What next for Los Osos?
August 2, 2011
With the decision of Judge Robin Riblet to accept the Los Osos Community Services District (LOCSD) Chapter 9 (Bankruptcy) Plan of Debt Adjustment, the five-year odyssey of the LOCSD through local, state, and federal courts is practically over.
The decision, barring any bizarre appeals in federal court, will allow the LOCSD to focus on two critical issues (water and staffing) within the LOCSD’s purview. Down the road in three to four years, the operation and potential transfer of the Los Osos Wastewater system to the LOCSD will emerge as a critical issue for the community.
Essentially, the creditors will receive about $ 4.5 million dollars, minus any final determination of attorney fees. It is vital that all parties, particularly the County of San Luis Obispo and the Court, monitor any further expenditures by the attorney for the Creditors Committee, expenditures which frankly have been and will be a drain on distribution of funds to the creditors.
The bulk of the funds distributed will come from a residual $1.7 million from the State Revolving Fund loan and the amortization of the District’s Solid Waste enterprise franchise fee (the fee is 10 percent, or $160,000 per year) from the County that will provide $2.8 million to the creditors.
One last major step of the Bankruptcy process will be for LAFCO to approve the transfer of the LOCSD Solid Waste service to the County. The LOCSD will also need to make the necessary accounting adjustments associated with various accounts, and a determination of what to do with existing LCOSD Solid Waste reserve funds will need to be addressed. All told, the process will not be completed for about a year, and certainly having the process completed by June 30, 2012 (the LOCSD fiscal year-end) would result in clean ‘go-forward’ audit and accounting for the LOCSD fiscal year that starts July 1, 2012.
During the course of the Bankruptcy, debts from numerous entities were reduced or eliminated. Those claims eliminated include those of prior LOCSD attorney Burke, Williams, Sorenson, prior LOCSD contractor Montgomery, Watson, Harza, and the State Regional Water Quality Control Board fines. Original debts to prime contractors Monterey Mechanical, Bernard Construction, and Whitaker Construction were also reduced down to about $11 million dollars via agreement and arbitration with the LOCSD, and the contractors will receive about 35% to 40% of their adjudicated debts.
Essentially, the total Bankruptcy costs to the Los Osos taxpayers will be the $2.8 million Solid Waste amoritzation fund plus attorney fees that ran in the hundreds of thousands of dollars. That does not include the costs of over $20 million for the prior Wastewater Project. The Wastewater project completion will likely have been delayed for about 9 years from the prior project.
The total cost of the Bankruptcy to State/Federal taxpayers will be the $6.2 million that was dispersed via the SRF fund, a debt which has been ‘covered’ by a $7.5 million grant to the Wastewater Project that is now administered by the County. The cost to the County is likely approaching a half million dollars in legal fees for in-house and outside counsel. Basically, no one other than the lawyers have made out in this mess, with taxpayers from all levels (local/State/Federal) and creditors bearing the cost.
Was it worth it? In Los Osos, a question like that will likely get you a hundred different opinions, no agreement, and a cup of coffee. Let’s at least enjoy the coffee, we’ve all certainly paid for it.
Joe Sparks is a past president and director of the Los Osos Community Services District.