Half a billion, but …

San Jose
– The Santa Clara Valley Water District has half a billion
dollars in the bank, but a variety of South County environmental
improvement projects are temporarily on hold because a county
auditor will not complete a review of the district’s budget in time
for the start of the fiscal year that begins
next week.
San Jose – The Santa Clara Valley Water District has half a billion dollars in the bank, but a variety of South County environmental improvement projects are temporarily on hold because a county auditor will not complete a review of the district’s budget in time for the start of the fiscal year that begins next week.

Today, the district board of directors will be asked to approve about $18 million worth of projects, including environmental work for South County’s planned recycled water expansion, contracts for agricultural programs and maintenance of a fire break near the Croy Road fire of 2002. Without an officially adopted budget, the board can’t know for sure they’ll have money to support the projects.

District CEO Stan Williams said the accountants completing the audit have not tipped him off to what they will recommend to the supervisors, but he expects they will suggest that the district cut its reserves, which are in the neighborhood of $500 million.

“Both the end of this year and the start of next year are problematic at this point,” Williams said Monday. “I can’t really tell the board what the fiscal impact of their decisions will be.”

The water district is not a county agency, but is subject to budget review by the county board of supervisors. This year, for the first time since the countywide district was formed in 1968, the supervisors ordered a comprehensive review of its proposed $388.5 million budget. The district’s budget for the current fiscal year, which ends June 30, including capital projects and operations, was about $482 million.

The review is being conducted by Harvey M. Rose Accountancy Corp., of San Francisco, the same company that reviews the county’s budget. The company was supposed to present its findings to the supervisors June 7, but will not do so until Aug. 2. Williams said the delay is due to the company’s lack of knowledge about the district’s functions.

“We were thrown for a loop,” Williams said of the review. “It’s always good to have an extra set of eyes, but it needs to be someone who you can have some faith and trust that they know what they’re looking at.”

District officials maintain that they are limited by law to strict and specific uses for the reserve funds. Williams said he fears the supervisors will give the recommendations too much weight because they too are unfamiliar with district operations.

It’s unclear how the district will react if supervisors order it to cut its budget. The county has no authority to set rates or any way change the district’s revenue streams. If the budget is cut, Williams said, the district may end up with money it doesn’t have legal authority to spend.

“That’s a real interesting quandary,” Williams said. “It’s not clear what would happen if they say add or subtract.”

An accountant with Harvey Rose could not be reached for comment. Gary Graves, chief deputy county executive, said the budget review is unusual but is not an effort to rein in district spending or an attempt to find additional money for the county.

The review of the water district is consistent with the way they approach everything else,” Graves said. “Anytime you have a big, complicated budget, having another set of eyes looking at it is beneficial. It is different. There’s no getting away from it.”

And Sig Sanchez, a South County representative on the water board, said he will likely vote to approve the projects at today’s meeting.

“At this particular point, my feeling is to go ahead and approve them,” Sanchez said. “I can’t imagine the county is going to cut our budget by 18 million bucks. We have reserves to cover these projects. They’re all contractual arrangements.”

Sanchez does share Williams’ frustration about the scope of the review. He believes the accounting firm has gone beyond its direction from county supervisors and duplicated the district’s in-house audit.

“You can almost say they’re auditing our budget rather than just reviewing it,” he said. “It will work out. I don’t see any real serious outcome.”

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