Water District Sinks
Titanic Taking On Water
by Margo-Sturges, As I See It
June 24, 2010

After a brief 25 minute meeting of the Warren Valley Basin Watermaster, the Hi-Desert Water Board of Directors approved that budget with a net deficit of $97,665.00 as proposed by CFO Frank Luckino. This small treasure chest with an income of only $37,000 per year was tattooed to contribute to the USGS water monitoring program and to the HDWD Urban Water Master Plan.

Five minutes later, at the Wednesday’s regular board meeting of the Hi-Desert Water District, Staff asked the Board of Directors to approve the purchase of additional available water coming on the market from their supplier, Mojave Water Agency, up to 2,000 acre-feet at a cost of $431.00 acre foot for a total of $862,000.00.

According to CFO Luckino, these funds are sitting in the cash reserves (approx. $889,000, or 12% of reserves) designated for purchasing water and after this purchase, will leave a smaller life raft for the District down to $3.7 million in reserves, or 52%.It was also explained there may be some difficulty in finding a way to store this amount of imported water so not to increase the levels of the aquifer to intercept the nitrate septic levels stated in simple terms, in marine terms, this ship’s water ballasts are full. All deliveries must be completed no later than December 31, 2010, according to the guidelines set forth by MWA in the agenda packet.

During the discussions, Ed Muzik, General Manager and Captain of this ship, informed the members of the board it was possible that MWA would make the entire 6,000 acre feet of water available to HDWD as other water agencies may not have the funds to purchase this water being put up for sale because they are struggling with their own cash flow and troubled budgets.

As I see it, other water districts, like a ship, may be changing their tack to fiscal responsibility during these troubled waters with their main sail flapping for lack of wind or a gusto economy. It might be their responsible decision, by choice, not to purchase this Liquid Treasure of additional water in order to maintain their reserve account life raft for a rainy day or a broken propeller.

I will always remember the image, not captured by the video camera, of CFO Luckino’s surprised jaw drop when this discussion went down this uncharted course of purchasing an additional 4,000 acre feet of water on top of the 2,000 acre feet that was originally proposed. As Co-Captain and Navigator of this HDWD Titanic heading towards the ice berg, Luckino quickly grabbed his calculator serving as his compass to recalculate the outcome of this possible course of action navigating by the stars without GPS.

With great folly, Ahoy Matey! Director Bob Stadum proclaimed this was a great opportunity and called this purchase of additional water an investment “even if we have to store it someplace for one or two years.” He explained with his own Power Point version as his hand zoomed up to the ceiling to indicate the direction of water costs. Previously, he motioned his hand in waves to explain the costs of pipe ebb and flowing. I was starting to feel sea sick and I did not have any Dramamine in my purse.

All for one and one for all, four Board members chimed in like drunken sailors having a good time at the bar spending someone else’s money on ship leave. Except for Board Member Dan Munsey, having both feet on the ground and a clear mind to pose the important questions about water storage.....asking where? Who will pay for the costs of pumping and delivery from the storage facility especially if utility costs are going to greatly increase next year? Will there be a contract to spell this out? What about water loss? What will this do to our cash reserves and how will this affect the HDWD’s ability to secure financing for the Wastewater Treatment Plant or bonding?

As I see it, Director’s Munsey’s important questions should have been enough reason to send this matter back to Staff for further evaluation. However, MWA sent the offer letter to HDWD on June 7, 2010, and like any successful high pressure salesman will confirm, stated this offer is only good for 30 days and IF you are approved to purchase, must pay MWA no later than close of business day, August 23, 2010, at the special increased rate of only $431 per acre-foot! Act now! (The Mojave River Basin will be charged $386 per acre-foot.)

GM Muzik, as Captain, proposed Full Speed Ahead stating he will work out the details later. CFO Luckino, as dutiful Co-Captain did not offer any resistance to these suggestions and calculated the reserves would be reduced to $2 million. Finally, Luckino was asked, “We’ll be okay with only $2 million dollars in reserve, right? This stored water will be an asset! Will the low reserves be a problem for our bond rating?” Luckino explained the low reserves will be a factor because there is no insurance available to purchase to increase the rating, and water is not considered an asset, it is an expense. Director Sheldon Hough insisted on removing the 2,000 acre-feet amount proposed by Staff in his revised motion to state “up to 6,000 acre-feet over and above the allocation.” The vote was unanimous.

Say! Where is the $1.2 million dollar refund from the Mojave Water Agency IDM account that was proposed to be earmarked to purchase extra water when it became available? The answer? That $1,200,000.00 refund (look at all these zeros) may have been quickly gobbled up by a flawed deficit budget that Luckino was unlucky enough to inherit when he signed on with the Hi-Desert Water District as their Chief Financial Officer.

As I see it, CFO Frank Luckino should have insisted on a forensic audit before taking over the Captain’s Log to navigate this HDWD TITANIC. There are funds available for a forensic audit and it is my opinion this must be addressed to change the present course before it’s too late.

In another matter, the Board of Directors approved payment of $109,767.92 severance pay packages for four employees that had to walk the plank to balance the budget for fiscal 2010/2011.

Man Overboard!