When California realised just how much they'd be spending on water if they had to pay a fair market price for it without the fed helping them out I'm sure they'd decide life is better as a state.
Personally I'd probably go for job #1 with the more interesting and challenging work. If the work truly is challenging then you should be able to build a strong skill set that will enable you to move onto #2-esque opportunities in the future.
You should also take other things into consideration, do you get better benefits (you're in the states so health care should of importance to you), time off, et al...
Which team do you prefer, remember you will spend a lot of time with them, make sure you get along. You mentioned a "strong engineer"; from what you've said I guess you plan to learn from him. If that is the case then make sure you get along well with him in particular.
Can you contact people who have worked with them before? Find out what they're truly like...
In my opinion it depends partly how your finances look at the moment. If you're scraping by then, assuming all else is equal, I'd go for the money.
That said if money isn't an issue for whatever reason then I would go for the job which is most interesting for you. Which job has a role more focused on your interests or plans?
Where ever you work you'll learn new skills even if some environments promote it a little more. You also have free time if there is a specific skill set you want to master.
I do it primarily for fun but I'd be open to the opportunity of finding a job on the site. Never really thought about it and as such wouldn't go out of my way to look for a job via the site however if I some how came across a decent looking job then why not?