Wallace’s continuing costs to South County residents

July 21, 2014
John Wallace

John Wallace


Even though John Wallace is no longer the administrator of the South San Luis Obispo County Sanitation District, district ratepayers continue to cover the costs of his mismanagement.

In 2013, following the states determination that a 2010 sewer spill was the result of Wallace’s mismanagement, Wallace announced his retirement at a district board meeting. Before he stepped down, the district regularly exceeded its more than $6 million annual budget.

Under a new administrator, the district’s costs are less than 50 percent of its budget, district records show.

Since Wallace announced his retirement, rate payers have covered the more than $15,000 Wallace charged to return district documents he insisted on keeping at his private engineering firm. Wallace said that he took the documents for his own convenience.

Rate payers also have paid approximately $70,000 to the law firm of Andre, Morris & Buttery, which represents Wallace and the Wallace Group in a lawsuit filed by six Oceano homeowners following the 2010 sewage spill, district warrants show.

During the 2010 spill, sewage flowed into approximately 40 homes in Oceano. The lawsuit, filed in 2012, claims that Wallace’s financial motivations led him to intentionally mismanage the sanitation plant.

Before his retirement, Wallace was the chief administrator of the district and also the owner and president of the Wallace Group, a private engineering firm located in San Luis Obispo. The Wallace Group received between $50,000 and $80,000 a month from the district for a variety of engineering services, according to district financial records.

In addition to legal expenses and the cost of regaining district documents, rate payers are facing a $1.1 million fine from the state because of the 2010 sewage spill.

The Central Coast Regional Water Quality Control Board determined the spill was the result of mismanagement. Shortly after water board’s investigators reached their finding it offered a $300,000 settlement to the district. The district board declined the offer at Wallace’s suggestion. The district then paid about $750,000 to the Wallace Group and a team of lawyers to argue against the fine.

The $1.1 million fine is under appeal. Nevertheless, the district has hired a consultant to examine rate increases the district could implement in order to pay the fine.

The sanitation district serves the residents of the Oceano Community Service District and the cities of Arroyo Grande and Grover Beach. At the time of Wallace’s retirement, the three-person board consisted of Arroyo Grande Mayor Tony Ferrara, Grover Beach Mayor Debbie Peterson and Oceano board President Matt Guerrero.

In 2013, Peterson requested a forensic audit of the district. If the audit determined Wallace had consciously elected to disregard public safety in an attempt to build his personal financial portfolio, as the homeowners’ lawsuit against him claims, the district could argue that Wallace should pay the $1.1 million state fine and his legal bills, expenses currently slated to fall on the backs of ratepayers.

However, instead of putting Peterson’s request on the agenda during open session, it was placed as a personnel issue on a closed session agenda while Peterson was on vacation.

Ferrara, Guerrero and Peterson’s alternate Glen Marshall then voted unanimously to terminate any further discussion about a forensic audit.

Mike Byrd

Mayor Peterson came in and, against great odds, cleaned up that mess almost overnight. Unfortunately Mayor Ferrara pulled a fast one to thwart the audit which would have exposed who all were involved in this ongoing theft. And now he’s trying to replace Mayor Peterson with one of his cronies who helped to sustain the corruption in the first place. If Ferrara and Shoals are elected in their respective cities we’ll have back the same crew that spoon fed Wallace all that public money. Will Wallace then return or will they team up with someone new?


This is exactly why you should run for AG mayor Mike.

I can’t. I live in the unincorporated part of AG. I can’t run for ANYTHING in Nipomo, Oceano, Grover, Pismo, Arroyo Grande or the City of San Luis Obispo. Not a city council member, not a mayor, not a board member. Nothing. That also means I cannot vote for any of those positions or issues in those areas even though I am absolutely affected by all their decisions and actions.

To make it even worse, I’m actually in District 3 so that means I can’t even run for an Advisory council position!!! The only active Advisory council in my district is Avila and I’m not allowed there. Edna township’s Advisory council is defunct and I don’t live there either. Where I live does not allow for an Advisory council.

How jacked-up is THAT? You though, you live in the city and CAN run and CAN make a difference!


Here are the numbers:


Year Ended June 30, 2013:

OPERATING LOSS $ 1,081,813

WATER BOARD FINE $ 1,109,813

TOTAL LOSSES $ 2,191,626


Year Ended June 30, 2014:

TOTAL PROFIT $ 507,712

Figures are from the 7-16-14 Board Pack at:



I was wondering how long it would take for a story like this to come out. As a taxpayer who was keyed in enough to see what was going on all those years ago I knew it was going to be a matter of time until we reached this point. If I weren’t one of you So. County Taxpayers immediately affected by this, I would laugh. It was almost 4 years ago to the day that the news broke that SSLOCSD was about to fire those two whistleblowers for announcing this fraud. Almost none of you showed up at that meeting. Then at the meeting where they announced they were going to lay off the employees, and there was no public outcry. In fact, a lot of you rallied around Wallace. …And then you reelected Ferrara.

