Upland Solons’ 180 Degree Reversal On H2O Board Appointments Hints Toward Brown Act Violation Or Backroom Deal

Inviting accusations that its members had engaged in a violation of the Brown Act, the Upland City Council this week made a major reversal from its previous direction, consenting to place all five of its members into board positions for water companies the city has a controlling interest in.
Last month, on February 8, Mayor Bill Velto attempted to get the city council to go along with appointing himself and Dan Richards, one of the primary donors to his political fund, to the board of the San Antonio Water Company. The council, however, had balked at doing so. The central element in the council majority’s reluctance to making those appointments hinged on an issue brought up by Councilwoman Shannan Maust, that being the potential complication and conflicts that would ensue if the city were to be called upon to make a decision with regard to water operations or water issues that might impinge on the company.
Upland has its own water operation, which is a division of the city’s public works department.
The City of Upland Water Department currently obtains its water from a combination of three sources, those being the nine wells the city owns as well as from the San Antonio Water Company and the West End Consolidated Water Company. The city is a 70.66 percent owner of the San Antonio Water company and a 91.18 percent owner of the West End Consolidated Water Company.
The San Antonio Water Company draws water by means of diversions from above-ground streams in San Antonio Canyon and seven wells, utilizing two booster pump stations that send water through 21 miles of pipeline to three reservoirs.
The West End Consolidated Water Company has four active wells and two currently inactive wells.
Though the city has a controlling interest in both the San Antonio and West End water companies, in recent years the city has avoided placing more than a single member of the city council onto the boards of those companies, although it has not hesitated in arranging the appointments of former council members to those panels.
While the lion’s share of the water harvested by the San Antonio Water Company is ultimately used in Upland, a significant portion of that company’s water is utilized in San Antonio Heights, an unincorporated county area north of the city. Indeed, a significant portion of the water the San Antonio Water Company draws comes from San Antonio Heights itself. Though the City of Upland and its residents and San Antonio Heights and its residents have a commonality of interest in the San Antonio Water Company, in particular maintaining its wells, reservoirs and facilities, there are occasional diversions of interest between on one side, San Antonio Heights and its residents, and on the other, Upland and its residents. When such differences manifest, this creates a conflict of loyalties for any member of the city council who is also a San Antonio Heights Water Company board member. In some cases, this can also result in a legal conflict of interest in that the council member may have a monetary interest if his or her vote, either as a council member or as a board member, either clashes with or corresponds to his or her own personal financial interest. In such cases, participating in such a vote could be or indeed is a violation of the law, specifically California Government Code 1090, a felony that could subject the officeholder to both a prison sentence and a ban from holding public elected office in California ever after. To avoid such a violation of the law, the official must abstain from voting, which is also referred to the elected official recusing himself or herself.
Former Upland City Attorney James Markman as recently as 2019 advised the city council it therefore would be best if the council appointed no more than a single currently-serving representative from among its members to either of the two water company boards. The council until recently adhered to that device.
Until Monday night, the only current member of the Upland City Council serving on the San Antonio Water Company board was Councilman Rudy Zuniga, although among that panel’s seven members were former councilmen Tom Thomas and Gino Filippi. Prior to Monday night, none of the five members of the West End Water Company’s board were current members of the city council, though two, Tom Thomas and Sid Robinson, were former city councilmen.
On February 8, when Mayor Bill Velto in his purview as mayor sought to elevate himself and Dan Richards to the San Antonio Water Company Board of Directors, Councilwoman Maust referenced the opinion rendered by former City Attorney Markman. Markman, who departed as city attorney in 2019, was replaced as Upland city attorney by Steven Flower, who was one of Markman’s colleagues with the law firm of Richards Watson & Gershon. As chance would have it, the February 8 meeting was the last forum at which Flower functioned as city attorney. Shortly thereafter, the city terminated the contract for legal services it had with Richards Watson & Gershon, replacing it with the law firm of Best Best & Krieger. Simultaneously, Flower was supplanted as city attorney by Steven Deitsch, a partner with Best Best & Krieger.
