As California prepares, in its fourth dry year, for all manner of apocalyptic scenarios—from rapidly depleted drinking water sources to Dust Bowl-era dirt farms—the thought of Silicon Valley devolving into a waterless sinkhole is “what I lose sleep over at night,” the region’s chief water official says.
As CEO of the Santa Clara Valley Water District, which provides flood protection and water to 1.8 million people in Silicon Valley’s largest county, Beau Goldie is especially concerned with subsidence—the depletion of groundwater basins that could destabilize the region’s supply and, down the road, puncture the landscape with street-swallowing pits. These concerns, he says, prompted him to take emergency action this spring and seek approval on an exclusive contract with RMC, a company that is expected to draw up plans for a recycling plant to replenish the valley’s fragile groundwater.
But sources within the water district say Goldie has routinely avoided disclosing potential conflicts of interest regarding RMC, the beneficiary of more than $18 million from the water district in the last decade.
The latest agreement with the company, expected to come in at more than $4 million, has for the most part escaped public scrutiny. In April, the seven-member elected Board of Directors, on a 5-2 vote, gave Goldie the green light to negotiate a single-source contract, which means competitive vendors were not even in the running. Goldie said a surprisingly dry winter gave rise to the fast track contracting process.
“Just about every month counts here,” Goldie told San Jose Inside. “We’re in a race.”
What Goldie never disclosed to the board is the cozy relationship the water district has shared with RMC for a number of years.
Melanie Richardson, one of Goldie’s top ranking deputies and the person responsible for overseeing watershed contracts for the district, is married to one of RMC’s principal owners, Tom Richardson. In a statement of economic interest form filed for 2010, Melanie Richardson noted that she held stock in the company worth between $100,000 and $1 million.
Goldie also neglected to inform board members that last year Monterey County Water Agency board member Steve Collins pleaded no contest to public corruption charges, including felony grand theft, related to payments from RMC and an artichoke grower. Collins worked as a paid consultant for the company and also voted on its contracts as an elected official. Collins also illegally billed clients $160,000 for meetings that he didn’t attend, or which were part of his duties as a public official, prosecutors said.
Gary Kremen, chair of the Santa Clara Valley Water District (SCVWD) and one of only two board members to vote against RMC’s contract, called the single-source negotiations with RMC “bad planning on an epic proportion.”
“It’s not like a dam is breaking and we need to immediately plug a hole,” Kremen said. “A couple months aren’t going to kill us. It’s going to take up to 10 years to get drops of water from a recycling plant into the groundwater.
“It’s starting out on the absolute wrong foot. We’ve known about this purified water project for years. We’ve had way more time to make disclosures about RMC’s past behavior, and those disclosures were never made.”
Goldie defended RMC’s selection, and the decision to exclude details about Collins and the Richardsons when going to the board for approval. He admitted that the SCVWD conducted no additional research into RMC’s role in Collins’ indictment. “It would just slow down processes tremendously, and we wouldn’t be able to provide any more assurances,” Goldie said.
In the case of Melanie Richardson’s potential conflict of interest, Goldie said that a “firewall” was put in place years ago to keep her from coming into contact with actions related to her husband’s company.
“Melanie is in the flood protection side of the house, so she has no involvement in this whatsoever,” Goldie said.
But sources at the water district tell San Jose Inside this hasn’t always been the case. In fact, internal documents show that Richardson has managed people who handle RMC contracts, including their performance reviews. The “firewall” appears to rely on her walking out of the room when RMC is discussed.
"It doesn't pass the smell test," said a source with decades of experience overseeing contracts between public agencies and consultants.
Sources confirmed that the Santa Clara County District Attorney’s office looked into the matter two years ago, but the investigation was called off due to an impending statute of limitations for any potential charges.
Goldie insisted in a May interview with San Jose Inside that an in-house ethics expert, LeeAnn Pelham, had strengthened SCVWD controls to prevent any impropriety. Pelham subsequently resigned her post.
RMC’s single-source contract was part of a package of non-competitive deals Goldie submitted at an April 28 board meeting. He received pushback not only from Kremen and fellow director Barbara Keegan, but also Ravi Subramanian, the district’s head of procurement.
“I just said the language needs to be stronger to justify why they should be single-source contracts,” Subramanian told San Jose Inside in a phone interview monitored by district communications staff.
The RMC deal earmarks several million dollars worth of preliminary planning for an indirect potable recycling plant, but Goldie said that the overall project could end up costing $800 million. Sources say that estimate is optimistic, as the water district has a history of going over budget.
District board member Keegan, a trained engineer who along with Kremen voted against Goldie’s single-source contract proposals, noted that companies doing preliminary planning often receive ensuing contracts. Engineers rarely trust work they have not verified themselves.
“Whoever does the preliminary engineering work obviously is going to have more experience with the project and that would help in the future for a final design contract,” Keegan said. “If another firm were chosen for the design, they would have to redo significant portions of the preliminary engineering to verify the accuracy of the other firm’s work product.”
Goldie said that RMC has been notified it is unlikely to receive future contracts on the project, making the decision to go with the company from the start all the more perplexing.
“That means, potentially, the $5 million being spent on this preliminary contract would be wasted if another firm were chosen to finish off the project,” Keegan said.
Beyond the proposed RMC contract, sources say the firm has improperly billed the district in the past. Sources also told San Jose Inside that a recent audit found that district staff has routinely moved money between projects, sometimes to the benefit of RMC, and these transfers of funds are tucked into massive reports that often go undetected by the part-time board members.
“By moving funds directly from project to project, it avoids scrutiny from the public and the Board,” Keegan said.
Board chair Kremen said he plans to call on Goldie to suspend negotiations with RMC until a more thorough vetting of their past dealings with the district can be conducted.