3.18.16, Contra Costa Times: Give it up, governor.
Gov. Jerry Brown is counting on the Westlands Water District to be one of the major financial backers of his $15 billion Delta tunnels, easily the largest public works project in U.S. history.
It’s time he dumped the whole notion, given last week’s admission by Westlands general manager that the nation’s largest water district got caught cooking the books with “a little Enron accounting.”
The Securities and Exchange Commission was not amused. The SEC leveled a $125,000 fine on Westlands to settle charges that it misled investors by faking its financial records in connection with a 2012 bond issue.
It’s the largest settlement ever for a case involving a municipal bond agency, and it raises major questions about Westlands’ credibility.
If Westlands General Manager Thomas Birmingham has an ounce of integrity he would immediately resign. Instead, it appears he will pony up the SEC’s separate $50,000 fine for his role in the wrongdoing and keep his nearly $400,000-a-year job.
Westlands’ penchant for playing fast and loose with investors normally wouldn’t matter all that much to Bay Area residents. But the Santa Clara Valley Water District will decide sometime within the next year if it wants to jump into bed with Westlands and Southern California’s Metropolitan Water District as major investors in the twin tunnels project.
This is just one more reason it shouldn’t.
The plan is nothing but a massive water grab by desperate Central Valley farmers and Southern California’s thirsty urban dwellers.
The project won’t produce a drop of new water for California while ratepayers will bear the brunt of a $15 billion project with costs that could perhaps double or triple, given the typical overruns on state projects.
Westlands’ settlement with the SEC includes no admission of wrongdoing, but it’s easy to see why it was hit with the big fine. In 2012, Westlands sought a $77 million bond sale. As a part of that transaction, it needed to tell bond buyers that it would maintain a 1.25 percent debt service ratio cushion, as it had with previous bond deals.
Except, in 2010, drought conditions made it impossible for Westlands to collect the revenues needed to do so. The right thing to do would have been to either admit the shortfall to potential investors, which would have raised borrowing costs, or raise rates to farmers by 11.6 percent to make up the difference. Westlands instead took money from accounts dedicated to other commitments to make it appear that all was well.
The twin-tunnel project was a bad idea from the outset. The latest revelation should end any thoughts by Gov. Jerry Brown or any local district of going into business with Westlands.