The state agency that oversees public authorities censured the Erie County Water Authority and asked the county Legislature to remove from office all commissioners associated with repeatedly breaking laws and best practices regarding openness, transparency and independent oversight and governance of the agency during a two-year period.
Two prior Republican commissioners who served during that time, Robert Anderson and Karl Simmeth Jr., have already left the three-member board, leaving only Democrat Jerome Schad, who serves as board chairman.
The Authorities Budget Office recommends that the county Legislature fire him, and several legislators said Tuesday they will either recommend Schad's termination and/or explore how to turn the authority into a county department.
"I hope this report convinces my colleagues that reform is necessary and that they stop protecting the status quo," said Legislator Thomas Loughran, D-Amherst. "I mean how much evidence do you need?"
The Authorities Budget Office pulled no punches in its scathing assessment of the operation of the public utility agency responsible for providing clean water to half a million county residents.
“Based on the historic issues with transparency and accountability at the Erie County Water Authority, we believe that the Authority would be best served by new leadership, that is more cognizant of its fiduciary responsibility to the Authority and the public,” stated ABO Director Jeffrey Pearlman. “A new board will help to implement and enforce its policies in an environment of transparency.”
The damning report spends 20 pages outlining violations that transpired primarily in 2016 and 2017, and paints the commissioners as ill-informed, naively trusting of decisions made by authority staff, and hostile and willfully resistant to public requests for information.
It then recommends "that any commissioner who served during 2016 and 2017 and remains on the Erie County Water Authority board be replaced by the County Legislature."
During that time period, Earl Jann served as board chairman until May 2017, when he left the board to become the authority's executive director. Simmeth replaced Jann as a commissioner and served for one year before retiring last month. Schad, who served as a commissioner both years before becoming chairman in May. Jann is now the executive director at the Water Authority.
The agency does not recommend his removal as executive director. Jann told The News Tuesday that as an employee, he is not allowed to speak about the Authorities Budget Office's findings.
The report outlines a litany of governance problems. They ranged from improperly responding to Freedom of Information Law requests and illegal closed-door meetings to poor board oversight of procurement practices and repeated, ill-prepared decision-making by board members.
Among the many findings, the Authorities Budget Office found the board:
- Approved an employment contract in April 2017 for Deputy Director Robert Lichtenthal without showing the agreement provided a 36 percent increase in his salary and without any recent evaluation of his job performance. The authority also acknowledged Tuesday that the employment contract for Lichtenthal was omitted from the authority's publicly posted agenda, which was posted the afternoon before the meeting.
- Approved the 2018 Water Authority budget in November without presenting any budget information or having any public discussion. Commissioners admitted they discussed the budget in private meetings instead.
- Negligently failed to file forms acknowledging board members' fiduciary duty, even though staff subsequently submitted annual reports certifying that the forms had been signed.
- Repeatedly failed to take proper action in regard to FOIL requests – in some cases ignoring requests – and improperly withheld information, even repeatedly refusing to provide information sought by the Authority Budget Office for the purposes of producing its report.
- Made repeated exceptions to the authority's vacation policy so that several top executives and authority lawyers could obtain, carry over and potentially cash out more vacation time than the authority provides.
A number of other highlighted examples have been previously reported by The Buffalo News, including the lack of transparency in hiring and employment contract for Jann and violations of FOIL and procurement policies related to emergency spending to investigate a matter involving Investigative Post. Numerous other transparency complaints have been lodged directly with the authority.
Blueprint for change
Schad acknowledged Tuesday that the authority made some serious mistakes regarding transparency, which has resulted in an overhaul of how it operates. The board responded to the agency's draft report by committing to use the findings as a "blueprint for change," he said.
"The prior majority did not believe in transparency," he said. "It was just not their way of looking at the world."
The Water Authority Board of Commissioners received a draft of the report the day Schad took over as chairman in May and fellow Democrat Mark Carney was seated. Since that time, the board has gone into high gear implementing a number of policies to improve transparency and openness, making more information available on the website, and holding more board discussion and debate in public.
When the Authorities Budget Office asked the board for a response to its draft report, the authority decided not to quibble with individual factual inaccuracies in the report. Rather, its response dealt all the efforts being made to transform the organization, he said.
"Rightly or wrongly, we looked at this thing and said look, we're not going to to get into a nitpicky thing, when they are making conclusions that they probably aren't going to back off of," he said.
In retrospect, Schad said, that was "a tactical error."
