Water District Money Spent on Lavish Trips, Perks : Public funds: Since 1984, two Santa Margarita officials have been reimbursed $162,000 for expenses, including a $125 car waxing and $1,500 for three days of room service. They defend the practices.

A southern Orange County water official was in New York on public business but he had some time to kill. So he hired a stretch limousine, cruised around Manhattan for five hours and lunched at the Tavern on the Green restaurant in Central Park.

Five weeks later, he billed the Santa Margarita Water District for the $245 limo ride and $121.70 lunch as part of the $4,021.81 in expenses he claimed for the three-day New York trip. He was fully reimbursed with public funds.

It was “a perk . . . part of the business,” said Walter W. (Bill) Knitz, general manager for the water district that covers Rancho Santa Margarita, Coto de Caza and parts of Mission Viejo and San Clemente.

For Knitz and his deputy--Michael P. Lord--such perks have been business as usual. Documents obtained by The Times show that the two officials have been reimbursed for tens of thousands of dollars in questionable expenses over the past decade, including cross-country trips for their spouses, rooms at posh hotels such as the Ritz-Carlton and Helmsley Palace in New York, sheepskin seat covers and $125 wax jobs for their automobiles, four-figure room service tabs and regular meals at pricey local restaurants.

In one instance, the two men successfully submitted the same hotel bill for reimbursement three times. They refunded two of the improper overpayments after being questioned by The Times.

In an interview, Knitz and Lord defended the expenses they had claimed, and issued a statement saying that their expense account spending had “been measured against the results achieved in accomplishing the goals and objectives of the district . . . (and) found to be cost-effective.”

No guidelines were violated, Knitz said, because none exist, and furthermore, none are needed.

There is no daily limit on food, no ceiling on dinner bills, no restriction on staying in luxury hotels.

Within 24 hours of the interview, the chairman of the water district’s board issued a statement saying guidelines for travel, hotel selection and business meals, as well as per diem limits on meals while traveling, were perhaps justified, and a proposed policy should require “pre-approval of major and/or non-routine business activities.”

“Maybe we need to do some soul-searching,” Chairman Don B. Schone told The Times.

Knitz makes $113,292 a year, Lord $109,116.

The Santa Margarita Water District is one of thousands of “special districts” that have been created in California in the 116 years they have been authorized to operate everything from water and sewage systems to parks and libraries. More than 20 such districts exist in Orange County. For the most part, they are largely unregulated and perhaps the most poorly scrutinized layer of government in the state.

Knitz and Lord agreed to be interviewed about their expenses and other matters this past week--but only on the condition that they be interviewed together, and for no more than one hour.

When asked if there are limits to what he considered acceptable spending, Knitz replied: “Probably are, but don’t ask me what they are. I have no idea.”

As for his 1990 limo ride in Manhattan, Knitz said he was “just killing some time before my plane left and doing a little sightseeing.”

Since 1984, Knitz has received $86,120 in expense reimbursements. Lord has received $75,949. These figures do not include some expenses, such as car rentals and airline tickets paid directly by the district and not included as expenses on their individual expense reports.

In addition, they have helped throw lavish parties, costing as much as $21,000, to celebrate the completion of a district construction project or employee anniversaries, and these costs are also not included on their expense accounts.

Often, the expense reports show that Knitz and Lord purchased expensive lunches and dinners for engineering consultants and contractors who had provided them with free meals and gifts.

Staff meetings and other vaguely described business functions were routinely held at local bars and restaurants, and occasionally in local hotel rooms.

On one such occasion, a hotel bill shows that Lord checked into a Costa Mesa hotel with an unidentified companion. He charged to his room a $6.35 pay-per-view movie, a $38.20 gift shop purchase, $22.99 in room service and $8 in “overnight valet” services before checking out the next day. The entire $186.16 hotel bill was charged off on his expense account as an “OCWA function”--something having to do with the Orange County Water Assn.

