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.



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This whole saga has been about just one thing – making money for a few local people and their business cronies at the expense of the taxpayers. In this county, the political machine runs everything with that objective in mind. Pay attention, dig deeper, and look at the real facts. While you’re at it, read this online article: Allegations, Accusations and Denials – MWH and its Customers in New Orleans, Cape Coral, Los Osos, and Morro Bay. It can be found at http://www.slocoastjournal.com/docs/archives/2011/april/pages/news9.html

A major forensic audit firm and the Inspector General of New Orleans came up with the same findings as some of our more astute residents. Fascinating…..

“It’s a matter of “pride” to have some say in what goes on in Los Osos”

Not many that live in, or out of Los Osos think our local handling of the wastewater issue since we clawed it away from the County is anything to be proud about.

Seemingly, Nitrate paranoia interferes with absorption of oxygen by the blood to the brain as well as causing methaemoglobinaemia.

The bankruptcy process has been convoluted from the start. Los Osos had a board that ramrodded a project in the middle of town, awarding contracts to their political contributors (MWH Americas), and failing to conduct a proper Proposition 218 vote. According to the California Legislative Analyst’s Office, local governments had to be in compliance with the law by July 1, 1997 for assessment and property tax fees. All the most vital — albeit legally questionable — decisions pertaining to the project were made almost a decade after the compliance was mandated. In short, the recalled board drove the community car into a ditch, and it’s taken nearly six years for us to get out of that ditch.

Now, the bankruptcy issue has been resolved, and that’s a great step in the right direction. Similarly, Congress has just passed their new deal to raise the debt ceiling. Whether the issue is local like the LOCSD bankruptcy or as national as raising the debt ceiling, there needs to be a debate. There needs to be discourse, and fiscally responsible leaders need to shape that discourse so the public can fully understand what these important processes entail.

Razor you say, “There needs to be discourse, and fiscally responsible leaders need to shape that discourse so the public can fully understand what these important processes entail.” But if the public doesn’t show up – who is to blame then?

RE: the 218

I guess you think paying the sewer bill with a $25,000 lien on houses is better that 20 years of rates and charges?

Have you ever asked the members of the Lisa board that when the Water Board asked them to hold that 218 to move ahead with their different project (that 218 they complained about not having) – they refused to hold one? This is what caused the bankruptcy.

PS, “ramrodded” is an inaccurate word.

Yes, the project may never come back to the LOCSD, but that may not be a bad thing.

AB2701 has a clause that reads “If the County constructs the wastewater system and operates it for at least three years, and the County and the District “mutually” apply to the CCRWB for permission to transfer the system from the County to the District”.

So, I would assume that if we don”t want it back, the County can just keep it.

The out of town location chosen by County is exactly what we were told to do many millions of dollars ago.

wolfhound, it isn’t a question of wanting it back. If the County can get a lower interest rate on the SRF loan and takes it for us, it won’t be coming back. The CSD very much depends on funds like these to run its administration, as there is not much else to fund that. Right now if LAFCO approves the deal for the County to take back the trash franchise, this income will be gone with the likely result of two employees losing their jobs and possibly more cuts to an already threadbare budget. It is a matter of local pride to have some say in what goes on in Los Osos.

To answer Joe’s question, you’d have to go back to the beginning and ask why the Solutions Group did not tell the voters that their proposed “affordable” alternative sewer plan, the one that was driving the formation of a CSD, had already been shot down by the RWQCB; it would not be permitted as proposed, and even if it had been changed to suit the RWQCB requirements, it would not be cheaper than the competing county plan. In short, the Solutions Group knew, before the CSD formation election, that the much cheaper sewer plan they were basing that CSD election on, was DOA but, uh, “forgot” to tell the community that small fact.

What became the disaster train of the Los Osos sewer is hinged on that one small original lie of ommission and everything followed thereafter. Along the way, this mutating, morphing disaster had many, many additional fathers and the DNA chain of patrimony is all laid out and linked at Ron Crawford’s blog, http://www.sewerwatch.blogspot.com.

But the fatal, deadly seed of disaster was right there at the beginning, concealed from the voters.