On February 8, Councilwoman Maust made a convincing enough assertion of the principles inherent in Markman’s longstanding advice, including quoting him verbatim, to essentially convince two of her colleagues, Councilwoman Janice Elliott and Councilman Carlos Garcia, that unless Zuniga was to step down from the San Antonio Water Company Board, the city should hold off on confirming Velto as a board member to that same panel because there was at least a potential if not a real conflict of interest and/or undesirable complications in appointing more than one of the council’s members to the board. This did not sit well with Velto and Zuniga, both of whom seemed intent on having Zuniga remain as a member of the San Antonio Water Company Board of Directors and having Velto join him on that panel. Despite Velto’s and Zuniga’s sentiments, they were outmuscled politically by their three council colleagues at that point.
This week, on March 8, with Richards Watson & Gershon no longer representing the city and Deitsch functioning in the place of Flower, the council convened. Whereas on February 8, the only appointment discussions agendized for that evening’s meeting pertained to the San Antonio Water Company, this week the council encountered an agenda that contained an item calling for the city council to consider appointments to the San Antonio Water Company as well as to the West End Water Company boards of directors. As per city policy and tradition, the mayor nominates those of his or her choosing and the full council then votes on whether to confirm or not confirm the suggestions.
Skillfully, Velto took up the appointments to the West End Water Company’s board, where four appointments were to be made, first. He then nominated Elliott, Maust, Garcia and former Upland Planning Commissioner Shelly Verrinder to those posts. This move, while flying in the face of the majority council reasoning that had prevailed on February 8 when it had been applied to the San Antonio Water Company Board of Directors and contradicting the counsel of former City Attorney Markman, nevertheless appealed directly to the vanity of the three members of the council who had previously obstructed Velto in his rush to his intended goal. Of note was that no appeal was made to Deitsch to weigh in on the advisability or legality of the move that would transform three-fifths of the West End board into members of the city council. Nor was it mentioned that a fifth member, the holdover from the previous board make-up, was Tom Thomas, a former city councilman. Without any explanation of how the conflict or complication that was belabored during the meeting on February 8 had been resolved, the council voted unanimously to confirm Velto’s nominations. The only direct assertion that allowing more than one city council member onto the water company boards would not create a conflict or complication came from Velto. Deitsch made no effort to contradict that assertion nor expound upon, expand upon or confirm it. This implied that Deistsch, as city attorney, had given the council, either in closed session or individually, some justification for allowing the appointments to proceed.
Many observers of the meeting were mystified to why Deitsch was remaining silent with regard to the issue and on what grounds the city and city council could consider Markman’s counsel to no longer be operative. Nor did Deitsch explain how the city council would be able to bypass a conflict of interest growing out of a circumstance when the council is called upon to vote with regard to anything pertaining to the West End Consolidated Water Company when a quorum of the city council serves on that company’s board, and those three members would have to recuse themselves.
The council had met in closed session prior to the open public session on March 8. The items on the agenda for the closed session did not include a discussion of the legality of appointing a quorum of the council to either of the water company boards. If, in fact, Deitsch had such a discussion with the council in a closed, nonpublic session, that would have run afoul of the Brown Act. The Brown Act is California’s open public meeting law which requires that a public board conduct all business, with certain exceptions, in public, and that those discussions be agendized 72 hours in advance of the meeting. The only exceptions to this restriction, that is, the issues that can be discussed in closed sessions outside the earshot and scrutiny of the public, are negotiations for land purchases, discussing employee discipline, hiring and firing employees, labor negotiations, pending and ongoing litigation, discussing threats to the security of public buildings, to discuss the licensing of individuals with criminal records, considering the investment of pension funds and discussing the governmental entity’s final response to a state audit. Thus, if Deitsch did provide the council with guidance on whether it was legal or advisable for the counsel to appoint a quorum of its members to one of the water company boards, that would have been a violation of the Brown Act.
It was not at all clear why the legality, propriety or advisability of appointing a quorum of the council’s members to the water company board was not explicitly dealt with in open session, and why the city attorney remained silent on the issue. It thus appeared that the city council had arrived at some collective understanding with regard to the issue prior to the meeting, which might suggest its members had engaged in a violation of the Brown Act, and that the city attorney had abetted its members in doing so.
