Cash-strapped Oceano operating in the red

March 20, 2015

By JOSH FRIEDMAN

oceano closedThe Oceano Community Services District Board recently voted to raise water rates to reduce budget deficits. However, the amounts to be garnered through the higher utility rates will not cover the overspending the board has approved in recent years.

Last year, the OCSD board of directors adopted an approximately $4 million budget with a deficit of more than $265,000. A mid-fiscal year update released in January states concern for a budget overrun beyond the existing deficit.

On Friday, the district finance committee may begin preparations for the 2015-2016 budget. In advance of the meeting, CalCoastNews asked district officials to state if and how they plan to balance the budget.

Neither General Manager Paavo Ogren, nor Board President Mary Lucey responded to email questions.

Earlier this month, the board approved a 3.5 percent water rate hike that is scheduled to take effect in May. The rate hike is expected to add $70,580, about a third of Oceano’s deficit, to the budget, according to a district staff report.

The primary duty of the district is to provide water, sewer and trash collection services. District officials have particularly struggled to operate the water fund.

In late 2013, the district loaned the water system $770,000 from the general fund. Debt from the loan is protracted over 30 years, and it will cost the water fund more than $3,500 a month in principal and interest payments.

The most recent district audit shows the water fund ran at a loss of about $150,000 in 2012-2013. On June 30, 2013, the CSD only had $58,025 in its water fund.

That amounts to just 10 days of operating expenses, according to ratings agency Standard & Poor’s.

Last year, S&P downgraded ratings of county bonds issued to fund improvements to the Lopez Dam. The Oceano CSD is one five agencies that fund the project, and S&P criticized the district’s water fund in its report on the bond downgrades.

“We consider the system’s liquidity position to be weak,” the S&P report states.

When asked for an update on its water fund reserves, CSD office manager Marie McGrath said the district computers’ servers were down, and would remain that way for at least the rest of the week.

McGrath later said the CSD had $369,765 in its water fund as of June 30, 2014, but she said she was unable to give a more current balance. Nevertheless, the district was scheduled to make a state water payment of about $410,000 in July.

Twice a year, on Jan. 1 and July 1, the district pays half of its yearly $818,000 payment for state water.

Even though Oceano uses less than half of its allocated 1,953 acre feet of water, it is still required to pay for its portion of state and Lopez water allotments. In addition, the amount of water used by the financially strapped community is exacerbated because of failing infrastructure.

The district loses 83 to 136 acre feet of water a year due to leaks and structural failures, according to a recent grant application.

“The district’s water system is old,” the application says. “The bulk of the system has not been properly maintained for 60 years.”

Nevertheless, revenue from the upcoming water rate hike will not go to infrastructure repair, either. The $70,580 expected to come from the rate hike is needed because of the water fund shortfall and a state mandate to cut water usage during the current drought, according to a district staff report.

Coincidentally, $70,000 is also the difference in salary costs between Ogren’s base pay and that of the district’s previous general manager. The board hired Ogren last May at a base salary of $196,000.

Paavo Ogren

Paavo Ogren

The previous general manager received a salary of $126,000. Just four years ago, the position came with a base pay of $87,500.

Ogren is also due for raises of about $5,000 this year and next. Likewise, district retirement contributions have increased since his hiring, and other district staffers have also received pay increases.

Ogren, the former San Luis Obispo County public works director, officially holds two jobs with the district. In addition to being general manager, he is also the CSD’s chief accountant.

But, some question the need for the accountant job. The position did not exist until two years ago, and it was vacant when Ogren applied to work for the district.

Still, board members have touted Ogren’s hiring, claiming it has made the CSD functional. Prior to approving his contract, then-board president Matt Guerrero said Ogren’s hiring would bring the district a lot of credibility.

The district has gone through numerous general managers in recent years, and the board has fired several of them. Two of the last three general manager firings came amid allegations of theft.

One former general manager, Tom Geaslen, overpaid himself by more than $45,000, according to a district audit.

Oceano ratepayers may soon pay for the fiscal shortcomings, which the district is blaming on decreased water sales because of the drought and revenue shortfalls.

In addition to the water rate increase scheduled for this year, another rate hike is expected to take effect in 2016. Oceano residents could stave off the upcoming rate increases through state-sanctioned ratepayer protests, but few community members participate in local government.

A ratepayer protest hearing is scheduled for April 20.

The finance committee meets today at 9:45 a.m. in the district boardroom.


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35 Comments

  1. falconbh says:

    Lets provide a safety net for low income families and fixed income seniors by raising the base level from six units to eight units of water at the fixed rate. Then cap and freeze pay and benefits at 2014 level .

    We hear so much about helping the rate payers from the board, we are here for the residents , we care about the residents, we will not ” sellout” the rate payers , trust your elected board.

    This is a simple change that can exactly target those in need.

    (-3) 9 Total Votes - 3 up - 6 down
    • Stunned says:

      That might work but, there’s a disproportionate(?) number of senior and low-incomers in Oceano. Give those a break and you’d probably break the system. Sell some water and cut the fat off the top!

      (0) 4 Total Votes - 2 up - 2 down
  2. hotgrandma says:

    How soon before the pressure to sell Oceano’s surplice” water begins?

