Hello, this is editor-in-chief Scott Lewis. I didn’t do a Politics Report this weekend because I couldn’t quite pull this story together by Friday. Instead, I have stolen the Environment Report.
The letter that brought down Adel Hagekhalil, the general manager of the Metropolitan Water District, is getting buried by the news it generated.
The big headline about the letter, Politico first revealed, is that its claims of dysfunctional management and harassment led the Metropolitan Board of Directors to place Hagekhalil on administrative leave and appoint an interim general manager.
Hagekhalil is probably done. Environmentalists are worried Metropolitan’s establishment is forcing him out for siding with them. But the letter itself hinted at a major disagreement between its author, Metropolitan’s chief financial officer, and San Diego representatives on the Metropolitan board. And that disagreement could have been part of what provoked the CFO to write the letter and thus led to Hagekhalil’s downfall.
It would not have taken much. He got the job after the delegations from the city of Los Angeles and San Diego County united to put him in charge through an ultra-slim majority on the board. Immediately, long hostile relations between Metropolitan and San Diego became warmer, symbolized by a fist bump in the fall between Hagekhalil and Dan Denham, the general manager of the San Diego County Water Authority. Within months, concerns arose about his management style and last year, when he hired a longtime associate as chief of staff without the board’s approval, Hagekhalil got into seriously warm water.
Last week, when the letter came out, board members voted unanimously to put him on leave and name an interim general manager.
The letter has more than just complaints about Hagekhalil’s allegedly dysfunctional managing style and cronyism. It has lines like this about the Climate Adaptation Master Plan for Water (CAMP4W):
“I am very concerned that CAMP4W is quickly becoming the most expensive line item relative to its purported value. To date, most consultants are burning hours with very little value added to the original [Integrated Resource Plan] work,” wrote Katano Kasaine, Metropolitan’s assistant general manager/chief financial officer.
Metropolitan managed to patch a historic budget deficit with an 8.5 percent water rate increase and an increase to the property taxes of all Southern California property owners. Kasaine was profoundly uncomfortable with how the budget came together and in large part, she blames San Diego representatives — in particular, it seems, Tim Smith, the Metropolitan board member who leads its finance committee and represents San Diego.
The San Diego angle: Kasaine wrote that board members proposed a different budget than the one her and her staff were building. They wanted water buyers to only see a smaller increase in rates and she found it challenging. When she expressed that, Hagekhalil was upset.
“My priority was to ensure that any budget cuts and revenue projections were realistic and achievable, and that staff be allowed to cost the proposal,” she wrote.
“Holding a different opinion from the General Manager does not imply a lack of respect for his authority or opinions. Unfortunately, others, particularly the San Diego Delegation, took issue with my perspective,” she wrote.
What she’s talking about: To keep rate increases from going higher, Smith put forward alternative proposals that assumed a new water deal between San Diego and Metropolitan would come together. We wrote about it last year. Put simply, the federal government was going to help several Southern California water agencies leave water in Nevada’s Lake Mead. Imperial Irrigation District would get some money, San Diego would not have to buy some of its water and would instead pay less to buy water from Metropolitan.
Smith insisted Metropolitan incorporate this deal into its projections – it could mean a $60 million infusion of cash for Metropolitan each of the next two years. But it is hardly a done deal and it relies on the federal government, which can be slow and unpredictable. This is what Kasiane was talking about when she worried about “realistic and achievable” revenue projections.
Her staff put it clearly in a March budget workshop.
“Overall, it’s probably safer to adopt rates not based on one-time items. It’s probably a good idea to sell water out of our storage but it’d be safer to add the revenue to our reserves to protect against future rate increases,” said Arnout van den Berg, the revenue and budget manager for Metropolitan.
(Smith had not returned my requests for comment by Monday.)
But Smith along with board members from Los Angeles pushed forward and in April, when the board settled on a two-year budget, it incorporated his preferred assumptions. The tax would go up. The water rates would go up. But not as much as they would have.
Now all eyes are on San Diego: The San Diego County Water Authority has long had a weird relationship with its representatives to the Metropolitan board. They are supposed to represent the agency, but they do not necessarily agree. Mike Lee, the director of public affairs for the Water Authority, told me it would have no comment on Hagekhalil’s downfall or what was happening.
However, it’s clear the Water Authority, although maybe not interested in paying even higher rates to Metropolitan, did not necessarily want this outcome. It too is going to have to adopt rate increases in coming weeks and they could be as high as 18 percent. We already pay the highest water rates in the country and now it’s going to get worse, quickly.
The Water Authority could also assume the benefit of the federal government’s expected participation in this water trade and it could also lower its expected rate increase a bit. But staff is conspicuously not proposing that. In other words, Metropolitan kept rates a bit lower by assuming this deal is going through and they did that because of the influence of directors representing the San Diego County Water Authority. But the Water Authority itself is not going to do the same thing.
