Morro Bay Harbor Board weighs alleged misuse of funds

December 6, 2013

By JOSH FRIEDMAN

The Morro Bay Harbor Advisory Board discussed allegations Thursday that the city misappropriated funds from the outfall lease agreement for the Morro Bay Power Plant.

For nearly a decade, owners of the Morro Bay Power Plant have paid the city approximately $800,000 annually in order to pipe cooling water through state granted tidelands that the city leases. The city considers about $250,000 of those funds to be rent and $500,000 to be a Community Development Fund payment, which goes to the general fund.

The state land grant requires all activity on the tidelands to promote public use of the area, and city policy states that all revenue from tidelands leases must go to the Harbor Fund.

California State Lands Commission spokesperson Sheri Pemberton told CalCoastNews several times that Morro Bay is under investigation for misappropriation of funds from the power plant.

On Thursday, Harbor Department Director Eric Endersby delivered a report to the Harbor Board on the alleged misuse of funds.

“It’s been reported to State Lands, and State Lands has an investigation,” Endersby said.

Harbor Board member Bill Luffee said he wanted to make sure that the allegations of misuse of funds were addressed in public.

“I’d just hate to see us because of an interpretation have some money that would needed to be refunded,” Luffee said. “I just want to make sure that we don’t get blindsided just like the city of Atascadero, where they received money for rebuilding and all of a sudden now I think FEMA wants $2.9 million.”

Harbor Board chair Jeff Eckles responded that there is no State Lands investigation.

“It also has been reported on or speculated that city is under investigation, which is completely false,” Eckles said. “Two individuals out of millions of people that live in this state reported what they thought were concerns to the State Lands Commission.”

Eckles referenced a memorandum submitted to the city council by City Manager Andrea Lueker. The memorandum stated that, based on Lueker’s communication with Pemberton, the allegations of misuse of funds are under review by State Lands and have not risen to the level of an investigation.

Lueker did not state in her memorandum, nor in her response to CalCoastNews questions, what the Community Development Fund is. The fund does not appear in Morro Bay budgets over the last decade.

Endersby said Thursday that the Community Development Fund pertains to power plant impacts on infrastructure, sewer and water.

He also said that the city’s interpretation of the Community Development Fund payment is that the money does not need to go to the harbor, but he would gladly accept it if it did.

“It would be great if I could get $500,000 for each of the last 10 years,” Endersby said. “I don’t think it’s going to happen.”

In recent years, harbor facilities have degraded, and the city has delayed repairs and upgrades.

The North T Pier has broken support beams and needs significant repair in order to meet code requirements. Basic repairs cost more than $400,000, and the city has been discussing making them for six or seven years, Endersby said.

The city is also in the process of acquiring a new harbor patrol boat.

One of the current harbor patrol boats has a list, meaning it tilts to one side as it moves. The boat previously suffered a hole in its bottom, and repairs resulted in one side becoming heavier than the other, according to harbor patrol officers.

The city did not allocate funds for the new boat until after a harbor patrol officer brought the issue to the city council.

Prior to becoming mayor, Jamie Irons also addressed the city council about the degradation of the harbor.

“He hoped that council would propose a long range plan that would restore the harbor’s infrastructure as well as the Harbor Department itself and then design an organization to fulfill that,” minutes for the March 13, 2012 council meeting state.

The Morro Bay Power Plant is expected to close in February. The city will receive its 2014 outfall lease and Community Development Fund payments in January and may receive them again in 2015, but thereafter the revenue will disappear.

If State Lands were to find that Morro Bay misused the Community Development Fund payments, it could recommend punishments ranging from repayment of the funds to revocation of the land grant by the Legislature.