I am always amazed that none of the blame ever rests with the citizens for failing to pay attention. What you seem to be saying is that the CSD never should have been formed in the first place and that local control wasn’t wanted, everything the County back then was doing was OK with everyone. But all I hear from the “Move The Sewer” people is how rotten the County treats Los Osos – the roads suck, the drainage problems go unaddressed, the bus stop was done wrong, Santa Ysabel traffic calming was messed up. Somehow it doesn’t make sense to dis the County and then say there should be no CSD.

What seems to be missing is the fact that if the new plan wasn’t cheaper and the old, County plan was hated, get over it, go forward and accept that sewers don’t come cheap. Tri-W would have been a whole lot cheaper if not for the multiple lawsuits against it – totally preventable if people had been paying attention when they should have been. And the County’s plan now, while cheaper per month, it a LOT more expensive after the 40 years is paid off.

The one and only reason the CSD was formed was the “Cheaper, Better, Faster” lie of $38.50 a month compared to the $80-90 a month County plan, to state anything else is just stupid. Do you really think that anyone would have voted in “Local control” if the lie had been exposed before the election? Hell NO! People vote their wallets and almost nothing else matters.

And remember, It was the County that created the problem in the first place by allowing the houses to be built, knowing full well that they were non complying.

And another thing, want to blame the voters for not paying attention? How about blaming the Tribune for not writing a single thing about the mess for three years while the original ponding plan fizzled out and morphed into a plan that by the counties own TAC and 6 million dollars vetted as dead last in choices for a sewer.

Nice try to point the finger elsewhere. People asleep at the wheel are as much at fault as are others. The town had every chance to go to CSD meetings to follow the project’s progress and to comment. They chose not to.

Maybe you don’t realize that the cost goes down on projects when more people pay into it? Of course this many years of delay has made it really expensive. Thank all the lawsuits for that. Also, we can’t fix the problems from the 70s and 80s. Had the county been crystal ball smart in those years, a gravity sewer would have been built as the houses went in. We’d have had housing prices just like Morro Bay!

Sorry, I know people that had kids in the middle school and they HATED the County’s project being so close to the school, as they could never get any straight answers on project parameters and they didn’t like the chlorine storage.

The Tri-W sewer was dead last because it was clear that half the town didn’t want it there – in 2005 anyway, so the TAC steered clear. Where were these location haters in 2000?

Another bullshit answer. Go read the TAC Worst for more reasons than I’ll list here. The TriW plant failed because of ineptitude at all levels.

Oh feel free to list them. I have already read every TAC report.

But you haven’t addressed the main point: People needed to speak up in 2000 to avoid getting what they supposedly didn’t want. The TAC is johnny-come-lately to this situation.

Oh, you want to blame the voters? You mean the ones that were lied to in their official voter pamphlet?

Should we have executed to entire population of Germany or Japan?

I was there (F) YOU!

Nice language Vagabond.

Did you go to any CSD meetings after it was formed? Go look in the mirror and answer that question. Then forgive yourself for not accepting your part in this, then let the anger go.

I have NO idea what you mean by that last sentence of yours.

Thank you Joe for your thoughtful article. And thank you for filling in gaps in the reporting of last Friday’s event. Do we know yet if the creditors will accept these terms that the judge deemed as a fair and reasonable plan? I am surprised that Cal Coast ran no story on it as they pick up so many other stories that concern Los Osos.

I’ll just add that it was Taxpayers’ Watch that eliminated the debts of prior LOCSD attorney Burke, Williams, Sorenson, and prior LOCSD contractor Montgomery, Watson, Harza.

Also, the wastewater project may never come back to the LOCSD. I asked Bruce Gibson last Thursday at Office Hours if the offer the State Water Resources Control Board made during the meeting to grant the SRF funds – namely to drop the interest rate on their money further if the County agreed to keep the project – was still on the table. It is and it is being considered by the County and the SWRCB.

The part even those hating the mid-town project can’t deny: Salt water intrusion has advanced all these years with no wastewater project to support meaningful water conservation – something that we might have had WITH a project.

Thanks for having the guts to write about this.