After he had safely established Elliott, Maust, Garcia and Verringer on the West End Water Company Board of Directors, Velto then took up his suggested appointments to the San Antonio Water Company Board of Directors. This time, he again nominated himself, while passing over Dan Richards, instead nominating Katy Parker, who had served a four-year term on the Inland Empire Utilities Agency until she lost her bid for reelection in November. For many observers, Velto’s move came across as a masterful political stroke. Presuming upon the individual personal ambition of Elliott, Maust and Garcia by offering them the political plums of the West End Water Board positions, he inveigled them into accepting those elevations. Thereafter, having compromised the principle the three had espoused the previous month in preventing his appointment to the San Antonio Water Company Board then, he put all three in the position of no longer being able to use that justification to block his own ambition.
Velto on February 8 said that he intended to forego collecting the $250 per meeting stipend provided to San Antonio Water Company board members. That, Velto suggest, would eliminate any financial interest he might have in the San Antonio Water Company, eliminating any conflict of interest that being a member of the city council and the company board might otherwise entail. On March 8, Velto alluded to the need for the other council members to waive the $250 per meeting compensation normally provided to West End Consolidated Water Company’s board members for Elliott, Maust and Garcia to serve on that water company board. None of the three at the meeting explicitly consented to such a waiver, which again seemed to suggest that an agreement to that effect had been reached prior to the meeting, another indication that a Brown Act violation had taken place.
Neither Maust nor Garcia consented to speak with the Sentinel following the appointments.
Councilwoman Elliott told the Sentinel that what had occurred on Monday evening was on the up and up.
Elliott said the potential for a conflict between the city and the West End Consolidate Water District is remote. “There’s a big difference between the West End Water Company and San Antonio Water Company,” she said. “West End is much smaller.”
The City of Upland’s water division is reliant on the West End Consolidated Water Company for about 15 percent of its water. The San Antonio Water Company provides more than half of the city’s water.
Though Elliott said, “The city owns 91 percent of West End,” Elliott said the company practically runs itself. “If I recall, we never voted on anything pertaining to the West End Water Company in the first four years I was on the council. I don’t anticipate anything coming up in the future where the members would have to recuse themselves. If there is a situation that arises in which we have a conflict, then my understanding is we can select members at random to determine who votes and who doesn’t.”
Elliott insisted that there had been no discussion of the nominations that took place Monday night in advance of the meeting, and she said the council did not hear anything from Deitsch with regard to legal issues pertaining to the council members serving on the water company boards.
Without explaining precisely how it had come about, Elliott said, “We did resolve that we can vote as members of the city council and the water boards in most situations as long as you don’t have a conflict of interest. You don’t have a conflict of interest if you give up your stipend.”
Velto’s nomination of her, Maust and Garcia and Verringer to the West End Consolidated Board was a surprise to her, she said.
“The staff report didn’t say who the mayor’s selections were going into the meeting,” she said. “My guess is most of us did not know who he would select. I did not know he would select me. All I had to do was decline my stipend, which I would have done anyway. I didn’t want that to an issue.”
Elliott said she assumed Velto had conferred with Deitsch about the legality of the appointments, but that she did not know for certain.
“The lawyer [Deitsch] made it clear to Bill Velto prior to the last meeting [that the appointments of all five members to the watar boards could be made],” Elliott said. She said that Velto had gone over that issue at the February 8 meeting.
She said she was confident that the council is not afoul of the law.
“None of us want to get into trouble,” she said. Restricting the council from serving on the water boards, she said, “was never an item of discussion. We all can serve.”
She continued, “I was on the West End Consolidated Water Company board in 2017, and I chose not to receive the stipend at that time. I felt the only reason I was on there was by virtue of being voted into office [as a member of the council]. I didn’t want any perception that I was profiteering.”
Pressed on whether waiver of the $250 per person per meeting stipend would entirely do away with any conceivable conflict, Elliott acknowledged that a contradiction of purpose could come about in such a situation. “The majority of the time I would say those two entities [the city and the water company] function independently of one another,” she said. “It does seem, though, that there could be a situation where, when you have a fiduciary responsibility to one entity and you have a fiduciary responsibility to the other and those are in conflict, it seems to me there is a possibility that might present a conflict, even if there is no money involved for you personally.”
-Mark Gutglueck

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