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This article originally appeared in the Friday May 24, 2019 issue of the Progress Times.
The Agua Special Utility District paid General Manager Jose E. “Eddie” Saenz nearly $1.1 million last year.
Saenz and CSJ Group, the Edinburg-based company he controls, billed the utility district nearly $923,000 for engineering work. The utility district also paid $151,000 to Saenz for supervising day-to-day operations.
“He does pretty much everything for Agua,” said utility board Director Roger Hernandez.
Saenz and CSJ Group, which employs five people, handled several major projects.
CSJ Group supervised the Palmview sewer project, monitoring contractors and engineers; handled the La Joya bypass project, which required the utility district to relocate infrastructure affected by the new highway; and completed a slew of smaller projects, ranging from subdivision reviews to construction of a new bathroom.
Saenz started working for the utility district in October 2016, when the board hired CSJ Group to provide engineering services. Saenz reported to Executive Director Oscar Cancino, who resigned in September 2017, and his replacement, Interim General Manager Richard LeFevre, who resigned two months later.
After the management shakeup, the utility board asked Saenz to serve as interim general manager. Saenz kept handling engineering work.
The situation created a potential conflict of interest.
Under normal circumstances, the general manager supervises the district engineer. Saenz, however, temporarily held both positions.
“We’re almost done with the Palmview project and it’s very important that it gets finalized,” Hernandez said, adding that he didn’t want to jeopardize the project by abruptly switching engineers.
After appointing Saenz to the interim general manager position, the utility board hired Emigdio “Milo” Salinas, the president of McAllen-based M2 Engineering, to serve as district engineer.
Former utility board President Mario Chapa said he remains concerned about the arrangement between Saenz and the utility district.
The utility board approved a contract with CSJ Group, which Saenz owns and operates. Under the contract, CSJ Group provided Saenz to serve as general manager.
Chapa would prefer that Saenz work directly for the utility district.
“Do I think that Eddie’s salary is too high? Yes. Do I think there’s a serious conflict of interest? Even more so,” Chapa said. “Because Eddie, when he took over the general manager job, continued to function as district engineer.”
Questions about the arrangement didn’t appear to bother the utility board, which trusted Saenz and considered the situation temporary.
“The conflict of interest there, to me, is overwhelming,” Chapa said. “But nobody seems to care.”
Auditors noted the payments when they prepared the 2018 Comprehensive Annual Financial Report, which the board approved May 14.
“The District entered into a contract with the Principal of an engineering firm to function as the District’s general manager and provide engineering services as the District’s engineer. The scope of the services provided as general manager are outlined in the contract and includes but is not limited to the implementation of policy and procedures,” according to the audit. “During the year ended December 31, 2018, the District paid $151,000 for services rendered as general manager and $921,712 for engineering services as the District’s engineer.”
Saenz said the payments to CSJ Group reflect engineering services provided by the five-person company.
The nearly $923,000 total for engineering services included a roughly $300,000 contract awarded by the board.
Saenz said that project — water lines and a booster tank designed to increase water pressure — included engineering costs, construction work and materials.
“Out of the contract for design-build, I’m probably getting 10 percent of the whole thing,” Saenz said. “That’s for some of the engineering and management.”
Along with payments to Saenz, the audit report listed payments to people deemed “consultants.”
They included attorney Frank Garza, who received nearly $246,000; district engineer Emigdio “Milo” Salinas, who received about $230,000; and Burton, McCumber & Longoria, the auditing firm, which received $55,000.
Payments to Garza and other attorneys, including $35,000 to McAllen-based law firm Roerig, Oliveira & Fisher, reflect the cost of a lawsuit and Public Utility Commission proceeding filed by the city of Palmview.
The utility district crushed the city in court, where Palmview received a stern rebuke from the judge.
Auditors also determined the utility district had an approximately $1.7 million operating loss in 2018.
Customers paid nearly $9.4 million for water, sewer and related charges last year, according to the audit.
Expenses totaled about $11.1 million.
The expenses, though, included $3.8 million in depreciation, which reflects the declining value of infrastructure, equipment and other assets over time.
As a result of depreciation, the utility district recorded operating losses for the past six years.
The utility district maintains a $4.2 million unrestricted fund balance. The utility district’s overall assets also increased as a result of new construction.
“You take out that amount, we had a positive year on operating,” Saenz said, referring to the estimated depreciation, adding later: “When it comes out to actual cash, we had a $2 million operating profit.”