Oceano facing insolvency
April 19, 2011
Oceano district leaders are grappling with possible solutions to ward off the looming threat of insolvency.
Oceano Community Services District (OCSD) general manager, Raffaele Montemurro, says the solution to the district’s financial problems is a combination of selling water rights, procuring loans and grants, and raising water rates.
The district, responsible for serving about 7,600 residents and business owners in Oceano and Halcyon with fire protection, street lighting, and sewer and water services, has been running about $25,000 in the red for more than a year depleting its reserve account down to a precariously low $1.5 million.
In a February 2011 report dubbed “Financial Challenges,” Montemurro contends the district has about four years before insolvency under the current budget, which only allows for $20,000 in capital improvement expenditures for the 2011/2012 fiscal year.
If spending exceeds the budget before a solution to the community’s financial crisis is found, the district could face insolvency even sooner than Montemurro’s four year projection.
Unexpected and needed repairs could put the OCSD further in the red. For example, at an April 13 meeting the board discussed putting a new roof on the district offices building. In addition, the OCSD needs about $1.2 million to provide necessary repairs to five water mains, according to district reports.
In his report, Montemurro suggests that another water rate increase could help ward off insolvency. This is in addition to a board decision earlier this year that hikes customer’s water bills 25 percent over the next five years.
Montemurro also said the district needs to apply for loans and grants. However, refuting his own suggestion, Montemurro’s report also notes that during this “time of challenging federal and state budget issues these programs are highly competitive and decreasing in availability.”
Regardless of competition, the OCSD may find itself disqualified by the fact that most loans and grants require that communities have audits and accounting records available, and the district has yet to complete its 2008/2009 audit.
Last month, former directors Jim Hill and Carole Henson tendered their resignations, citing disagreements with Montemurro over his accounting practices and failure to follow the board’s direction that asked him to complete the past few years of audits.
For months Montemurro has attempted to get the board to approve the sale of a portion of the district’s water rights noting that the water pipes are in dire need of repair. After his first proposal to sell water to Pismo Beach was denied, Montemurro turned his sights on selling water to Arroyo Grande.
Some Oceano residents are pressuring the board to consider other possible remedies to resolve the district’s financial woes such as spending reductions or a merger with either Grover Beach or Arroyo Grande.
Former director Hill contends there should be a public discussion on the idea of joining a neighboring city. The marriage would lower administration costs while bringing either Arroyo Grande or Grover Beach additional water rights.
“If the district was properly managed with audits done on time,” insolvency would not be an issue, Hill added.