Knitz’s disdain for expense account controls is perhaps a product of the almost unique status of the Santa Margarita Water District, a so-called “landowner district” whose board members are elected--not on the basis of “one man, one vote,” but under a voting procedure that awards votes exclusively to landowners on the basis of one vote for each dollar of assessed land value.

Among Orange County’s 17 water districts, which distribute water to those residents not served by municipal water departments, only one other--the Los Alisos Water District--is a “landowner district.”

Since big landowners, such as the Santa Margarita Co., and developers own most of the acreage in the Santa Margarita district, the board members, and managers such as Knitz and Lord, serve at their pleasure. That Knitz has survived as the top manager for 17 years suggests that he has pleased the big landowners, who are likely to remain in firm control of the district for decades.

Directors of other Orange County water districts and several local government observers expressed surprise at the spending in Santa Margarita, and said such extravagances would never have been allowed by their governing boards.

Orange County Auditor-Controller Steve E. Lewis said some of the expenditures were clearly “outrageous and improper.” Stan Sprague, general manager of the Municipal Water District of Orange County, said the expenses were “amazing” and that he has never spent so much himself.

Nearly 100% of the Santa Margarita district’s day-to-day operating budget of $28 million comes from water usage charges, said district finance director James W. Clark, meaning that Lord’s and Knitz’s expenses are generally reimbursed from water ratepayer funds.

“They are spending other people’s money,” said William R. Mitchell, head of the Orange County chapter of Common Cause, a citizen watchdog group. “These have got to be the best jobs in the county. This isn’t even a close call. It’s off the map.”

To make life on the road more comfortable, Knitz has ordered more than $6,200 in room service over the past five years. During the same period, Lord has frequently taken his wife or an unidentified companion along for the ride at district expense.

Usually, the highest room service tabs are incurred at the semiannual Assn. of California Water Agencies convention.

For instance, Knitz, Schone and another Santa Margarita board member spent $3,478 at a three-day ACWA conference in Indian Wells last May. The cost of the men’s three hotel rooms--$1,467--was less than their $1,498 room service tab. More drinks and snacks--most of them served poolside--cost an additional $290, records show.

Santa Margarita’s parties often include alcohol expenses, such as a bash at the pricey French restaurant La Ferme in Mission Viejo to salute outgoing board member Robert Moore that included $342 worth of Chardonnay, $255 of Val Merlot and $645 in other liquor.

Moore was picked up at his home by Stardust Limousine. The $326 limo bill was paid for by the district.

“The board thought it would be a nice touch to pick him up,” Knitz said.

The expense accounts submitted by Knitz and Lord have also included many other questionable charges--golf games, cut flowers and myriad car parts, such as a bumper or a headlight or truck tire chains. Both men sit on sheepskin seat covers paid for by the district. Knitz’s set cost $276, Lord’s $371.

“I do a lot of driving and it’s the district’s vehicle,” said Lord. “It made it more comfortable to drive.”

Records also show that Knitz and Lord have accepted more than $40,000 worth of gifts from contractors, bankers, developers and consultants, some of whom they recommended for millions of dollars worth of contracts.

From pheasant hunting and fishing trips to theater tickets and golf outings, Knitz and Lord have regularly taken gifts from companies, primarily engineering firms, that were awarded more than $22 million in work over the same period that the gifts were offered and accepted.

A sampling of five other water districts in Orange County show that those administrators had not reported receiving any gifts in the same period of time.

While Knitz and Lord accepted tens of thousands of dollars in gifts, neither man abstained from decisions that benefited the companies financially, as required under the state Political Reform Act of 1974.

Both men say their acceptance of gifts has no bearing on the contracts awarded.

“If you think that . . . the value of some of these trips and meals and a few golf games with these guys influences any of my impact on the board . . . I don’t think it does,” Knitz said.

Times librarian Sheila A. Kern contributed to the research for this article.