Wallace’s continuing costs to South County residents

July 21, 2014
John Wallace

John Wallace

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.


29 Comments

  1. falconbh says:

    We need New Tax Relief candidates in the Oceano Community Services district or After the election You will have Rate Increases for Water and Sanitation. $$$$

    August 8 Deadline
    Make a Positive Difference
    Help Residents
    Represent The Will of the People
    Balance The Budget
    Local Control
    New Ideas
    Improve Quality of Life
    Let People Vote On Rate Increases and Show Some Courage [ eliminate Protest Vote-Automatic Rate Increases]

    Are You That Person- Remake Oceano

    Like or Dislike: Thumb up 0 Thumb down 0

  2. wineguyjc says:

    Wallace gets caught falsifying reports and yet he is still a licensed engineer, yet his firm still continues to provide sound consulting services to what a dozen local agencies? WTF, time to wake up.

    Like or Dislike: Thumb up 14 Thumb down 0

  3. falconbh says:

    I find it so interesting how the ” We Are A Team” concept corrupts our elected leaders.
    After elected, the Senior Management Team, lawyers, consultant, all have a retreat or meeting to begin this process of “learning” the way we work together.

    ” We The People” are left out of the equation.

    The end result is a lack of oversight, just like the sanitation district . It becomes a personal’ monopoly kingdom’ in an isolated power vacuum.

    Automatic rate increases become the norm, temporary taxes become permanent taxes,
    infrastructure or public safety or schools are used routinely as the bait and switch.

    Dependence on the Senior Staff, Lawyers, and Consultants grows until local control is just a word with little meaning. Ask yourself a simple question; Why do we pay these employees so much and when a special problem or election arises the first thing they do is hire an outside consultant to come in and “game the system” against local taxpayers ?

    Staff is rewarded with unsustainable salaries, luxury benefit packages, and bankrupting early retirements. The cycle begins again.

    We need to break this cycle in November.

    Like or Dislike: Thumb up 10 Thumb down 1

  4. mbactivist1 says:

    It was this stellar firm that the past administration in Morro Bay hired to co-manage the original (failed) sewer plant project. Morro Bay staff hired Wallace for a lot of projects in the past. Hopefully, the new people in charge will not make the same mistake. The old boy/girl network has cost taxpayers all over the county a fortune that should have gone to benefit those taxpayers – but instead only benefited network members.

    Like or Dislike: Thumb up 12 Thumb down 4

    • kayaknut says:

      Not just “has” cost but will continue to cost the taxpayers….

      Like or Dislike: Thumb up 11 Thumb down 1

    • Human Reason says:

      Wallace did not co-manage the original failed sewer project. They had a very minor part and were hired as a subconsultant by the consultant. As for other projects that the City has used Wallace on, that Department head is still with the City. Tthe two that Council fired were not responsinle for ever hiring Wallace. In fact, if you do your fact checking you will find that Wallace was run out of town i10 yeras ago n SSCSD while Shultz was there . Don’t try and rewrite history to fit your agenda.

      Like or Dislike: Thumb up 3 Thumb down 7

      • kayaknut says:

        Your proof is?

        Like or Dislike: Thumb up 6 Thumb down 1

      • mbactivist1 says:

        Better check your own facts, Reason, and quit rewriting history to fit you own agenda.

        First of all, Delzeit and Wallace Group applied jointly for the job of managing the (now failed) Morro Bay WWTP project.

        This CCN story: http://calcoastnews.com/2013/01/morro-bay-council-rejects-proposed-sewer-plant/ says, “It is unclear if the project manager Dennis Delzeit works for Wallace and the Wallace Group or if Wallace is working for Delzeit.”

        A lot of people wondered about that. Then, we have another story in another local news publication – “Consulting Waste”. Discussing the thoroughly-fouled-up project, the author says, “In fact, Delzeit’s contract with Morro Bay is a joint venture with him as the project manager along with the Wallace Group. On paper, Delzeit and the Wallace Group are virtually synonymous. Every page of his contract pitch for the project management gig is labeled “R. Dennis Delzeit & Wallace Group.”

        Then, of course, we have that very interesting FEMA study that Wallace did – the one that resulted in new FEMA maps for the area. It cost $23,380 and is not a small thing in that the new maps are now the official ones for the area where the existing WWTP is located.

        The FEMA map revision project appears to have been conducted “under the radar”. It was not within the original scope of ESA’s contract with the City and the CSD. Yet, it was done under the “umbrella” of that contract. The project was recommended by Wallace Group, the ESA sub-contractor who ended up doing the project work. Wallace Group proceeded with the FEMA flood map revision project that it had recommended, and the work continued through the remainder of 2009, all of 2010, and well into 2011.

        Some serious concerns about that FEMA flood map revision have been raised by residents and its accuracy has been questioned for various reasons, including issues related to dune topography (dunes are constantly shifting), failure to adequately address impacts of demolition of the existing plant, and failure to consider what would happen when Hanson’s did not have any concrete blocks to help divert flood waters away from the WWTP site.

        Yes, you read that correctly. Wallace Group’s 2009 Flood Hazard Study appears to indicate that human activity also plays a significant role of flooding patterns. The Study says that, “Staff coordinates with the neighboring Hanson Aggregate owners regarding the orientation of their yard and supplies. Flood waters from the southeast first cross the Hanson property. When Hanson has stock on hand of large concrete block, they store the blocks on-site in a manner that directs flood waters to Atascadero Road rather than through the WWTP.” The reliability of a FEMA flood inundation map in an area where stacks of concrete blocks were (not sure if this still goes on) alter floodwater inundation patterns may be questionable.

        Like or Dislike: Thumb up 8 Thumb down 0

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