Sanitation district served notice for violations

May 10, 2011

By KAREN VELIE

The South San Luis Obispo County Sanitation District has been slapped with a notice of violation for the 12-hour raw sewage spill that occurred in December, 2010, according to an April 18 enforcement action that CalCoastNews received through a Public Records Act request.

California water pollution enforcement officials can levy fines of up to $10 a gallon, or in this case as much as $30 million, for sanitation plant sewage spills as well as financial penalties for failing to comply to testing and management requirements of the State Water Resources Control Board.

The state board is requiring the sanitation district to put together a lengthy technical report about the sewage spill, the operations of district and the adverse impacts the untreated sewage that spilled into the community of Oceano and the Pacific Ocean has had and is having on the local environment.

The bulk of the 36-page notice of violation, a total of 34 pages, is filled with questions the district needs to answer by May 31 before the state levies fines or takes further regulatory action.

John Wallace is the chief administrator of the district that provides services to about 38,000 customers in Arroyo Grande, Grover Beach and Oceano. He is also owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo that receives from $50,000 to $80,000 a month for plant administration and engineering services.

The district is overseen by a board comprised of Arroyo Grande Mayor Tony Ferrara, Grover Beach Councilman Bill Nicolls and Ocean Community Service District Board Member Lori Angelo.

Failure to comply or accurately respond to the state mandated report by late May could result in criminal action to be taken by the San Luis Obispo County District Attorney’s office or the State Attorney General against Wallace or board chairman Nicolls, according to the notice.

The district faces a cease and desist order and fines of up to $1,000 per day if it does not complete the report by the end of May, the notice says.

The technical report requires the district to attach documents or provide answers to 223 questions.

Wallace and Ferrara have repeatedly claimed at public meetings, either at City Council sessions or sanitation district meetings, that allegations that the spill was inaccurately reported or the plant is mismanaged were rumors being allegedly spread by CalCoastNews and former “disgruntled employees.”

Wallace and Ferrara claim that there are no problems in the operations of the plant.

In an odd twist, Wallace hired his own firm, the Wallace Group, to prepare the bulk of the report with some technical reports being provided by interim plant manager Bob Barlogio and outside qualified professionals, Barlogio told CalCoastNews.

State laws require any expenditure of more than $5,000 to be approved by the district manager and expenditures of more than $25,000 to receive district board approval.

However, in the case of this report, it appears Wallace has given his private firm the job of putting together the mandated technical report without board approval.

Angelo, a sanitation district and Oceano Community Service District board member, said she was aware of the notice of violation and order for further information, but did not know how the expenditure for Wallace Group to prepare the report had been approved.

“We did not discuss it in closed session,” Angelo said.

In addition, the board members and Wallace have been accused of keeping the public in the dark about the April 18 notice by not mentioning the state enforcement action to their fellow board and city council members or the public.

Wallace, Nicolls, Ferrara and the attorney for the district Michael Sietz did not return calls asking how the cost of doing the report was approved or if the Wallace Group agreed to prepare the report for under $25,000.

At a news conference on Monday about another issue in Arroyo Grande, Ferrara encountered a CalCoastNews reporter, whom he called “illegitimate.”

He added: “You have lied and twisted things in the past and I have nothing to say to you.”

Meanwhile, plant manager Appleton has been out on sick leave since January when state regulators determined he operated the plant “using fraud and deception,” according to a letter of proposed disciplinary action. Appleton contends he was following Wallace’s direction.

Following the December spill, Wallace argued with Appleton over the amount of the spill and who would sign the reports, according to emails between Wallace and Appleton obtained by CalCoastNews. Multiple reports put the spill anywhere from 50,000 gallons to more than three million gallons.

Following a report by Appleton that was supported by computer readouts that placed the spill at about three million gallons, Wallace elected to hire staff at the Wallace Group to reevaluate the spill amount using an approach that focused on the height of sewage spewing out of manhole covers throughout the community.

It did not take into account the amount of sewage shooting up through toilets, bathtubs and showers in homes near the plant, according to Wallace’s methodology.

Two district employees, who complained to state and local regulators that the district had been violating laws meant to protect the public and the environment, were terminated during the past year.

Former shift supervisor Scott Mascolo and former lab technician Devina Douglas began reporting incidents of suspected misuse of public funds and problems with the plant complying with safety and health requirements to local and state regulators more than a year ago. Douglas has since filed a wrongful termination lawsuit against the district, Wallace and Appleton.

The ex-employees accused Wallace of using his position as administrator of the district to funnel hundreds of thousands of dollars to his Wallace Group while concealing environmental violations.

For example, Wallace Group has been paid to do studies about plant inefficiencies, in several cases every five to eight years, and then placed the item on the plant’s list of needed repairs.

The state’s notice of violation orders Wallace to provide information about all proposed improvement projects and what type of funding was to be used since 2000.

The Dec. 19 sewage spell occurred because storm water flowed through electrical conduits at the sanitation plant into pump motors which shorted out the plant’s electrical system, shutting down the plant’s intake pumps forcing untreated sewage to leak out into homes, roadways, rivers and the ocean.

A sewage spill several former and current employees said could have been avoided if Wallace managed the plant for the benefit of the public and not to provide work for the Wallace Group.

In 2004, the district paid the Wallace Group to conduct a study on the plant’s electrical system. It noted that the bulk of the plants electrical system was more than 40 years old, according to district reports.

The report goes on to say wiring “has begun to deteriorate due to being submerged by groundwater. . . .As a result, there have been several instances where the wiring has failed and either caused an electrical fire or a loss of power.”

However, while the Wallace Group had been paid for the study, the repairs, which Wallace Group could not do, were never started, Mascolo told CalCoastNews.

According to the 2010 major budget items report, Wallace would put a bid out for subcontractors to do the job early in the 2010 fiscal year.

And as every year since the study was completed, the repairs were not done and the capital improvement project was moved over to the next year’s major budget items report.

The state is also asking Wallace to provide copies of the plants operating and fiscal budget reports along with how major budget items are included in the budget as part of the mandated technical report.