Arroyo Grande mayor seeks sanitation district audit
December 5, 2014
By KAREN VELIE
Arroyo Grande Mayor Jim Hill has asked the South San Luis Obispo Sanitation District to initiate a forensic audit of the district in an attempt to recover the cost of a fine and mismanagement attributed to the former plant administrator.
At Wednesdays sanitation district meeting, Hill’s first action as a district board member was to place the request for an audit on the first agenda in January. The sanitation district, which serves the residents of the Oceano Community Service District, Arroyo Grande and Grover Beach, is governed by a three person board consisting of one representative from each community.
In 2013, amid allegations of mismanagement, John Wallace, the sanitation district’s former administrator, stepped down. Within months, the plant was operating cleaner at less than 50 percent the cost, according to financial reports obtained from the district.
Following Wallace’s resignation, former Grover Beach mayor Debbie Peterson requested a forensic audit of past practices in an attempt to possibly reimburse ratepayers for misappropriated funds. However, former Arroyo Grande mayor Tony Ferrara and Oceano Community Services District Board President Matt Guerrero voted against Peterson’s proposal, and it failed.
The current board consists of Guerrero, Hill and new Grover Beach Mayor John Shoals.The three are slated to vote on the proposed audit in January.
Under Wallace, the district regularly exceeded its more than $6 million per year budget and ran at a deficit. Currently, the district is running at less than 50 percent of its budget, with overages being placed in a reserve account.
For decades, Wallace acted as chief administrator of the district, and also as owner and president of the Wallace Group, a private engineering consulting firm located in San Luis Obispo. For years, the Wallace Group received between $50,000 and $80,000 a month from the district for a variety of engineering services.
In a 2010 exclusive, CalCoastNews detailed allegations that Wallace had been funneling thousands of dollars to his private engineering company, while concealing environmental violations.
In June 2011, the San Luis Obispo County Grand Jury said that the district board failed to recognize the conflict of interest between Wallace’s administration of the district and his private engineering firm, and that Wallace’s contract had never been competitively bid as required by law. The three-person district board led by Ferrara fired back a response saying that the Grand Jury’s allegations of district mismanagement “were largely inaccurate.”
The district currently owes the state a $1.1 million fine for a 2010 sewage spill determined to be the result of Wallace’s mismanagement. Several weeks ago, the district board under Ferrara’s leadership voted to sue the state over the fine. However, the new board is also planning to take another look at its previous decision to sue the state.