Because the authority did not challenge specific details in the report, the Authorities Budget Office denied the board a face-to-face exit interview, giving the board no opportunity to verbally address all outstanding concerns.
When contacted by The News, Anderson, the former board chairman, said he's been traveling and had not yet read the report. He criticized the current leadership of the Water Authority, however, for preventing him from contributing to the authority's official response. He said he asked to participate but was denied because he was no longer employed by the authority.
The findings of the report were scathing because the board made no effort to set facts straight, Anderson said.
"You don't soft shoe the answer and hope they don't hammer you," he said.
Both Schad and former Commissioner Simmeth said that many of the assertions made in the report about commissioners not having enough information to make their decisions are false. Staff either provided the needed information to the board – though not to the public – or commissioners sought the information, they said.
As board treasurer, Simmeth said, if he had questions about any payments, the staff was always forthcoming with information.
"Nobody hid anything from me," he said. "It's a good group of people over there."
He also expressed support for Schad, despite their different party affiliations.
"Jerry's a good man, even if he's on the other side of the aisle," he said. "He's trying to do the right thing."
Schad said an investigation is underway to determine the extent to which the authority did not comply with FOIL requests. The Authority Budget Office stated that of 70 FOIL requests received, "there was no indication the Authority responded to 22 requests." Schad said he finds this hard to believe, but promised a thorough look into the agency's charge.
The report also took issue with how the board responded to FOIL appeals, indicating that only three of six appeals were reviewed by the board. Schad said five FOIL appeals were reviewed by the board. The authority cannot find any record of a sixth appeal.
Making his case
Schad said he should be allowed to continue as chairman, since under his watch, a majority of the recommendations in the draft report have already been addressed.
The agency recommended Schad's removal because he voted in support of many decisions that the state agency deemed unjustifiable.
Schad said that as a minority member, his ability to influence the outcome of board decisions was limited. Moreover, he said, he has always favored informal tactics of influence and persuasion over head-on confrontation, though he acknowledged that this makes him a target of criticism.
"It's been my style to persuade, not to bang on the table," he told The News. "I can't change who I am, but I don't believe in secrecy. I don't believe in this stuff, and that's not where we're going to go if I stay as chairman."
The board has moved swiftly to transform the Erie County Water Authority into a more transparent organization since he took over the chairmanship in May, he said. Of the 20 recommendations made by the state agency, 16 have already been implemented. If he were removed as chairman, there's no way to assure that continued momentum, he said.
He also said it's unfortunate that the board's move toward transparency coincided with the Authorities Budget Office sharing its draft findings, saying that the commitment to transparency would have existed with or without the report.
"If the Legislature says I have to walk away, I will walk away," he said. "But if I have to, I will persuade them, like I tried to persuade the ABO, this is the right track, and I can help get us there."
Legislators reached by The News said they are uncertain whether the Legislature has the authority to remove sitting Water Authority commissioners, but that isn't stopping at least two lawmakers from calling for Schad's resignation.
"I will certainly be the first to call for Jerry Schad to resign immediately," said Legislature Minority Leader Joseph Lorigo, C-West Seneca.
Loughran, who has been a vocal critic of the Water Authority, joined in that call.
"What we've got going on over there, it's like a Curly, Larry and Moe operation," Loughran said, referring to "The Three Stooges." "It's not professional. It's not accountable. I think the answer is to abolish this and fold it into a county department. In the near term here, we should clean house and get interim commissioners that are committed to reforming the authority once and for all."
County legislators appoint the Water Authority commissioners, though political party leaders have a big say who who gets the commissioner positions, which pay $22,500 a year.
Though Schad, a Democrat, was in the minority on the three-member and Republican-led board during the years the Authority Budget Office conducted its review, that does not excuse his participation in bad board decisions, Lorigo and Loughran said.
"It doesn't matter whether he was in the minority or the majority," Lorigo said. "He voted in lock step with all those other commissioners, which is why he was censured. And if those other commissioners were still sitting, I'd be calling for their resignations, too."
Legislature Chairman Peter Savage, D-Buffalo, did not return calls seeking comment. Instead, he issued a statement that refers to the Legislature's appointment of Carney earlier this year but makes no mention of Schad.
"I am aware of the report and agree that the Erie County Water Authority needs to reform the way it does business, which is why the Legislature recently appointed a reform-minded commissioner who has already taken strides to improve transparency at the Authority," Savage stated. "With that said, we all agree much more work remains and additional reforms are needed."