Water District’s Problems Won’t Be Solved by Its New Code of Conduct : Ethics: Santa Margarita agency is showing much concern for public relations, little for actual reform.

Recent reports from the Santa Margarita Water District promote the impression that action is being taken to solve the various problems afflicting the district. The water district unveiled a code of ethics and Walter W. Knitz, general manager, and Michael P. Lord, assistant general manager, have resigned. The problem is that the district’s approach to “reform” is guided by the belief that its chief problem is amenable to remedy by better public relations.

Board Chairman Don B. Schone and Knitz and Lord have all blamed the press for the troubles with the district. No one has admitted any misconduct. The first action taken by the board after public disclosure of self-dealing, double-billing, conflicts of interest and expense account abuse was to hire political consultants to salvage the district’s image. Every subsequent action was designed to solve a public relations problem, not solve structural or management difficulties.

The district board is wrong. Its problems are not the result of a malicious press. Rather, the causes of the district’s difficulties are structural inefficiencies and poor management.

A significant structural problem is the proliferation of and the lack of accountability for special districts, whether they be water, sewage or fire protection districts. The outmoded and inefficient nature of special districts has been the subject of two Orange County grand jury reports that warned that these special districts were ripe for abuse due to the lack of accountability. To date all recommendations for reform have been ignored.

This district invited abuse due to the lack of one-person, one-vote elections. The district uses the archaic method of electing directors based on dollar of assessed land value per vote. Thus, the largest landowners in the district have disproportionate power to influence board elections and thereby district policy. It will surprise no one that (1) the largest landowners are also large land developers and (2) the board granted special financial benefits to the largest landowner, the Santa Margarita Co. The financial windfall the board gave the Santa Margarita Co. amounted to $8.5 million. That’s right folks, the district chose to pay $8.5 million for interest on debt that the Santa Margarita Co. was obligated to pay. The water district received no benefit from its generosity with the public treasury in return; worse yet, most property owners in the district received no benefit either. By maintaining a voting system based on land value, the water district is thumbing its nose at real reform.

The management problems with the Santa Margarita district are the poor supervision exercised by the board over Knitz and Lord and the incestuous relationship between the district and those who conduct business with it. While the occurrence of excessive travel and meal expenses, such as a limousine ride in the Big Apple, captures public attention, the cost to the ratepayers for such abuse is small potatoes compared to the cost due to the lack of an arms-length relationship with those who do business with the district. The biggest problem with the district was not Knitz and Lord, and thus their resignation will not solve its serious problems.

A troubling aspect to this issue is the lack of acceptance of responsibility by the board. The ratepayers elected the board to protect ratepayers’ interests, not the interests of the board, district personnel or land developers. Though there has been abundant evidence that the actions of Knitz and Lord were well known to the board, Schone continues to plead ignorance. If true, then Schone failed to perform his responsibilities as chairman. If Schone knew of their activities, he should acknowledge this and not allow Knitz and Lord to be the fall guys. In either case, it would be honorable for Schone to step down and let someone with credibility attempt to resolve the district’s problems.

The code of ethics adopted by the district is a step, albeit small, in the right direction. However, the district’s claim that its code of ethics is the “strictest” in the county is little more than a smoke screen. The code primarily delineates guidelines for travel, meal and entertainment expenses and eliminating nepotism. Much of it is common business practice. Failure to comply with such practices would get most employees fired in the private sector. The code’s most serious flaw is that it lacks the force of law and will be enforced by the very people who have been the problem.

This is not reform, it’s a press release intended to minimize further scrutiny of problems that remain and move the district out of the public limelight. Ratepayers and the general public cannot let this happen. A public relations campaign is no substitute for reform to remedy the structural and management ills of the Santa Margarita Water District.