to work with lawmakers to find another solution, believing there was an inherent conflict in allowing the district's clients to appoint board members to a public agency enable. The combination of the district's administrative law, various laws, and state law make the district's work difficult, he said.
"We think there might have been good intentions but now we have a lot of confusion," he said.
So far, the bill has not stepped down from the Senate committee chaired by Senator Toni Atkins, but state legislation is due to meet on Monday, August 31st.
Garcia said negotiations between the Senate and the assembly were still ongoing.
"There's a lot of desire to do something," she said.