Lawyers making bank with sanitation district

January 20, 2015
Debbie Peterson

Debbie Peterson

BY DEBBIE PETTERSON

Wednesday night at 6 p.m. in the Arroyo Grande City Hall, 38,000 users of the South San Luis Obispo County Sanitation District serving Arroyo Grande, Grover Beach and Oceano may finally get some answers about the 2010 spill and subsequent $1,100,000 fine.

While I was a member of the district board, there was regularly information that was unavailable to me. I found it almost impossible to get direct, complete, comprehensible answers to questions.

Having heard late last year that more has come to light, I went looking for some answers. I wanted to know three things:

1. How much has been spent on legal fees since 2010?

2. How much money was diverted from the capital expansion fund to shore up the operating fund and how many sewer hookup fees went to the operating fund, rather than to the capital expansion fund?

3. What really happened with the insurance at the time of the 2010 spill?

In order to get the answers I had to make several public records requests of the county and the district.

Staff was very helpful in providing me with budgets, audits, bank statements, county ledgers and agenda packets dating from 2000 to the present. I discovered that not only had the district strayed from the mandate to deposit connection fees into its long term expansion account, but the district was also pulling $50,000 a month from its capital expansion fund, the Local Agency Investment Fund (LAIF) for payroll.

The District also failed to report bank balances annually to the county auditor as required by Health and Safety Code. As a result, the county’s records showed over $6,000,000 in the LAIF account when the actual amount was nearer $2,500,000.

I found payments to lawyers since 2005 in the county’s records of vendor payments. From the LAIF statements I added up amounts withdrawn for payroll. The district budgets provide hookup fee figures. I entered these into a spread sheet. If I wasn’t sure a payment was a legal expense I didn’t use it. These numbers are therefore quite possibly on the low side, but they provide answers.

1. How much has been spent on legal fees since 2010?

Legal fees spent or committed for the past five years were nearly $1,500,000, ten percent of the $15,000,000 revenue over the same period.

2. How many sewer hookup fees went to the operating fund, rather than to the capital expansion fund as required?

Total connection fees not deposited into the LAIF account plus funds removed for payroll since 2005 is over $7,000,000. These practices redirected revenue reserved for expansion to shore up the operating account.

A 2012 letter from the District’s auditors identified the above practices as “material weaknesses” and “significant deficiencies that merit attention by those charged with governance.” With reorganization, staff have worked diligently to cut costs and are now depositing retained earnings to repay the expansion fund. The practice of diverting reserves to cover payroll is no longer needed and hookup fees are now being allocated correctly.

3. What really happened with the insurance at the time of the 2010 spill?

At the last meeting the attorney promised to explain why the insurance covering the district administrator lapsed for 18 months around the time of the 2010 sewage spill. It is not clear how much the district has lost as a result. This is on the agenda for Wednesday’s board meeting. Also on the agenda is a forensic/operations audit, and review of the attorney’s contract. That will be in closed session along with discussion of current legislation. Hopefully the board will consider mediating rather than continuing to raid funds needed for plant upgrades.

Questions remain for me. Is it kosher for interest earned on the long term expansion account to be transferred out to the repairs and maintenance fund and why, when the district enters the county figures, did the county and district year end statements never agree on the LAIF account balance?

These are good questions for a forensic auditor.

Since the reorganization of 2013 staff have successfully brought expenses back under control. Now it’s the board’s turn. Will the new board step up and address these issues? Will they allocate funds to a forensic audit? Will they reconsider the attorney’s contract? Will they stop spending hundreds of thousands a year on legal battles?

You can make the difference by showing up. Come to the South San Luis Obispo County Sanitation District board meeting Wednesday night at the Arroyo Grande City Hall at 6pm.

Debbie Peterson was a director of the South San Luis Obispo County Sanitation District from 2012 – 2013.

END
For more information contact Debbie Peterson – Tel/Text 550-4490 or PetersonTeam@charter.net


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31 Comments

  1. Otis says:

    Debbie Petterson’s competence in overview was severely missing in the historic and evident mismanagement of the South San Luis Obispo County Sanitation District. Debbie is a star!

    Besides Petterson, the other star of the Board meeting on January 21 was the technical disclosure by a little lady who detailed the past corrupted process of wastewater collection — all of which resulted in high operating cost — and the present miraculous restoration of competent management and technical integrity to the facility with corresponding cost efficiencies.

    Petterson’s elaboration of the financial consequences of this mismanagement farce suggests the lining of the financial pockets of lawyers and the possible exploitation by past managers and board members. In this soup of mismanagement incompetence may have bowed to fraud.

    (10) 12 Total Votes - 11 up - 1 down
  2. ajdury says:

    What a night!

    It was the most respectful, well-run, forward-thinking and transparency-seeking board, community and meeting I have seen in quite some time, across the entire south county area.

    Mayor Hill is certainly fair, but exhibits firmness when needed. Mayor Shoals has started his term with an open-mindedness I honestly didn’t expect and Board member Guerrero has done a subtle shift of getting off the fence he has sat on for some time.

    And former Mayor Peterson! What a dynamo. She had sunk her teeth into the San District shinanigans during her tenure but now that she has moved to the position of private citizen activist she is really tearing into the flesh and relentlessly shining a bright light on the extremely questionable practices of previous staff and board members of the SSLOCSD.

    Arroyo Grande – paving the way to transparency in our county, one dark governmental corner at a time!

    Seitz looked like a man who just comprehended the light at the end of his tunnel is attached to a train. It may be a slow train right now, but it’s a’coming.

    Remember, Debbie Peterson is out and fighting for what she believes is best for the city she *used* to serve. Tony Ferrara is nowhere to be found. His silence is deafening.

    (9) 15 Total Votes - 12 up - 3 down
    • falconbh says:

      It sure would be nice to see Mr. Guerrero display the same leadership to balance the Oceano Community Services District budget. Clearly many residents see that we have a $250,000 manager,working part time !
      We need to reduce spending and balance the budget. The district is placing a unfair burden on those that can least afford another rate increase,at a time when real wages are falling.

      (3) 5 Total Votes - 4 up - 1 down

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