STATE OF CALIFORNIA FAIR POLITICAL PRACTICES COMMISSION 1102 Street . Suite 3000 . Sacramento, CA 95811 (916) 322-5660 . Fax (916) 322-0886 February 16, 2018 John Powell, Jr. President of the Board of Directors Coachella Valley Water District Board of Directors 46537 Manitou Dr. Indian Wells, CA 92210 Re: Your Request for Advice Our File No. A-18-004 Dear Mr. Powell: This letter responds to your request for advice regarding the con?ict of 1nterest provisions of the Political Reform Act (the Please note that we are only providing advice under the con?ict of 1nterest provisions of the Act and not under other general con?ict of 1nterest prohibitions such as common law con?ict of interest or Section 1090. Also, note that we are not a ?nder of fact when rendering advice (In re Ogtesby (1975) 1 PPC Ops. 71), and any advice we provide assumes your facts are complete and accurate. QUESTION Does the Act prohibit you from taking part in governmental decisions relating to the Coachella Valley Water District?s pr0posed formation of Assessment District 34 to ?nance the Oasis In'igation System Expansion Project given that you have various ?nancial interests that may be ?nancially affected by those decisions, including an indirect investment in real property located within the Project area? CONCLUSION Yes. The Act prohibits you from taking part in those decisions because they would have a reasonably foreseeable material ?nancial effect on your real property interest based on the facts presented. The Political Reform Act is contained in Government Code Sections 81000 through 91014. All statutory references are to the Government Code, unless otherwise indicated. The regulations of the Fair Political Practices Commission are contained in Sections 18110 through 18997 of Title 2 of the California Code of Regulations. All regulatory references are to Title 2, Division 6 of the California Code of Regulations, unless otherwise indicated. File No. A-18-004 Page No. 2 FACTS AS PROVIDED BY REQUESTOR The Coachella Valley Water District (CVWD) is a local government agency that, among other things, delivers irrigation and domestic (drinking) water, collects and recycles wastewater, provides regional storm water protection, replenishes the groundwater basin, and promotes water conservation. The CVWD Board of Directors will soon consider whether to approve the formation of Assessment District 34 to ?nance its Oasis Irrigation System Expansion Project. The Project would expand irrigation system in the Oasis Project Area to supply nearly 32,000 acre-feet of Colorado River water from the Coachella Canal. The Canal delivers approximately 280,000 acre- feet annually of imported water for irrigation and an additional 40,000 acre-feet for recharging local aquifers and supplementing the recycled water system. Under the Project, Canal water would be provided to an additional 7,110 acres within the Project area. The Project entails the construction of signi?cant infrastructure in the area, including pipelines and laterals, pump/booster stations, and reservoirs. The Project is estimated to cost $58.3 million and will be ?nanced primarily by approximately $10 million in existing user contributions, approximately $27 million in Replenishment Assessment Charge contributions, and approximately $30 million in Assessment District Bonds. The annual assessment is not expected to exceed $230 per acre. Assessment District 34 would consist of a total area of 7,1 10 acres, comprised of 40 landowners and 260 parcels of land. Those 7,110 acres currently use groundwater for irrigation purposes, but the Project would provide those prOperties with Canal water instead. Within the Project area, landownership ranges from 0.14 acres to 1,457 acres. Landowners will also bear annual assessment costs to repay the bonds issued to ?nance a portion of the Project?s costs. You are an elected member of the CVWD Board of Directors. You are also the trustor, trustee, and a lifetime bene?ciary of the John P. Powell, Jr. Separate Property Trust dated August 14, 1990 (also known as the Crown Hill Ranches, Inc. Revocable Shareholder Trust of John P. Powell, Jr.) (the ?Trust?). The Trust owns 50 percent of the shares of Crown Hill Ranches, Inc. Crown Hill Ranches, Inc. owns three parcels of land, totaling approximately 240 acres, within the Project area. These properties currently use groundwater, and Crown Hill Ranches, Inc. pays the District?s replenishment assessment charge with respect to these properties. The Project would provide these properties with Canal water instead. Crown Hill Ranches, Inc. leases these prOperties to Amazing Coachella, Inc. which Operates them as a lemon ranch. The Trust also owns a 50-percent interest in Amazing Coachella, Inc. You derive your salary from Peter Rabbit Farms, a corporation in which you have a minority interest. Peter Rabbit Farms provides some services to Amazing Coachella, Inc. Your request for advice indicated that at least two other members of the ?ve-member CVWD Board of Directors also had potential con?icts of interest under the Act with respect to these decisions. File No. A-18-004 Page No. 3 ANALYSIS Sections 87100 and 87103 prohibit a public of?cial from taking part in a govemmental decision if the decision would have a reasonably foreseeable material ?nancial effect on one or more of the of?cial?s ?nancial interests. Section 87103 sets forth the ?nancial interests that may give rise to a disqualifying con?ict of interest: 0 Any business entity in which the of?cial has a direct or indirect investment worth $2,000 or more (Section 87103(a)), or in which the of?cial is a director, of?cer, partner, or employee, or holds any position of management (Section 87103(d)). 