The troubled Rio Linda/ Elverta Community Water District recently settled lawsuits brought by its former general manager for $264,000 a payout that could undermine its ability to restore liability insurance.
Operating without such insurance is risky for an agency that has repeatedly had its financial viability questioned by auditors. A recent report by a government oversight agency found that the district operated with a deficit of about $24,000.
The California Joint Powers Insurance Authority, a consortium that serves water agencies, terminated the district's coverage last year because of a string of lawsuits by former employees and the volatile politics that precipitated the legal action.
The insurance authority and the district shared the cost of settling with former General Manager Joe Sherrill.
Despite the Sherrill settlement, the district does have some factors in its favor when the insurance authority considers reinstating its coverage May 6, said Walter Sells, CEO of the authority.
Sherrill's lawsuits were the last remaining ones against the district, and the November election of four new directors on the district board has promoted stability, Sells said.
In recent years, the district has been sued by two former general managers and a former bookkeeper. The district settled the claims for a total of $354,000.
Much of the district's $1.6 million annual operating budget has gone to fees for its attorney, Ravi Mehta, who has billed the district almost $700,000 in the past 12 months.
Brent Dills, chairman of the water district's board, said the district agreed to settle with Sherrill simply to save on legal bills from its own attorney.
"We made a business decision to stop the bleeding," he said.
Sherrill said he forced the district's hand by coming up with new evidence. Sherrill filed four lawsuits against the district, one alleging wrongful termination and three others alleging violations of the state's open meetings law.
Sherrill became the general manager in November 2011 and was fired the following month after a new board was seated. Board members said he was fired for insubordination and other reasons, while Sherrill claimed he was dismissed for political reasons.
Sherrill said the district at one point offered to settle for $115,000, but added $50,000 to the offer after he sought to introduce evidence about board member Courtney Caron not living in the district.
Caron participated in meetings via a video feed from Southern California, where she works. She maintained that she had residences there and in the water district. Sherrill said she lived only in Southern California.
Dills said the residency issue played no role in the decision to settle.
The lawsuit filed by the district's former bookkeeper, Elizabeth Myers, also stems from Sherrill's tenure as the district's general manager. Sherrill fired her, saying she used a district credit card for personal expenses, including trips abroad.
Myers sued the district for publicizing information about her dismissal in news stories that ran in The Bee. The district settled with Myers for $62,500.
The district also settled with former General Manager Clifford Dillon, who also claimed he was fired for political reasons when a new board took control. The district settled with Dillon for $27,500.
Board chairman Dills says such disagreements have largely disappeared from the district, and longtime observers told The Bee this week that they agree with him.
That isn't to say the district has eliminated all potential legal actions. Sherrill said he is considering suing the district because it released his Social Security number on public records when his settlement was announced.
Call The Bee's Brad Branan, (916) 321-1065. Follow him on Twitter @bradb_at_sacbee.