    (4) 10 Total Votes - 7 up - 3 down
    • hotgrandma says:

      Excuse me. That should read “surplus” water. Brain out to lunch.

      (3) 7 Total Votes - 5 up - 2 down
  3. Rambunctious says:

    “Cash-strapped Oceano operating in the red”

    Join the club……nice hope and change wasn’t it?

    (3) 9 Total Votes - 6 up - 3 down
  4. falconbh says:

    Democratic Vote – Lets have a real democratic election on the ballot and let the people vote if they want these big rate increases.

    Or do the people want a balanced budget approach that includes smaller rate increases with reductions in spending.

    (4) 8 Total Votes - 6 up - 2 down
  5. Stunned says:

    Here’s my late-breaking thoughts. SCREW the whole thieving OCD….OCSD bunch from Cooney to Wallace to Parvo or whatever his name is. They come to little old Oceano and rape and pillage the coffers only to disappear as quickly as they appeared.

    SLO COUNTY…..reclaim this mess please!!

    (8) 22 Total Votes - 15 up - 7 down
  6. itneverends says:

    OCSD used to be County Service Area No. 13, governed by the Board of Supervisors and administered by the County Department of Public Works (then called the County Engineering Department). The changeover occurred back in the 1980’s when the people decidedthat they preferred more local control.

    (10) 18 Total Votes - 14 up - 4 down
    • Julie says:

      Where’s the “local control” now?

      Why do so few people care about what’s going on at OCSD?
      Often times I am the only person in attendance at their meetings. I invite others to join me.
      But, be prepared, if the Board doesn’t like something you say you WILL be vilified, discredited and marginalized.
      Oh, maybe I just answered my own question…not many would subject themselves to that.

      (0) 56 Total Votes - 28 up - 28 down
  7. Snoid says:

    Nice, up to 325900 gallons of water lost every year due to bad management, ancient meters,leaks and
    bad meter reads likely? People in the county deserve better than the crap government were
    getting shoved down our throats. A $200,000 a year manager hired for the lowest tax based
    community in the county, friggin insane.

    (39) 49 Total Votes - 44 up - 5 down
    • Julie says:

      Snoid,

      One (1) acre foot of water is 325,851 gallons.
      The OCSD distribution system is leaking up to 136 acre feet per year, that equals 44,315,795 gallons annually.
      That water is lost to the ground through leaky pipes; never to be measured through a meter
      or charged even the base rate.

      Lost Water = Lost Money

      Data from the meters for production (at the wells and State and Lopez turnouts) compared to the data from meters for consumption (at each property) differ by 83-136 AFY.

      You should have heard OCSD Pres. Lucey scream about Arroyo Grande emptying 35,000 gallons from a
      tank for repairs last September.
      Apparently she has no clue 121,000 gallons is being lost right under her nose every single day.
      Funny thing is that grant application referenced in this article (where these water loss numbers come from) was prepared by staff before Paavo even came to work at OCSD,
      surely she (their self proclaimed “grant expert”) read it before it went out.

      Talk about in-friggin-sane!!!!

      (13) 59 Total Votes - 36 up - 23 down
      • Julie says:

        I’m so curious about these thumbs ups & down…

        Q: What do you like?
        A: Information; even when it’s bad news.

        Q. What do you dislike?
        A: Leaky water systems, losses of money, misplaced blame and insanity.

        (-21) 37 Total Votes - 8 up - 29 down
  8. Mike Byrd says:

    I’m not advocating this and don’t even know if it’s a possibility, but I wonder if the OCSD could just be shut down and replaced with a county services district. It seems there might be some economies of scale and sound, qualified governance that might better serve the folks who have to pay for all this.

    (27) 45 Total Votes - 36 up - 9 down
    • falconbh says:

      Clearly the district should be shut down.

      The recent SP downgrade impacts the future of the OCSD,Sanitation District,Five Cities Fire,Lucia Mar USD , Lopez Water,and the other local cities that support these districts and services.

      Mismanagement, waste, and hiring practices have placed the other cities at additional financial risk.

      (22) 44 Total Votes - 33 up - 11 down
  9. falconbh says:

    Too small to succeed. Are the big salaries, cost of benefits, and rapidly increasing PERS retirement contributions justified for this small district with a poor citizen ratepayer base of financial support.

    It is not a question about individual worth, the question is what can we afford and then pay no more in compensation.

    Rational, ethical ,moral, leaders sworn to serve, understand that the needs of citizen ratepayers and small businesses in a way that promotes shared sacrifices and not pay raises, servant leadership and not individual greed.

    (25) 41 Total Votes - 33 up - 8 down
    • justbeware says:

      Face it, there is no real leadership at the OCSD.

      Leaders lead, not into financial ruin, but on a path that looks toward the future.
      Who on the board can make the case that they were acting in the longterm best interests of the district and its ratepayers when they committed themselves to Ogren and his exorbitant salary?
      The pyramid is upside down folks, the ratepayers cannot bear the weight of what has been heaped upon them.
      Obviously the majority of the board does not possess enough business sense to make a go of it.
      They appear to be more concerned with how their position will benefit them as they strive for loftier positions.

      (28) 38 Total Votes - 33 up - 5 down
    • analyticone says:

      Too small to succeed, too big to fail.

      (4) 20 Total Votes - 12 up - 8 down

Comments are closed.