Folks, we are paying BIG TIME for our collective apathy.

This HAS to stop.

We have to organize to get these crooks out of our county for good.

Anyone know a good lawyer?


So true! If more citizens would have shown up at SSLOCSD meetings and demanded changes, we would have been better off. But, looking forward, we should demand accountability from the candidates who had a chance to do something about the many issues at SSLOCSD — BUT DIDN’T. Those who did something but were not supported in their efforts at the time — Phyllis Molnar, Debbie Peterson, Karen Bright, basically the entire OCSD, and Tim Brown (the only AG Council member to ask tough questions into the microphone).

Those who didn’t do enough: John Shoals, Bill Nicolls, Caren Ray, Tony Ferrara, Jim Guthrie, and Joe Costello. Even in hindsight (the 20/20 argument), these people should give full credit o the positive changes that Debbie Peterson was able to bring to the SSLOCSD. Otherwise, with no remorse, we need to seriously question the caliber and our expectations of the people who represent us.


Let me get this straight…

Because of negligence due to Wallace Group mismanagement caused a major spill that resulted in $1.1 million fine.

The water board offered to settle for $300,000.

But the district board declined and spent $750,000 in legal fees to argue to not pay the $300,000.

If the appeal fails then the original $1.1 million dollar fine still stands plus the already spent $750,000 plus additional fees will result in over $2 million!



We are seeing a moral and ethical awakening of voters in the South County and spreading across the county after the defeats of New Tax Increases.

The day of “Automatic Rate Increases for Water and Sanitation” and Excessive General Managers Salaries In the Oceano Community Services District can all be brought to an end in November.

Support Candidates That Will Bring Tax & Automatic Water/Sanitation Rate Increase Relief !

Vote-Register-Inform- Change


Another example of a fine upstanding local businessman. To that matter, how competent can the engineers at the Wallace Group be? “The Wallace Group received between $50,000 and $80,000 a month from the district for a variety of engineering services, according to district financial records.” Yet, the residents of this small community have paid out over a $1.1 million dollars in legal defenses because of the fine engineering work conducted.


Their competence may be debatable but their ethics belong in the sewer — hopefully a better one than they managed.


I’d rather fail with honor than succeed by fraud.




Julie you are absolutely correct about Tony and Caren enabling Wallace to continue in his corrupt ways.The problem is no one ran against Tony so we are stuck with the ego driven creep for years to come. I don’t see why we don’t hold tony and Matt responsible for some of the fines, they knew damn well what was going on and did nothing. And then when debbie was out of town they tabled the whole forensic audit idea.

I wonder what Tony had to lose if this audit went forward. Those skeletons will come out of the closet sooner or later, to bad it looks like later.


What is it going to take for the citizens of this county to finally take the bull by the balls and say…ENOUGH of the out of control waste, fraud, and abuse of OUR tax dollars?

There is not time like the present!


And yet John Shoals who sat around for years on the Grover Beach city council and as mayor and let John Wallace steal from the taxpayers wants to be mayor again?


Caren Ray (running for Supe, sat on the AG City Council during all of this) and Tony Ferrara (Mayor of AG during all of this) are both running for offices, yet neither did anything to stop the corruption; in effect enabling it.

What is wrong with these “leaders”? They do not want to recover the funds squandered and/or seek damages. Oceano/Guerrero had Geaslen by the short hairs; but rather than prosecute him and “claw back” spent almost as much on legal to sever his contract and recover the $45K absconded.

Cozy legal relationships lead to advice that recovery costs more than what was lost. But in fact, you can’t buy back voter confidence unless you go after those who have used the public trough as their own piggy bank.

These same “leaders” voted your public properties in the FCFA assessment. Prejudicing the vote by putting your properties thumb on the scale. Will you be paying the same level of attention when SSLOCSD comes after you to pay the fine and other losses due to mismanagement?

Things are running smoother at the plant these days, but the costs associated with its history reverberate into the future.


As long as we keep electing and re-electing the bozo’s how can we expect different results? I will vote once, maybe even twice, for a candidate and then no more. They start with the best of intentions and pretty are owned by special interest, the party, special groups and lobbyists. I vote for the person but have no mercy for the scum bags when they don’t serve the people the people they represent.


Given our electorate system, all too often we are forced to vote for the cream of the crap….not the crop.