0 Any real property in which the of?cial has a direct or indirect interest worth $2,000 or more. (Section - Any source of income aggregating $500 or more in value to the of?cial within 12 months prior to the decision. (Section 0 Any donor, or intermediary or agent of a donor, of $250 or more in value to the of?cial within 12 months prior to the decision. (Section I An interest in his or her personal ?nances and those of immediate family members. (See Section 87103.) An of?cial always has an interest in his or her personal ?nances or those of immediate family members. The Trust Section 82005 de?nes a ?business entity? as ?any organization or enterprise operated for pro?t, including but not limited to a pr0prietorship, partnership, ?rm, business trust, joint venture, syndicate, corporation or association.? Based on the facts presented, the Trust is a ?business trust? operated for pro?t, and you have an investment in the trust of $2,000 or more. Therefore, you have a business interest in the Trust. Crown Hill Ranches Inc. Section 87103 provides that an ?indirect investment or interest? includes, among other things, any investment or interest owned by a business entity or trust in which the of?cial owns directly, indirectly, or bene?cially a lO-percent interest or greater. You are the trustor, trustee, and a lifetime bene?ciary of the Trust. The Trust owns 50 percent of the shares of Crown Hill Ranches, Inc. Therefore, assuming you have a 10-percent interest or greater in the Trust, you have a business interest in Crown Hill Ranches, Inc. Amazing Coachella. Inc. The Trust owns a SO-percent interest in Amazing Coachella, Inc. Therefore, assuming you have a lO-percent interest or greater in the Trust, you also have a business interest in Amazing Coachella, Inc. File No. A-18-004 Page No. 4 Crown Hill Ranches. Inc.?s 240 Acres Within the Proiect Area The Trust owns 50 percent of the shares of Crown Hill Ranches, Inc. Again, assuming you have a lO-percent interest or greater in the Trust, you would also have a real property interest in Crown Hill Ranches, Inc.?s 240 acres within the Project area. Peter Rabbit Farms Peter Rabbit Farms pays you a salary, and provides some services to Amazing Coachella, Inc. Assuming you aggregate $500 or more from Peter Rabbit Farms in the 12 months preceding the decisions relating to the pr0posed formation of Assessment District 34, you have a source of income interest in Peter Rabbit Farms. Thus, with respect to those decisions, you have business interests in the Trust, Crown Hill Ranches, Inc., and Amazing Coachella, Inc.; a real property interest in Crown Hill Ranches, Inc.?s 240 acres within the Project Area; a source of income interest in Peter Rabbit Farms; and an interest in your personal ?nances and those of immediate family members. Foreseeability and Materiality The standard for foreseeability differs depending on whether or not an interest is explicitly involved in the decisions at issue. Under Regulation 18701(a), an of?cial?s real pr0perty interest is explicitly involved in a decision, and is therefore presumed to be reasonably foreseeable, if it involves ?any governmental decision affecting a real property interest as described in Regulation which sets forth the materiality standards applicable to an of?cial?s explicitly involved real property interest. Regulation provides that a decision?s effect on an of?cial?s real property interest is material if the decision would impose, repeal, or modify an assessment applicable to the property. The decisions at issue would determine whether the assessment at issue will be imposed on your real property interest in Crown Hill Ranches, Inc.?s 240 acres. Therefore, the Act prohibits you from taking part in decisions relating to the proposed formation of Assessment District 34 because those decisions would have a reasonably foreseeable material ?nancial effect on your real pr0perty interest based on the facts presented. In light of this conclusion, we do not further consider the potential effect on your various business interests.2 1 You have indicated that other members of the CVWD Board of Directors may have conflicts of interest under the Act with respect to these decisions. The Act ?does not prevent an of?cial from making or participating in the making of a governmental decision to the extent his [or her] participation is legally required for the action or decision to be made." (Section 8710].) Regulation 1870501) authorizes an of?cial who is disquali?ed from taking part in a decision to establish that he or she is ?legally required? to take part in that decision ?if there exists no alternative source of decision consistent with the purposes and terms of the statute authorizing the decision.? (Regulation You should seek ?irther advice if you require assistance applying the Act?s ?legally required participation" provisions. File No. A-18-004 Page No. 5 If you have other questions on this matter, please contact me at (916) 322-5660. Sincerely, Brian G. Lau Assistant General Counsel Matthew F. Christy Counsel, Legal Division