Reservoir Project Faces Cost Overrun

The huge new reservoir being built in east Riverside County by the Metropolitan Water District of Southern California is more than a quarter-billion dollars over budget.

The overrun amounts to approximately 11% of the $2-billion budget. About half of it is due to increased costs for managing the project, said project manager Dennis Majors. Another substantial portion is the increased cost of installing hydraulic systems.

The reservoir, under construction near Hemet for three years, is scheduled to be completed next fall. It will hold 260 billion gallons of water, enough to supply emergency needs for the region for six months.

The complex project, which is supposed to allow the agency to capture and store water during rainy periods and sell it during dry seasons, involves building earth and rock dams on either end of the Domenigoni Valley. In addition to the costs of the reservoir, an extra $1 billion is being spent to build a pipeline to fill the reservoir.

Top district staff have been aware of the overrun since spring. But the agency’s board of directors was not informed until this week. The board is to receive its first detailed briefing on the problem Tuesday.

“The overruns can be explained, but why didn’t they come to us with it?” said Jerry King, a Metropolitan board member from Orange County. “It’s a huge amount of money. I can’t believe they let it get away from them this way.”

Majors said he delayed informing the board until he was certain of his projections and had determined that the costs could not be recovered by savings elsewhere in the budget. Costs have actually grown by close to $310 million. About $90 million will be covered by contingency funds. Majors said he hoped the rest could be taken from other capital funds.

“We’re working to minimize or eliminate any effect on water rates,” he said.

Majors’ boss, general manager John Wodraska, was traveling Friday and unavailable for comment. He announced two weeks ago that he will resign from the agency later this month to take a private-sector job in Texas.

Deputy general manager Ed Means said it took a full month just to collect the data and an additional two to analyze it.

“Frankly, an 11% overage on a project of this size is not that large. Although clearly $200 million is a huge amount of money. You can’t just go out and say we’ve got this overrun. Realistically, you’re going to be asked to explain it and you should be asked to explain it. It took us 60 days to figure it all out,” Means said. “Nobody clearly is happy, but these are costs that are justified. When you are building dams you are dealing with the unknown. It is a safety-critical element and you can’t cut corners.”

The overall financial management of the district--the principal importer of water to Southern California--has increasingly has become a concern to some Metropolitan board members, who complain the staff has too much autonomy.

Metropolitan has an annual operating budget of about $1.3 billion and its capital budgets are frequently half that size.

“These are unbelievable sums of money, which can cover a host of sins. There’s absolutely no accountability. Zero. No public scrutiny,” said Francine Krauel, a board member from San Diego.

Katherine Moret, a Los Angeles board member, said she has had difficulty getting staff members to understand they work for a public agency. Some want to treat agency affairs as a private matter, she said. “When you challenge the staff on something--say, sole-source contracts--they say, ‘You take that away from us, we’ll be just like a government.’ Well, we are a government.”

The Metropolitan Water District is a confederation of 27 cities and local water districts that serve 16 million people. Local water supplies meet only about one-third the region’s needs. The remainder is brought by canal from the Colorado River and the Sacramento River Delta.

The water is then sold to local water districts, which in turn sell it to consumers.