State, U.S. Urged Not to Pay Delta Flood Costs

A state audit, citing faulty record-keeping and possibly illegal acts, urges state and federal disaster agencies not to reimburse local reclamation districts for $25.8 million of $27.3 million spent to fight floods in the Sacramento-San Joaquin Delta four years ago.

If the disaster agencies withhold aid, the already financially strapped reclamation districts say they are likely to go bankrupt. The districts are responsible for maintenance and repair of the delta levees.

In an 18-page summary of the audits obtained by The Times, Controller Gray Davis’ auditors say the attorney general and federal agencies should investigate allegations of “possible illegal activities.”

Double-Billing Alleged

Among other things, the auditors say there were instances in which some districts billed federal and state disaster agencies for the same levee repairs. But while calling on state and federal investigators to look further into the alleged double-billing, the auditors said faulty record-keeping and sloppiness could have been the cause.

Dante Nomellini, lawyer for several reclamation districts embroiled in the audits, said there were no intentional instances of double-billing. He called the audit reports a “hatchet job” performed by “inexperienced” staff, and he predicted that if the districts are forced to pay, they would end up bankrupt and banks, contractors and government agencies would end up owning the islands.

Deputy Atty. Gen. Richard D. Martland said investigators have opened an inquiry, but he did not describe it as a full-fledged criminal investigation.

The preliminary audits were done for the state Office of Emergency Services and Federal Emergency Management Agency, both of which are reviewing them with representatives of the local districts.

The report focuses on claims submitted by 26 districts in 1982 and 1983. Other audits are in the works for money spent to fight floods in more recent years. In all, state and federal disaster assistance has totaled about $120 million since 1980.

The summary report describes the districts as being in “serious financial condition” with most of them spending more money than they receive in taxes. The deficits are made up in a variety of ways, including using state and federal disaster aid. The districts owe one bank, the Bank of Stockton, $12 million, the report said.

“Everybody is fighting for their lives, their livelihoods, their crops. Five years after the fact, the auditors don’t recognize that,” Stephen Sinnock, a Stockton engineer hired by several districts, said, explaining any oversights.

The audits noted that virtually none of the disaster work was done through competitive bidding and that most of the levee reconstruction work went to Dutra Construction, a Rio Vista dredging company run by Bill T. Dutra.

“I know there’s not a district out there that is hiring us because we’re good old boys. They hire us because we’re most cost-effective,” said Dutra, a member of a fourth-generation delta family long involved in dredging work.

Since 1980, despite 24 levee failures and spiraling state and federal aid, the number of contractors with barges and dredges has dwindled to two--Dutra and a company called Delta Dredging. Dutra quickly became dominant, however, in part because of the increasing number of levee breaks but also because of what a former competitor called Dutra’s “gutsy bravado.”

He would close levee breaks without any assurances that the floods would be declared disasters, a prerequisite to receiving state and federal assistance. But in most instances, the breaks were deemed state or federal disasters, making disaster aid available to pay for the repairs.

Owns Rock Quarry

Dutra further increased his business by buying a quarry that supplies most of the rock used to riprap levees.

“He darn near put us out of business,” said Paul McQueen, owner of Delta Dredging who spent 15 years as a dredge operator for Dutra’s father and has run his own company since 1977.

While state law requires competitive bidding for most government contracts, an exception was made for the reclamation districts. An opinion by the state attorney general’s office called the exception inexplicable.

Reclamation district officials contend that there is no time to put levee work out to bid during a disaster. Additionally, they point out that the landowners run the districts and fund them as well so there is no incentive for the districts to allow gouging by contractors.

Assemblyman Robert J. Campbell (D-Richmond) is carrying a bill to require competitive bidding by the districts, one that is opposed by the districts.