Frazier holds DWR's feet to the fire on WaterFix finances

Friday, 12/01/2017, 6:00 am
Staff

A public town hall meeting co-hosted by Assemblymember Jim Frazier (D-Discovery Bay) and Senator Bill Dodd (D-Napa) was held yesterday in Walnut Grove. The topic of discussion was the proposed California WaterFix project and its fiscal management.

Just about every seat in the house was taken, many filled by interested Delta residents. Mike Tilden, Audit Principal at the California State Auditor's Office, set the table with a presentation on recent findings from a comprehensive audit performed on the Department of Water Resources (DWR) specific to the California WaterFix project. The audit revealed that the DWR committed a lot more financially to the project than originally suggested. Legislative Delta Caucus California WaterFix public hearing, Walnut Grove

“The first thing that we noted was that the planning phase had significant cost increases and schedule delays,” Tilden said. “The first part of that was the cost and timeline for preparing [the plan] increased because of the scale and complexity of the projects.”

The original DWR budget estimate for the planning phase was only $13 million, however, the audit found that actual budget estimates are approximately $60 million, close to five times the original amount. By the end of June 2017, the State Auditor's Office estimated that the overall cost of planning and developing the project would be approximately $280 million.

Another major concern revealed by the audit is that the DWR didn't complete a financial analysis report. In 2016, the DWR did provide a draft of a financial analysis of the WaterFix project in response to a public records request, however, the draft was incomplete. This report is crucial in understanding the overall impact of the project and typically is performed well before getting this far in the process.

The DWR attempted a financial analysis in 2012, but to this date, still has not made any final decisions on cost allocation, largely because of incomplete negotiations with state and federal water contractors. In order for the DWR to hire contractors for the project, the state requires contractors have fully licensed staff. Furthermore, to control spending, the state requires contractors be paid based on their qualifications and ability. In 2008, the DWR elected a program manager from URS Corporation (URS), based on those guidelines, and a year later exercised its right to replace the program manager because of an inability to work on the project full-time. Skip Thomson, Legislative Delta Caucus California WaterFix public hearing, Walnut Grove

The DWR replaced the program manager with Hallmark, but the state audit shows a lack of a competitive hiring process and no licensed staff from Hallmark, contrary to correct hiring procedure. When confronted by the State Auditor's Office about the allegations, the DWR responded that they received a recommendation to hire Hallmark from the Metropolitan Water District (MWD). The State Auditor's Office reached out to the MWD and confirmed the recommendation, however, the general manager there revealed they had never worked with Hallmark before and had simply pulled the name from a third party.

The DWR kept URS and subcontracted Hallmark out to them. That would normally be within the DWR's legal authority, however, the actual contractual language holds the DWR responsible for managing and paying the subcontractor.

A cost-benefit analysis was performed by Dr. Jeffrey Michael, Director of the Center for Business and Policy Research at the University of the Pacific. His analysis, in part, shows a 40 cent benefit for every dollar spent on the project, ultimately concluding that the proposed solution is going to cost more than the problem itself.

DWR Acting Director Cindy Messer was on hand to present the other side of the argument. Frazier addressed some of his concerns with her. “It just seems like you've moved this project ahead, not knowing if it's affordable...[You've] spent hundreds of millions of dollars, and what happens if it's not?” He asked. “To me, it's like,'Full speed ahead, it is what it is, we have an objective, and it's gonna be what it's gonna be.' And that's not okay. That's the perception the public has.” Cindy Messer, Legislative Delta Caucus California WaterFix public hearing, Walnut Grove

Frazier also questioned the foresight in the project for focusing on one portion of the state's economy, but not all of it. “Is it okay to incentivize two-thirds of the economy and damage a third of the economy with this project...There's gotta be another way.”

It's no secret that many in the Delta, including Frazier's own constituents in Discovery Bay, are not fans of the California WaterFix project or the local impact it could have on business, recreation, the community, and the environment. He went on to identify how a lack of oversight of the DWR on the project has only intensified those feelings, specifically citing the State Auditor's report. “How can we trust you?” Frazier asked.

Messer responded to Frazier directly, defending the overall environmental philosophy of the project, but accepting responsibility for some of the planning failures. “I think perhaps I didn't do a good job of painting what to expect [financially],” Messer said. “We may need to look at changes in the project moving ahead.”