Dist. 7 City Councilman Howard Shook said council members decided to review KPMG’s performance audit of the Department of Watershed Management “in a way that was not inflammatory and gratuitously political” so as not to jeopardize bond negotiations critical to continuing work on the city’s water/sewer system overhaul.

Asked about the timing of the audit’s release at the precise time the city was seeking bond money for the department, Shook said: “A year ago, when we asked for the audit to be done, no one knew that would be in conjunction when our friends from Wall Street would be in here evaluating a proposed bond issue.”

Shook explained: “It was pointed out to us by the CFO (Jim Glass) the extent to which we were going to have our ratings re-evaluated. There was a chance they could be reaffirmed, a chance they could go up and a chance they could go down. It was readily apparent that going down potentially would add not just hundreds of millions of dollars in borrowing costs, but, worst-case scenario, it could end the program and trigger a special master. There are a whole bunch of probable negatives that go along with that.”

The council members talked among themselves and recognized that while they had to ask tough questions about the audit, “it was clear that we were under an obligation to do it in a way that was not inflammatory and gratuitously political,” he said.

“That was our psychology,” Shook added. “We were there for six hours in a public meeting. I think I asked some pretty tough questions. The heart of it was this assertion the auditors appeared to have made that the rates were higher than they needed to have been.”

Watershed Management said the auditors’ methodology was incomplete, Shook said. “It was instructive to us that the CFO, who we have a lot of trust and confidence in, very emphatically said that the auditors’ methodology was incomplete.”

— John Schaffner