Sanitation district board pursues an audit

January 22, 2015
John Wallace

John Wallace


After several years of voting against an audit, the South San Luis Obispo County Sanitation District Board voted 3-0 on Wednesday to pursue a financial review of the past 12 years.

Approximately 30 people attended Wednesday’s meeting. Attendees asked the council to approve the audit and to terminate its contact with embattled attorney Mike Seitz. The board agreed to allot $40,000 for an audit of the district’s finances with a goal of ensuring fiscal accountability in the future.

The board took no reportable action against Seitz who looked down with pursed lips while attendees claimed he failed to protect the ratepayers and the environment while supporting the plant’s former administrator, John Wallace.Sanitation district staff spoke of the importance of an audit in order to put into place policies to prevent future financial digressions. Staff said that under Wallace’s administration, chemical costs ran about $600,000 a year and under the current management chemical costs have fallen to $240,000 a year.

Under Wallace’s administration, former staffers at the plant said the company Wallace purchased chlorine from also provided top management perks such as inclusion in a yearly boar hunting trip.

In 2013, amid allegations of mismanagement, Wallace stepped down. Within months, the plant was operating cleaner at less than 50 percent the cost, according to financial reports obtained from the district.The board had previously voted against an audit with Oceano Community Services District President Matt Guerrero joining former Arroyo Grande mayor Tony Ferrara arguing against spending money to investigate past acts.

However, following the November election, the makeup of the board changed with Arroyo Grande Mayor Jim Hill and Grover Beach Mayor John Shoals joining Guerrero who under public pressure changed his anti-audit position.



Mary Lucey- Guess we all know why Mary Lucey OCSD is not on the sanitation board after her presentation at the last meeting and behavior at previous meetings. Watch her, listen to her, then evaluate her leadership abilities.

It would really be in the public interest to see a real in depth news article and live radio interview With her.


coudnt agree more. this is one egotistically driven incompetent misfit.


Other than Guerrero being in CYA mode,

I don’t understand his reluctance to the audit.

Afraid something will turn up?

When the plant went from using $600,000/yr in chemicals under Wallace’s management

to $240,000/yr with proper management,

it’s easy to assume there are other issues as well.

Due diligence, simple due diligence–long overdue.


wow. I was there last night and the story the new management told about the old management was alarming. the new management basically said that John gave himself an capital outlay award to grow gallon capacity per day from 2.4M to 4.8M, and that capacity and management thereof ended up costing the taxpayers tens of millions of dollars in Wallace fees, legal costs and inefficiencies.

In order to perform this audit, one only need sort through the top ten payments to Wallace and make sure those payments would have been made the same at any other sanitation district. Once you find that answer, you can then press charges against Wallace and Ferrara and begin to reclaw millions to the south county taxpayer.

Karen Lucey of course tried to defend in an incoherently cryptic manner which blatantly announced her incompetence and ignorance. She is got to be the most inept civil leader I have ever seen. Even KFB has a slight edge against Mary Lucey.

Guerrero was either being defiant or coy acting like he didnt know where to start with an audit, but at least he succumbed to the obvious.


Mary Lucey- The more she is in the public spotlight, more people will realize that she needs to step aside for the good of the ratepayers.


That is one clueless cloud floating in the wind…..


Yep, she belongs on the Morro Bay City Council. She’d fit right in.


Hey hey, we’ve got enough dipsticks in council now, we need to thin them out before they ruin this town, worse than it is.

mb business owner

maybe someday CCN will be able to focus some of their time to morro bay (however, they have seemed to not want to look at the city at all) and investigate some of the sketchy occurrences such as the sudden departure of the city clerk, ignoring the city’s personnel rules, the lack of public involvement/notification in setting the city goals or construction projects in the right of way, or the restructuring of city departments without analysis, and to top it off, looks like the good old city of morro bay is going to end up with a cartoon logo featuring a sailboat, since everyone knows sailing is much more important than the fishing industry.


Mary Lucey- Wasted a lot of the ratepayers funds during her time in office. Always likes to blame others and in a very unhealthy state of denial about her actions.

Mike Byrd

It was a stunning revelation that they doubled the capacity of the plant and there was no need to do that. Not only was a lot of money wasted constructing it but the extra capacity without a commensurate increase in inflow caused the plant to stop functioning properly which caused the huge increase in operating expense trying unsuccessfully to make it work properly. It seems it was fairly easily fixed once Mr. Wallace departed.

The other interesting clarification was the discontinuance of insurance coverage for Mr. Wallace. That left the district on the hook defending his mismanagement because they had indemnified him from any blame for his actions. It’s unclear whether the board at that time even knew about this.


pretty telling that revelation. it must be nice to wear the hat that awards the money for an unnecessary expansion and the hat that reaps the engineering reward. that is your audit right there. its criminal and Tony was in on it with Wallace.


From what I heard, the plant expansion was made under the assumption that the rapid growth of the time was going to continue. This is an easy mistake to criticize in hindsight but an understandable one at that time. The errors in managing that increased capacity can be attributed to marginally incompetent management if what the engineer who helped correct it said was true. There is plenty about Wallace’s reign to criticize but picking on the big issues will save time and money rather than nitpicking about minor ones.

