How corruption affects the cost of water in Weslaco

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Water was already expensive in Weslaco in 2013 – and then the rates nearly doubled.

The water bills rose because the South Texas town was struggling to pay for an expensive new water treatment system. Residents were told that the new system, once completed, would allow city commissioners to lower rates, because more water would be available to sell.

But amid a federal corruption investigation that has ensnared a municipal judge and former city commissioners, local residents are still paying dearly.

“Enough that I got three calls already this morning, complaining,” said Weslaco City Manager Mike Perez.

The city has a new plant and different city commissioners than those who voted in 2007 to issue $28 million in bonds to upgrade the city’s water system and then borrowed more millions from the city’s general fund to finish the work. For the project, the city commission hired an engineering company that has been implicated in major scandals in other cities and at least one foreign country.

“I don’t see how the cost of water here is ever going to go back down,” said Perez, who became city manager in December 2013.  He said an initial analysis of water use assumptions was faulty, and the debt on those bonds is too high to allow a rate cut.

For years Weslaco relied on an outdated system that in 2010 drew a ten-page complaint from the state contending that the town no longer had enough water storage or water treatment capacity to serve the populace.

City leaders declared an emergency, allowing them to skip the bidding process and give the contract to CDM Smith, a Boston-based multinational group that had built the previous treatment plant. 

The idea, presumably, was to build a water system that would allow rates to be reduced, partly through increased water sales. But the water treatment plant build-out was done at an inflated price, Perez said, and included borrowing money from the general fund. That is keeping the rates high and usage lower.

”I really just don’t know how they made certain decisions,” Perez said.

The high costs of filling a tub or watering a yard in Weslaco today are in part the cost of corruption, as it lands on taxpayers.

Engineers, unnamed in federal court documents, allegedly paid more than $4 million in bribes to intermediaries, who passed along the money to some members of the city commission in office starting around 2008.

The fallout from the resulting scandal and investigations continues.

Former city commissioners Gerardo Tafolla and John F. Cuellar have pleaded guilty to bribery and wire fraud charges. Former City Commissioner David Fox pleaded guilty this week to making a false statement during a federal grand jury proceeding. Former Rio Grande City Municipal Judge Leonel Lopez Jr., the middleman between the engineers and elected officials, has also pleaded guilty to bribery.

Charges against businessman Ricardo Quintanilla, former Hidalgo County Precinct 1 Commissioner Arturo Cuellar Jr., and Rio Grande City school board Trustee Daniel J. Garcia are pending.

Instead of making the water more affordable, the project kept Weslaco residents paying rates higher than those in neighboring towns.

Perez said that the charges may result in some criminal restitution payments, “and we can see if we can get some of that [money for city government] … we’ll just have to see.”

CDM Smith has not been named as a defendant. The federal complaint alleges the bribes were made to facilitate “the award of a $38.5 million contract to rehabilitate Weslaco’s water treatment plant.”

It’s not clear what the final size of the CDM Smith contract with Weslaco was, just that the cost of the project was considerably more than $28 million.

CDM Smith did not respond to an email seeking comment for this story.

Federal charging documents refer to “company A,” described as “an international engineering and construction company that performed large-scale infrastructure projects for public and private clients.”

CDM has in the past been accused of partaking in illicit activities in connection with public contracts.

Last year, officials in Buncombe County, North Carolina, announced they would cease working with CDM Smith after an engineer who formerly worked for the company was alleged to be at the center of a bribery ring there.

In 2017, CDM Smith admitted it paid $1.18 million in bribes to government officials in India for roadways and a water project. The company was also indicted by U.S. Department of Justice under the Foreign Corrupt Practices Act and paid a $4 million penalty.

And in 2005, an executive with CDM, then known as Camp, Dresser & McKee, was convicted of racketeering, bribery and fraud in connection with cases in several cities, including Houston and Cleveland.

In Cleveland, federal agents alleged Camp, Dresser & McKee received contracts from the water department after the company made a $25,000 contribution to a scholarship fund run by the mayor of Cleveland.

The alleged crimes in Weslaco took place between 2008 and 2016. Federal indictments were handed down in March.

Last year the city of Weslaco sued CDM Smith, alleging the company asked for $2.4 million more than previously agreed to for the project. CDM said that the money was owed due to delays in the project.

CDM asked the court to dismiss the case and when it refused, the company took the case to the appeals court, where it is pending. 

Steve Miller can be reached at [email protected].

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