Cash-strapped water program puts small businesses at risk

David Duel didn’t think he’d have to lay off 45 of his 52 employees.

But that’s what the 23-year-old and his two partners, Sean Neman, 23, and Kevin Refoud, 25, did in April after their company, ReGreen, didn’t receive $900,000 for water efficiency work from an incentive program run by the Metropolitan Water District of Southern California.

“In every sense, we’ve had to downsize our company,” said Duel in a barren office so new that fresh paint scent was still in the air.

The incentive program provides rebates to customers and vendors such as ReGreen, which installs water-efficient devices, including toilets and washing machines, for clients.

Though the program has been highly successful — the demand has increased threefold in the last two fiscal years — it was suspended in May because of the overwhelming number of requests, said Bob Muir, a spokesman for the MWD. The district sells water to 26 public agencies in Southern California.

“We weren’t able to keep up with the demand that was coming in,” he said this week.

By the time officials did catch up — after adding $20 million in funds to the program, suspending it, then auditing it — they found they still had $14.2 million in outstanding payments to customers and vendors.

Through the audit, the agency found that there had been a breakdown in financial controls and that the organization “failed to stop further rebate application processing once management was aware that the program was oversubscribed,” according to audit documents.

Debra Man, chief operating officer for the district, said the organization’s intent is to pay outstanding debts within the next 30 days.

“We will make every effort to make sure they will be reimbursed,” she said. “We recognize that it is important for us to pay the validated pending payments as soon as possible.”

But it might be too late for some.

Marie Ager, director of California Toilet Replacements, said her family’s business is owed $282,165 for installing high-efficiency toilets in multifamily apartments in Los Angeles, San Diego and Burbank.

“We pay for all the toilets. We paid the plumbers. We did the work,” Ager said.

Ager said she’s not doing business anymore because she can’t afford to pay plumbers or buy the toilets from vendors.

“Our credit’s been cut off,” she said.

She has mortgaged her house and so has her father.

“I’m going to lose my house, and my father is going to lose his house if they don’t pay us,” she said.

As for ReGreen, the company’s 7,000-square-foot building in downtown Los Angeles is almost empty except for some energy-efficient lightbulbs and remnants of empty cubicles. The company has restructured to focus less on rebates from government agencies and more on green consulting for businesses, and it is starting to bustle again, like it did before this spring.

“We’re just trying to survive,” Duel said.

from: latimesblogs.latimes.com