Wallace’s continuing costs to South County residents
July 21, 2014
By KAREN VELIE
Even though John Wallace is no longer the administrator of the South San Luis Obispo County Sanitation District, district ratepayers continue to cover the costs of his mismanagement.
In 2013, following the states determination that a 2010 sewer spill was the result of Wallace’s mismanagement, Wallace announced his retirement at a district board meeting. Before he stepped down, the district regularly exceeded its more than $6 million annual budget.
Under a new administrator, the district’s costs are less than 50 percent of its budget, district records show.
Since Wallace announced his retirement, rate payers have covered the more than $15,000 Wallace charged to return district documents he insisted on keeping at his private engineering firm. Wallace said that he took the documents for his own convenience.
Rate payers also have paid approximately $70,000 to the law firm of Andre, Morris & Buttery, which represents Wallace and the Wallace Group in a lawsuit filed by six Oceano homeowners following the 2010 sewage spill, district warrants show.
During the 2010 spill, sewage flowed into approximately 40 homes in Oceano. The lawsuit, filed in 2012, claims that Wallace’s financial motivations led him to intentionally mismanage the sanitation plant.
Before his retirement, Wallace was the chief administrator of the district and also the owner and president of the Wallace Group, a private engineering firm located in San Luis Obispo. The Wallace Group received between $50,000 and $80,000 a month from the district for a variety of engineering services, according to district financial records.
In addition to legal expenses and the cost of regaining district documents, rate payers are facing a $1.1 million fine from the state because of the 2010 sewage spill.
The Central Coast Regional Water Quality Control Board determined the spill was the result of mismanagement. Shortly after water board’s investigators reached their finding it offered a $300,000 settlement to the district. The district board declined the offer at Wallace’s suggestion. The district then paid about $750,000 to the Wallace Group and a team of lawyers to argue against the fine.
The $1.1 million fine is under appeal. Nevertheless, the district has hired a consultant to examine rate increases the district could implement in order to pay the fine.
The sanitation district serves the residents of the Oceano Community Service District and the cities of Arroyo Grande and Grover Beach. At the time of Wallace’s retirement, the three-person board consisted of Arroyo Grande Mayor Tony Ferrara, Grover Beach Mayor Debbie Peterson and Oceano board President Matt Guerrero.
In 2013, Peterson requested a forensic audit of the district. If the audit determined Wallace had consciously elected to disregard public safety in an attempt to build his personal financial portfolio, as the homeowners’ lawsuit against him claims, the district could argue that Wallace should pay the $1.1 million state fine and his legal bills, expenses currently slated to fall on the backs of ratepayers.
However, instead of putting Peterson’s request on the agenda during open session, it was placed as a personnel issue on a closed session agenda while Peterson was on vacation.
Ferrara, Guerrero and Peterson’s alternate Glen Marshall then voted unanimously to terminate any further discussion about a forensic audit.