Remember, recovering costs of mismanagement has to be done through the court system where standards of proof are pretty stiff and where one can’t be assured of a sympathetic jury. The legal costs of such actions mean that it would be prudent to focus on the most blatant and indisputable examples of his mistakes and misbehavior.


I have a bridge to sell you. the one you are on now will need to double. just sign right here and i will take care of everything.



Mike, There seems to be some misunderstanding here, there was no “plant expansion”. The problem lies in that there should have been a Biological ” plant expansion” or better said biological upgrade. In reality the funds were whittled away by Wallace on irrelevant small time Wallace engineered projects that did nothing to better the BOD removal efficiency. I do recall at one of the Board meetings one of the three making reference to the Digester project and how it increased the plants capacity. Absolutely untrue with regard to “plant capacity” Wallace likes to misconstrue words and we must watch this. In Wallace’s” layman’s” mind it did increase the plants capacity. How? by removing decades of debris in the digesters so they hold more biosolids, nothing more. The items below are a review of the plant projects that Wallace engineered over the decades, that have no value to the plants biological effluent treatment capacity. FFR drive unit, FFR pump #3, Chlorine Contact Chamber, Biogas Cogen unit, New Centrifuge, its building and associated parts, the Boiler & Digester cleaning/rehab project, The Emergency generator, the emergency pump purchase, The headworks flood gate and pump upgrades, The digester gas bridge to nowhere and new flair, New slide gates,O&M manuals, costly SSMP & SSO plans etc,etc. You can add all the systems & pumps you want to pump more sewage, however when the Biological part of a plant is taxed beyond its serviceable life or no longer produces the removal rates you need per your permit, its time to move forward. For 25 years Wallace disregarded this, thus the plants violations on BOD, suspended solids, fecal and Total Coliforms. Additionally Wallace fired the lab tech and the District lost its ELAP accreditation which caused more unnecessary expense and hardships. Wallace must think BMP’s mean bad management practices, not best management practices.


Thanks, CCN, for keeping the light on this. Your work demonstrates that the press is, indeed, the 4th Estate.


HUGE thanks go to Debbie Peterson

for making it her mission to expose the wrongdoings at the plant.

Debbie continues to prove the books have been cooked,

and numbers don’t lie–people do.

Also, thanks to Jim Hill for his calm demeanor, yet firm hand in guiding this Board in a direction Seitz, Wallace, and Tony Ferrara fought against for years.

The glances exchanged between Sweet and Seitz throughout the evening were, oh SO telling.

These two were NOT pleased to be on the hot seat.

It was very disturbing to learn just how improperly this plant had been running under Wallace. Now that he’s gone, that has completely turned around.

Now, with Wallace and Ferrara gone, we have the opportunity to get the finances in order–won’t that be nice?


A classic case of speaking softly and carrying a big stick!


We need to keep attendance and pressure up at the san dist meetings if we wish to change the boards mind and finally get rid of Seitz.

It is clear that Shoals does not want to keep the public around, he wants to rotate the meeting locations between AG and GB. It has been pointed out my members of the public that doing so will confuse people and it really should stay at one location.

We must remember Shoals, Seitz, Wallace and Ferrara are good friends, this is far from over. The games will continue unless the public stays involved.

Debbie Peterson hit a couple of grand slams last night with some of her comments and handing the board her fact sheets. She even said double check my work I am not a professional.

Keep up the nice job Debbie.


Are you sure Ferrara, Shoals, Seitz and Wallace are friends?

I want to know which ones are “FRIENDS WITH BENEFITS”?


While it may have been a benefit

to have been friends with Wallace at one time,

he may be as toxic as his spill at this point.

I wouldn’t want “those high ranking officials”

Tim Brown referred to showing up at MY house!

Let’s not leave Wallace’s #1 BFF off the list–

even though Ferrara is nowhere to be seen,

he’s still in the picture.


Government Contract = License to Steal


I am so glad to hear this, and so glad CCN is covering this story. Now that Wallace and Ferrara are gone we’re finally getting answers. I only wish this had come sooner. Maybe the District would have more money to make the improvements it needs and the employees who were terminated for standing up to Wallace and Ferrara would still have their jobs.

I cannot wait to find out the results of this audit, does anyone have an idea when we’ll expect to know? I have other questions too, however. Maybe someone here has the answers:

Did anyone report Seitz to the State Bar Disciplinary Board?

Does anyone know if criminal actions are being sought against Wallace?

Will the District be able to recover from Wallace if there was collusion between him and Ferrara? By my math, it looks like they stole millions of dollars from us.


According to Sweet, the audit would take approx. 2-4 months depending on scope of work.

Highly suggest Ms Debbie Peterson, she provided a wealth of information and stated it took her two days to compile.


dont waste focus during the audit. Just focus on the top ten payments to Wallace and answer the question would a properly guided sanitation district make the same payments as was made to Wallace.

Your answer will give you plenty of fodder to press charges against Wallace and Ferrara.


Unless it can be proven that Ferrara was compensated in some way for his protection and promotion of Wallace, chances are that it would be impossible to get either civil or criminal penalties against him. We may have to be content with political penalties which have already been administered.


Ignorance, negligence and nepotism are enough to bury him.


Well, it’s about time! Good work people! Let’s get our town cleaned up and back on track!


BIG step towards clean-up last night.

Write-In Jim Hill

AG Mayor